Many people use a revocable trust to avoid probate. The idea is to make management and settlement of the estate quicker and easier than a formal court-managed probate. Even though use of a trust is commonly quicker and easier, the successor trustee will still need to administer the trust properly to be successful.
A typical trust administration is done outside of the view of the courts. As such, the family gets a greater degree of privacy. Since there is no court supervision, the expenses and formality of court don’t need to be incurred. When the family is cooperative and transparent about management of the trust property, the administration can be fairly easy.
But the correct administration of the trust has various steps that can easily be missed by a successor trustee. These missed steps might open the successor trustee to liability from beneficiaries, creditors, and others who might claim they were harmed by the trust administration. For example, a disgruntled beneficiary might later challenge the validity of the trust or claim they were owed a larger distribution from the trust. In some cases, the claim could come a year or more after the death of the settlor.
Fortunately, the California Probate Code has provided various remedies to help successor trustees and trust beneficiaries settle the estate quicker. For example, the successor trustee can provide specific forms of notice to beneficiaries and creditors that, if done properly, will require any outstanding claims to be brought sooner rather than later. Any late-filed claim can be barred, even if the claim would have been valid without the notice.
Furthermore, the successor trustee will need to gather the various assets of the trust, which may mean changing title to real estate and bank accounts. Only upon claiming these assets on behalf of the trust can the successor trustee hope to dispose of them, whether by a sale or by transfer directly to a beneficiary. Failing to properly claim these assets can have strong consequences, ranging from unnecessary delays to needing to probate the missed assets to losing assets altogether as someone else claims them.
Along with the powers, each successor trustee has a fiduciary duty towards the beneficiaries of the trust. This means that a successor trustee could become liable for loss or damages due to actions or lack of actions by the successor trustee. To make sure a successor trustee is carrying out their fiduciary duties and limit their liabilities, it is common for the trust to consult and hire various professionals, such as attorneys, accountants, financial planners, and others who might provide specialized advice.
If you have any questions or comments about this article, or trust administration in general, please contact Yeager Law APC.