A trustee has many responsibilities in settling a decedent’s estate. The trustee must locate all of the beneficiaries, interpret the terms of the trust, send out required notices, take an inventory and appraise the assets, pay final expenses, satisfy all remaining creditors, pay all taxes, and finally distribute the assets to the beneficiaries in accordance with the terms of the trust.
While it certainly is easier and faster than handling a formal probate, trust administration is often a lot more work than one might imagine. In the midst of handling all of these responsibilities, the trustee is often under pressure from the beneficiaries who do not share the trustee’s responsibilities to distribute the assets “as soon as possible,” not understanding all the steps the trustee is legally required to take.
By the time the trust is in a position to be closed and the assets are ready to be distributed, the trustee is often anxious to “be done” with the duties of trustee. However, it is crucial that the trustee follow very specific steps in distributing the estate in order to be fully discharged of the responsibilities as trustee.
The California Probate Code requires the trustee to give the beneficiaries an accounting at the close of trust administration. The Probate Code requires the accounting to include specific details and to be presented in a certain way. Often the formal accounting required by the Probate Code is more detailed than beneficiaries feel necessary and requires additional time and expense to complete, right when both the trustee and the beneficiaries are ready for the trust administration and its expenses to be over. Ignoring the formal accounting, however, is not without peril as the trustee will forever be “on the hook” to the beneficiaries.
The middle ground in this situation is for the trustee to give the beneficiaries a summary report of the financial aspects of the trust administration such as the date of death values of the trust’s assets, the current values of the trust’s assets, the trustee’s proposed fee, and the planned distribution amounts to each beneficiary. The trustee can then request that the beneficiaries accept the summary report and waive in writing the necessity of a formal accounting. This assures that the beneficiaries are provided with key information and it also absolves the trustee of the duty to prepare a formal account while simultaneously saving time and unnecessary expense.
Once the beneficiaries all approve of the report and waive in writing the necessity of a formal accounting, the trustee may distribute the trust’s assets. The trustee should require that the beneficiaries sign a receipt for their share of the trust so that there is no doubt that the beneficiaries received their full distribution.
The trustee might wish to retain a certain amount of cash as a “reserve” to handle final expenses that might be necessary such as taxes and tax preparation fees. The amount of the reserve should be reflected in the trustee’s report.
While most trustees and beneficiaries (and believe it or not, their attorneys as well) are eager for the trust administration to conclude, making sure that each final step is handled correctly is crucial in fully relieving the trustee of all responsibilities and preventing future disputes related to the trust administration. As tempting as it might be by that point, it is never a good idea for the trustee to shortcut the process at the end in an attempt to save a few weeks of administration. Handling the trustee’s responsibilities properly at all stages is always the best course of action.