Properly Administering a Trust

Dear Len & Rosie,

My mother named my sister and me as successor co-trustees in her trust; and co-executors of her will.  We are the only heirs and will split her property 50/50. My question is, upon my mother’s passing, do we need to register with the probate court to be able to disburse her property?  Her estate is less than $3 million (that includes her home owned free and clear) and there’s no dispute as to who inherits what.  We’d rather do this ourselves and not use an attorney.

Dear Joy,

When your mother passes away, you and your sister should see an attorney. While it is possible for you to do much of the work itself, it’s impossible for us to tell you precisely what you have to do in order to properly administer your mother’s trust. Every case is different and depends not only on the exact terms of your mother’s trust, but also on exactly how each of her assets are titled. You can’t get to Point B (final distribution to you and your sister) without first identifying Point A (where everything is upon your mother’s death).

In general, the first step is to get everything in your and your sister’s names as trustees. That usually requires affidavits of death to be prepared and recorded for your mother’s home and any other land she owns. Complicating this is the property tax paperwork that you need to submit to the County Assessor to avoid losing your mother’s Proposition 13 protected assessment. Don’t try this unless you know what you are doing, because if you make a mistake your property taxes may skyrocket in comparison to what your mother pays today. It’s also important to note that depending on what your mother’s assets are worth, her home may be able to fit into one daughter’s share - maybe your sister will get the home and you’ll get cash and stock of equal value. If it’s done correctly, 

Non-real property assets have to be transferred to you and your sister as trustees, under a taxpayer identification number obtained from the Internal Revenue Service. Usually a summary of the trust document, called a Certification of Trust, is also required. Stocks and other securities also have special transfer documents to prepare. So do mobile homes.

Now would be a good time for you to examine all of your mother’s assets and make sure they are held by her as the trustee of her trust. Otherwise there could be a probate upon her death. Your mother should also verify that she has named beneficiaries on all of her retirement accounts. Everything should be in the trust except for her vehicles (they don’t trigger a probate), retirement accounts (she should name the two of you as beneficiaries) and her checking account (she should add you now to this account so you can sign checks immediately in an emergency).

Can you do this on your own? You could do it, but you would have to educate yourself first, and it’s more complicated than you think. People think, “But trusts are supposed to be easy!” ought to understand that while trusts are less expensive and time consuming to administer than an estate in probate, it’s just as complicated.

Len & Rosie