Living Trust Services in Mission Viejo, CA

A trust is a legal entity that can “own” assets.  The document looks much like a will, and like a will, a trust includes instructions for whom you want to handle your final affairs and whom you want to receive your assets after you die.  There are different kinds of trusts:  irrevocable (usually cannot be changed) and revocable living trusts.

Today, many people use a revocable living trust instead of a will in their estate plan because it avoids court interference at death (probate) and at incapacity.  It is also flexible.  As long as you are alive and competent, you can change the trust document, add or remove assets, even cancel it.

The person who assumes control of the trust after the initial trustee dies or becomes unable to continue with his or her responsibilities. Once the successor trustee has assumed control, he or she is responsible to ensure that your property is distributed to your beneficiaries according to the trust terms. Ideally, a successor trustee will be someone you know and trust.

The person that manages trust property on the beneficiary’s behalf. In most cases, the first trustee of a trust is the person who created it. You can name someone to act as a successor trustee after you are gone.

A person or company that receives benefits from a living trust. For example, if you leave a car to your son in your trust, he is a beneficiary of the trust. Your beneficiaries are entitled to their property only after your death.

If you have been named as a trustee or successor trustee for someone’s trust, you may be wondering what you are supposed to do. Successor trustees can relax a bit, because you don’t do anything right now. You will only begin to act when the person becomes unable to manage his or her financial affairs due to incapacity, or when he or she dies.

For a living trust to work properly, you must transfer your assets into it. Titles must be changed from your “individual” name to the name of your trust. Because your name is no longer on the titles, there is no reason for the court to get involved if you become incapacitated or when you die. This makes it very easy for someone (a trustee or successor trustee) to step in and manage your financial affairs.

The most important thing to remember when you step in as trustee is that these are not your assets. You are safeguarding them for others: for the grantor (if living) and for the beneficiaries, who will receive them after the grantor dies.

As a trustee, you have certain responsibilities. For example:

• You must follow the instructions in the trust document.
• You cannot mix trust assets with your own. You must keep separate checking accounts and investments.
• You cannot use trust assets for your own benefit (unless the trust authorizes it).
• You must treat trust beneficiaries the same; you cannot favor one over another (unless the trust says you can).
• Trust assets must be invested in a prudent (conservative) manner, in a way that will result in reasonable growth with minimum risk.
• You are responsible for keeping accurate records, filing tax returns and reporting to the beneficiaries as the trust requires.

Usually the trust document contains instructions for determining the grantor’s incapacity. The trust may require one or more doctors to certify the grantor is not physically or mentally able to handle his or her financial affairs.

If all assets have been transferred to the trust, you will be able to step in as trustee and manage the grantor’s financial affairs quickly and easily, with no court interference.

First, make sure the grantor is receiving quality care in a supportive environment. Give copies of health care documents (healthcare directive/power of attorney for healthcare) to the physician. If someone has been appointed to make health care decisions, make sure he or she has been notified. Offer to help notify the grantor’s employer, friends and relatives.  

Next, find and review the trust document. (Hopefully, you already know where it is.) Notify any co-trustees as soon as possible. Also, notify the company who prepared the trust document; they can be very helpful if you have questions. You may want to meet with an attorney to review the trust and your responsibilities.

You will want to become familiar with the grantor’s insurance (medical and long term care, if any) and understand the benefits and limitations. Assuming the insurance will cover a certain procedure or facility could be a costly mistake.  Have the doctor(s) document the incapacity as required in the trust document. Banks and others may ask to see this and a certificate of trust before they let you transact business.

Become familiar with the finances. You need to know what the assets are, where they are located and their current values. You also need to know where the income comes from, how much it is and when it is paid, as well as regular ongoing expenses. You may need to put together a budget.
If you cannot readily find this information, others (family members, banker, employer, and/or accountant) may be able to help you. Last year’s tax returns may be helpful.
Apply for disability benefits through the grantor’s employer, social security, private insurance and veteran’s services. Notify the bank and other professionals that you are now the trustee for this person. Put together a team of professionals (legal service or attorney, accountant, banker, insurance and financial advisors) to help you. Be sure to consult with them before you sell any assets.

Now you can start to transact any necessary business. You can receive and deposit funds, pay bills and, in general, use the person’s assets to take care of him or her and any dependents until recovery or death.  You’ll need to keep careful records of medical expenses and file claims promptly. Keep a ledger of income received and bills paid. An accountant can show you how to set up these records properly. The trust may require you to send an accounting to the beneficiaries. Also, don’t forget income taxes (due April 15) and property taxes.

You go back to being a co-trustee or successor trustee and the grantor resumes taking care of his or her own financial affairs. It’s very easy, and there is no court involvement.

You will have essentially the same duties as an executor named in a will would have. But if all titles and beneficiary designations have been changed to the grantor’s trust, the probate court will not be involved. That means you will be able to act on your schedule instead of the courts.  The trustee is responsible for seeing that everything is done properly and in a timely manner. You may be able to do much of this yourself, but an attorney, corporate trustee and/or accountant can give you valuable guidance and assistance. Here’s an overview of what needs to be done:
Inform the family of your position and offer to assist with the funeral. Read the trust document and look for specific instructions. Notify a co-trustee as soon as possible.

Make an appointment with a legal service or attorney to go over the trust document, trust assets and your responsibilities as soon as possible. Do not sell or distribute any assets before you take a full inventory.

Before the meeting, make a preliminary list of the assets and their estimated values. You’ll need exact values later, but this will help the attorney know if an estate tax return will need to be filed (due no later than nine months after the grantor’s death). If there is a surviving spouse or if the trust has a tax planning provision, the attorney may need to do some tax planning right away. The trust may also need its own tax identification number.

Collect all death benefits (social security, life insurance, retirement plans, and associations) and put them in an interest bearing account until assets are distributed. If the surviving spouse or other beneficiary needs money to live on, you can probably make some partial distributions. But do not make any distributions until after you have determined there is enough money to pay all expenses, including taxes.

Notify the bank, brokerage firm and others of the grantor’s death and that you are now trustee. They will probably want to see a certified death certificate (order at least 12), a certificate of trust and your personal identification.
To finalize the list of assets, you will need exact values as of the date of the grantor’s death. Some assets will need to be appraised. An estate sale may need to be held to dispose of household goods and personal effects.

Keep careful records of final medical and funeral expenses, and file medical claims promptly. Keep a ledger of bills and income received. Contact an accountant and attorney to prepare final income and estate tax returns, if required. Verify and pay all bills and taxes. Make a final accounting of assets and bills paid, and give it to the beneficiaries.
If the assets are to be fully distributed, you will divide the cash and transfer titles according to the instructions in the trust. That’s it…you’re finished and the trust is dissolved.
If the assets are to stay in a trust (for minors, for a surviving spouse, for tax purposes or if the beneficiaries will receive their inheritances in installments), each trust will need a new tax identification number, and proper bookkeeping and reporting procedures will need to be established.

Yes, trustees are entitled to reasonable compensation for their services. The trust document should give guidelines.

Consider hiring a legal service or attorney, bookkeeper, accountant or corporate trustee to help you. (A corporate trustee can manage the investments and do the record keeping.) If you feel you cannot handle any of the responsibilities due to work, family demands or any other reason, you can resign and let the next successor trustee step in. If no other successor trustee has been named, or none is willing or able to serve, a corporate trustee can usually be named.