Acting as a successor trustee is a significant responsibility, and will likely seem daunting at first. Don't be intimidated! Read on for a step-by-step guide to the Top Ten Duties of a Successor Trustee.
First Things First!
If you have been named to be a Successor Trustee in a Trust, it is advisable to get a copy of the Trust in advance of taking over as Successor Trustee. This will give you a chance to review what you are being asked to do and to gather any information you will need to carry out your job duties.
1. Gathering Assets and Preparing a List of Assets
For each asset you control, you will need a date-of-death value. These values will form the inventory that you provide to the beneficiaries and may be used to file tax returns.
2. Paying Bills
The law requires you to review the decedent’s papers to determine who the creditors might be and to pay all of the legitimate creditors.
3. Paying Fiduciary Fees
You are entitled to be paid a fee for the time spent on administering the Trust. Although many Trustees eventually decline the fee, it is good practice to start keeping records of the time spent on the Trust. These records should include the date of the service, the amount of time spent, a description of the services performed and any mileage or other out-of-pocket expenses.
4. Filing Tax Returns
If it appears the deceased’s total estate is less than $5 million (for 2011 and 2012), then no estate tax return needs to be filed. If the estate is larger than that amount, then you may need to retain an accountant to prepare and file a Federal Estate Tax Return. You must also file a final income tax return (Form 1040) for the deceased’s last year of life. Trust income tax returns (Form 1041) must be prepared for each calendar year starting the year of death and continuing until dissolution of the Trust.
5. Starting Probate Proceedings
If you find any assets were owned solely by the deceased, without a joint owner or a beneficiary designation, those assets will require probate administration.
6. Re-Titling Assets
If there are assets that are registered to the Trust, you must re-title them in the name of the Successor Trustee. Since the decedent’s Social Security number can no longer be used to report income and dividends, you must obtain an Employer Identification Number for the Trust from the I.R.S. (or have an accountant or attorney obtain that number).
7. Keeping Beneficiaries Informed
You are required to keep the beneficiaries informed, in writing, about the administration of the estate, including:
- The Trust’s existence;
- The court where the Trust is registered (if it is registered);
- The Successor Trustee’s name and address;
- The beneficiary’s right to receive a copy of the Trust terms that describe or affect his interest; and
- Relevant information about the Trust property (i.e., a list of the Trust assets, their location and value, etc.)
8. Preparing an Accounting
You must prepare an accounting for the Trust at least annually and when all assets are distributed to the beneficiaries according to the terms of Trust. The beneficiaries are entitled to review the accounting and all of the receipts. If the beneficiaries believe there are any improprieties, they may ask a probate court to order you to reimburse the Trust for improper or excessive expenditures or fees.
9. Investing Assets
You have a duty to invest the Trust assets as a “prudent investor”. If you need assistance with investments, you may retain a competent investment advisor to assist you.
10. Making Distributions
You must distribute the Trust assets to the beneficiaries according to the rules spelled out in the Trust. The length of ongoing administration of the Trust depends on terms of the Trust. If the Trust distributes income and principal to a minor or a disabled beneficiary, the Trust administration may continue for years.