What is a TRUST?
A TRUST is when one person (trustee) holds title to property for the benefit of another person (the beneficiary).
A person called the settlor (or trustor) creates the trust and puts the property in the trust.
The settlor, trustee, and beneficiary can be different people. But, one single person could be the settlor, trustee and beneficiary.
For example, one person may create a trust and put property in it, make himself the trustee, and use the property for his own benefit. In that case he would be the settlor, trustee, and beneficiary all at the same time.
What is a TRUSTEE ?
The trustee is the person (or people) who holds legal title to the property that is in the trust. The trustee’s job is to manage the property in the trust for the benefit of the beneficiaries in the way the settlor has asked.
What are powers of the TRUSTEE ?
A trustee has all the powers listed in the trust document, unless they conflict with California law or unless a court order says otherwise. The trustee must collect, preserve and protect the trust assets.
To do this, the trustee can:
- make reasonable repairs,
- insure the property,
- sell assets,
- make prudent investments,
- pay certain administrative bills and expenses, and
- make distributions and payments to the beneficiaries according to the trust document.
To read more about the law on a Trustee’s powers, read California Probate Code, Sections 16200 – 16203 and 16220 – 16249.
What are duties of the Trustee? – The trustee must:
- Do what the trust document says as long as it is legal;
- Do only things that benefit the beneficiaries;
- Not favor one beneficiary over another;
- Avoid conflicts of interest with the beneficiaries
- Never use trust property or the trustee’s powers for personal benefit, unless the trust authorizes it;
- Keep trust property separate from property owned by anyone else;
- Not delegate to others anything they can reasonably do themselves. If the trustee must delegate some duties, s/he must supervise what the delegated person does;
- Administer and invest the assets of the trust with care and skill to protect the trust;
- Diversify investments unless it would not be a good idea to do so;
- Keep detailed records and give periodic reports to the beneficiaries as required by California law. See Probate Code Sections 16060 – 16064 and Sections 1060 -1064);
- Distribute the income as required by Probate Code Sections 16230 -16375.
What must trustee do when settlor dies?
When the settlor dies, the trustee has other duties.
Notice to beneficiaries and heirs: If the trust is irrevocable when the settlor dies, the trustee has 60 days after becoming trustee or 60 days after the settlor’s death, whichever happens later, to give written notice to all beneficiaries of the trust and to each heir of the decedent.
The notice must provide this information:
- The settlor’s name and the date the trust was signed;
- The name, address and telephone number of each trustee of the trust;
- The address where the administration of the trust will take place;
- Any information the trust document asks for;
- That beneficiaries can ask for a complete copy of the trust; and
- That beneficiaries have a deadline of 120 days after getting notice to start a legal action to object to the trust, or 60 days after a copy of the trust is mailed or served upon the recipient, whichever is later.
For more information, see California Probate Code Section 16061.7.
Notice to Assessor’s Office: If the trust property includes real estate in California, the trustee must give written notice to the Assessor’s Office of the county where each parcel of real estate is. For more information, see California Revenue and Taxation Code Section 480(b).
Inventory and appraisal: If there is no court-appointed executor for the estate of the deceased settlor, in most case the trustee must make an inventory and appraisal of all the settlor’s assets as of the date of death (whether or not the assets were in the trust). The trustee does this to see if federal and state estate tax returns need to be filed. If they do, the trustee will apply to the Internal Revenue Service for new tax ID numbers for the trusts and make sure the returns get filed and any taxes owed get paid within 9 months of the settlor’s death.
If the settlor was acting as trustee of his or her own trust, the new trustee (called a “successor trustee”) will also sign an Acceptance of Trusteeship.
Follow trust instructions: The trustee also must do anything the trust instructs. Often, the trust says the successor trustee will take care of paying for the settlor’s funeral expenses, the settlor’s outstanding debts (like, recent medical expenses and credit card bills), and then distribute what is left to the beneficiaries of the trust.
Sometimes, the beneficiaries have the right to get most or all their inheritance through the trust within days or weeks of the settlor’s death.
- In other cases, the trustee may delay distributing property to:
Sell property to pay the settlor’s final bills or taxes,
- Calculate the distribution required by the trust, or
- Determine if there will be other debts or taxes to pay at a later date.
Some trusts say the trustee cannot distribute the assets for a certain number of years, or until the death of someone else. In these cases, the trustee is responsible for investing the assets of the trust, perhaps making periodic distributions to the beneficiaries, until all assets of the trust are distributed to the beneficiaries.
Source is Superior Court of California, County of Santa Clara. This is for information only about trusts in California and is not the providing of legal or tax services. You should consult with a lawyer or income tax professional prior to setting up any TRUST and especially a REVOCABLE LIVING TRUST.
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