After someone dies or becomes incapacitated, the successor trustee has obligations regarding administering the trust. These duties are very important and should be followed with utmost care by the successor trustee. Duties include notice, accounting, inventory, appraisal, creating sub-trusts, filing all sorts of taxes and winding up decedent's affairs.
Here's a quick run down of what you might find yourself doing as successor trustee:
Remember this: keeping good records is paramount.
The successor trustee must give notice to the decedent's heirs and beneficiaries if the trust has become irrevocable. If the heirs or beneficiaries request copies of the Living Trust, be sure to send them a copy as soon as possible. The best method for delivering a copy of the document is with a letter sent by certified mail with a return receipt requested.
A Living Trust is only revocable while the settlor(s), the person(s) who created the Living Trust, are alive and well. Once the settlors lose capacity or pass away, their Living Trust becomes irrevocable.
You will want to keep detailed accounting records of the trust. Keep track of all the trust money you are spending to wind up the decedent's final affairs. Keep track of all deposits and disbursements from the trust. Obtain a separate federal tax identification number for the trust as explained in this post a few days ago. Review the trust document to see what method of accounting is required. Some trust documents expressly require an accounting while others have waived accountings. It's always a good idea to have an accounting in case the trust administration goes into litigation.
Be sure to prepare an inventory of all trust assets and obtain appraisals for trust assets that do not have a readily ascertained value. Assets such as real property should be appraised immediately from the date of death.
You will also need to determine if sub-trusts should be created such as a separate share trust for a minor, a bypass trust for a married couple or even a pet trust.
You also need to add up the total value of the decedent's estate to include trust assets and non-trust assets to determine whether federal estate tax returns must be filed on the decedent's estate. If the decedent passed away in 2006, the exemption is $2 million. This means that if the decedent's estate is worth less than this exemption amount then federal estate taxes probably don't need to be filed.
As successor trustee, you will be responsible for filing the last income tax returns for the decedent. You may also have to file fiduciary tax returns.
There's much to do when it comes to trust administration. The terms of the trust generally control the administration so be sure to read the document before doing anything.
As always, please seek the advice of an attorney during this important time.