- Listen carefully to clients’ questions and concerns about the administrative process
- Provide clients with an understanding of the general steps involved in administering an estate, including the authority and the duties of a fiduciary
- Advise and assist the clients regarding practical, hands-on administrative matters
- Assist the clients to properly prepare trust/probate reports, beneficiary notices, accountings, petitions, waivers, disclaimers, etc.
- Take the steps necessary to shield the client from personal liability while acting as a fiduciary of the estate
- Consider after-death, “post-mortem” planning options to minimize income tax, estate tax and property tax via disclaimers, IRA distributions, pre-distribution allocation of assets among residual beneficiaries, etc.
- Help the client to properly address creditor claims, payment of taxes, and maintenance and protection of estate assets
- Assist the client with the proper distribution of assets to beneficiaries and with the closing of the estate
The nature and scope of legal services required depends on the circumstances of the estate. If the decedent died intestate or with only a will, a probate will generally be required. Though generally the purposes and goals in a probate are similar to estates administered outside of probate, the procedures in probate are also more rigid and are subject to close court oversight. Thus, the probate services provided by our office are similar to those set forth below for trust administrations, but are handled differently from a procedural standpoint.
As a result of the estate plan which involves a living trust, general California law, and pertinent tax laws, a decedent’s passing has a number of important legal consequences. Under a typical husband-wife bypass trust, the assets of the trust property, depending upon tax considerations addressed in the Trust and the total value of the estate, are to be allocated between the decedent’s trust, sometimes known as the “Family Trust”, and the Marital Trust.
The surviving spouse is typically the trustee of the Family Trust and the Marital Trust. Both of these trusts will provide you benefits to the surviving spouse during his/her lifetime, after which the property remaining in these trusts will pass to the named beneficiaries.
The trustee of the new sub-trusts is entrusted with the legal responsibility for performing a number of tasks that we will assist with in the course of the trust estate’s administration. Some of these tasks involve complying with the requirements of the Trust, while others involve compliance with a variety of tax laws. Some of the more significant tasks include:
1. Identification and segregation of the decedent’s property from the surviving spouse’s property. This does not always require a physical segregation, but one will need to be able to distinguish between the survivor’s and decedent’s properties at all times, including identification of separate and community property.
2. Preparation of an inventory of all property owned by decedent at his/her death, including the share of the property held in the living trust, and notification to beneficiaries and others pursuant to probate code section 16061.7.
3. Prudent management, protection, and investment of the property, including maintenance of appropriate property and liability insurance.
4. Procurement of professional appraisals of the property.
5. Preparation of a list of all debt at the date of death.
6. Payment of the various debts and trust expenses.
7. Allocation and transfer of trust property to the various sub-trusts which are to receive it.
8. Preparation and filing of California and federal estate tax returns. These returns are customarily due nine months after the date of death.
9. Notification to the county assessor of the changes in real estate ownership resulting from the decedent’s death, and filing documents required to avoid property tax reassessment.
10. Preparation and filing of income tax returns for the income received before the decedent died. This may be accomplished by filing joint returns.
11. Preparation and filing of one or more California and federal income tax returns for the various sub-trusts. This will be required annually, with the returns being due on April 15 of each year.
12. Making appropriate trust distributions. Once the Marital and Family trusts have been established, the trustee will need to determine how to distribute the income of the various sub-trusts. “Income” refers to interest, dividends, and rents, in contrast to “principal,” which is the asset which produces the “income.” In addition, the trustee may distribute additional funds from both the Marital and Family trusts under limited circumstances described in the trust document. In general, the trustee can make such distributions if the money is needed for the surviving spouse’s support, but the rules regarding this are complex.
13. Preparation of periodic written trustee reports to all beneficiaries on the financial status of the trusts.
14. Taking appropriate action with respect to any property which is not included in the trust.
The services to be performed by the attorney in connection with the administration of the trust depend on a number of circumstances, but we typically do most if not all of the following tasks:
1. Review the existing estate plan documents and a variety of matters pertaining to the decedent’s family’s property and circumstances. This review, like a doctor’s general physical exam of a patient, is intended to make sure that potential problems are discovered and promptly addressed. In contemplation of this review, the client would want to be cautious about taking actions with respect to assets which would constitute an “acceptance” of the asset which would preclude the possibility of a “disclaimer” of the asset if necessary.
2. Actively assist in establishing a proper bookkeeping system for administration of the trust.
3. Actively assist in the preparation of the inventory. This assistance includes advice regarding the information and document needed with respect to each asset of property, and assistance in preparing the actual inventory document.
4. Actively assist in obtaining appraisals of the trust’s assets.
5. Develop a plan for transferring property to the various sub-trusts. This plan includes our recommendation as to which assets should be allocated to each sub-trust, and review of a wide variety of the tax issues involved.
6. Change title of assets to reflect ownership changes which result from the decedent’s death and the terms of the estate plan.
7. Prepare required tax returns, except to the extent this task is allocated to the client’s tax preparer. This includes handling related tasks involving taxing authorities (e.g., applying for tax identification numbers for the trusts, and filing notices of fiduciary relationship).
8. Represent the client’s interests in connection with tax return audits, except to the extent this task is allocated to your tax preparer.
9. Advise the client with respect to the collection of trust assets.
10. Advise concerning the payout of estate and trust expenses.
11. Advise and assist in preparation of accounts and reports which must be given to other trust beneficiaries. If necessary, we also present the reports and accounts to the probate court for approval.
12. Represent the client’s personal interests with respect to any disputes with creditors or beneficiaries which may occur in connection with administration of the trust.
13. Generally, respond to the client’s requests for advice.
Unless the client was to bring additional matters to our attention, and we enter into a supplemental agreement to represent the client with respect to the additional matters, the extent of our legal services are limited to those tasks described above. In particular, the following services are not customarily provided absent a further agreement:
1. Services necessary to determine whether the decedent or spouse’s estate have a right of recovery against any persons who may in any way have caused or contributed to causing his/her death, or any injury suffered before death.
2. Services necessary to determine whether the client or the decedent’s estate have a right of recovery against any person for damages arising from property-related transactions, including business transactions, investment transactions, and matters related to real estate.
3. Services related to claiming any kind of government benefits, including Medi-Cal, Medicare, Social Security, state disability insurance, and unemployment insurance.
4. Services related to processing claims for insurance benefits, including health and life insurance benefits.
5. Services related to pension plans, profit-sharing plans, annuities, and IRA’s, including matters relating to tax elections with respect to these assets.
6. Services related to the evaluation and recommendation of investments or investment strategies.
7. Services related to procuring or maintaining insurance, including automobile insurance, homeowner’s insurance, professional liability insurance, and insurance on property.
8. Services related to defending the client or the decedent’s estate, or any of the trusts from any legal claims of any kind made by other persons.