If you're taking over as trustee of a deceased person's living trust, you are not expected to get to work the day grandma dies. Luckily, most trust and estate tasks are not emergencies and can wait a while so that family members can grieve and make decisions about things like memorial services. But within a month or so, you need to begin to collect information, bills, and documents and to organize a filing system, so that you can ultimately hand over property to the trust beneficiaries.
You don't need a lawyer to complete most of your tasks during the first few months of a trust administration. Most of what you need to do first involves just getting organized. Some tasks require only a phone call; others may take hours of information-gathering, letters, and follow-up calls. Later, when it comes to such things as making good investment decisions, filing tax returns, transferring the ownership of real estate, and funding subtrusts, professional advice will be well worth the money.
If you'll be distributing all the trust property to beneficiaries quickly, you'll probably get most of your work done in about six months. If you are administering an ongoing trust (a trust for children, for example), there will be more work to do, but you'll still have tackled most of the largest tasks in the first few months.
If you aren't serving as both executor of the estate and trustee of the trust, stay in close touch with the executor during these first few months. You need to know what the executor is doing and why. In many cases, the executor will transfer the estate's assets (assets not held in the name of the trust) to the trust, where they become your responsibility.
Here's an outline of what you're going to have to do, even for a simple trust:
Many of these tasks are straightforward. For example, the funeral home that helps you with the disposition of the deceased person's remains will usually order death certificates for you and may also notify Social Security of the death. Get eight to 12 copies of the death certificate -- you'll need them for nearly everything else you'll have to do. If you need to notify Social Security, just pick up the phone and call 800-772-1213.
You are required to return any Social Security payment that was for the month of death, no matter what day of the month the death occurred. It can be confusing to figure out whether a Social Security check or deposit needs to be returned. Payments are usually made during the first week of the month for the prior month. So, for example, the check for March arrives in early April. If the settlor received payments for the month of death, the whole amount must be returned, even if death occurred on the last day of the month. If social security payments were deposited directly into the deceased person's bank account, it can take a few months for social security to deduct the payments made after death, so make sure to leave the account open for a few months.
Next on your list is to notify the beneficiaries of the trust. Start by reading the trust instrument and making a list of the people it identifies. A trust may not be perfectly clear about this. If the trust doesn't individually name the beneficiaries, but instead uses a term like "children" or "issue," you might need help understanding what state law does and doesn't include in that term. If you have any questions whatsoever, consult a trust administration attorney -- it's very important to get this part of the trustee job right.
Almost all of your remaining trustee tasks hinge on your ability to organize what you're doing. You'll need to know what the trust owned and what the trust owed. You'll need to get a federal tax identification number from the IRS so that the trust can accurately report the gains and losses it incurs before you distribute the property to the heirs. You'll also need to figure out the value of the assets the trust owned at the time of the deceased person's death. For this, you'll hire appraisers and scrutinize account statements. Finally, you'll monitor the deceased person's incoming mail and pay debts as they come up: funeral expenses, administration expenses (like lawyers, housecleaners, and tax preparers); and possibly (if you're also the executor) personal debts like credit cards and medical expenses.
Your system doesn't have to be complicated. If all you need to do is collect the trust assets, pay the settlor's debts, and distribute what's left to the beneficiaries, you won't need to track income and expenses for very long -- probably three to six months, tops. You won't even have to file a trust tax return unless the trust assets generate more than $600 in income. For a simple trust, you may be able to do a good job with chronologically organized bank and brokerage statements, a trust checkbook, and notebook.
If you are administering a trust that will exist for more than six months, you should buy basic accounting software (such as Quicken) to keep track of the movement of money in each trust account. The cost is a perfectly permissible trust-related expense. If you spend a few hours to set up the accounts, you will avoid countless problems at the end of the year.
Sound like a lot on your plate? Don't be intimidated. Being a good trustee takes work, but it's not rocket science. With patience and effort, you can do a great job. For a step-by-step guide to everything you need to know to manage a trust, get The Trustee's Legal Companion by Liza Hanks and Carol Elias Zolla (Nolo).