If the trust has co-trustees serving together, it is important that they coordinate their actions as trustees. Failure to do so can result in trustee liability for breach of fiduciary duties.
Here are some examples of what needs to be taken into account:
1. How many co-trustees must sign trust documents? Some trusts will require all co-trustees to sign all documents, while other trusts will allow one co-trustee to sign certain documents by him or herself.
2. Do the trustees have to agree on all trust matters? California law requires that all actions by the co-trustees be made unanimously, unless the trust provides otherwise. Does the trust allow for a majority vote?
3. Does the trust allow a co-trustee to delegate his or her duties to another co-trustee? This can be done if the trust allows for trustee delegation of duties.
During the trust administration process, it is necessary to review the terms of the Family Trust in order to identify the beneficiaries of the trust. This ensures that the trust assets are properly distributed at the close of the trust administration.
This first step in the process requires the determination of who the beneficiaries are and what portion of the trust’s assets each will receive. Are distributions to be made outright to the beneficiaries or will some of the assets be distributed to trusts for beneficiaries?
The next step in the process is to determine which beneficiaries will receive which assets. As an example, assume the decedent had two sons, and the trust’s assets consist of $500,000 in stocks and a $500,000 house. The trustee must determine whether the distributions to each beneficiary are outright or to a trust for his or her benefit.
When dividing the assets among beneficiaries, it is important to be aware of the various tax consequences that may occur. For instance, in the above example, the distribution of the house equally to the sons will not result in a property tax increase, so that the sons will pay the same property taxes as their father. However, transferring the house to one of the sons could result in a property tax increase that could raise the property taxes on the house to an amount the son cannot afford to pay. It may be possible to avoid the property tax increase, but this would require careful planning.
An Administrative Trust is a trust that is created when a person who had a Family Trust during his or her lifetime dies. The purpose of the Administrative Trust is to carry out the trust administration of the family trust.
The Administrative Trust is an irrevocable trust that will hold title to the family trust’s assets. It will have a federal taxpayer identification number and will file its own income tax returns.
When the trust administration is completed, the Administrative Trust will distribute the assets to the beneficiaries and will terminate.