Trusts after a death

What actually changed at the moment of death

While the settlor was alive, a revocable trust was effectively their own pocket: they could change it, empty it, or revoke it. On death it became irrevocable. The terms are now fixed, the beneficiaries have enforceable rights, and you — the successor trustee named in the document — are the person answerable for it.

• You act for the beneficiaries, not for the family and not for yourself. Where those differ, the beneficiaries win.
• You must keep trust money entirely separate from your own. Commingling is a frequent breach and the easiest to prove.
• You must treat beneficiaries impartially, including the ones you like least and the ones who will not return a call.
• You must keep records good enough to account for every movement of money, because you may be required to.
• You cannot delegate the responsibility, though you can and often should hire professionals to do the work.

These duties are personal. A trustee who distributes early to a sympathetic beneficiary, pays a family member's expenses out of trust money, or sells an asset to themselves at a friendly price is exposed personally — not through the trust.

The first two weeks

1. Read the trust document in full, including the amendments. Trusts are frequently amended and the last one governs; a trustee acting on the original is acting on the wrong instrument.
2. Confirm you are actually the successor trustee, and that any condition on your appointment has been met. Some trusts require a physician's certificate or a formal acceptance.
3. Order certified death certificates. Every institution will want one, and most will keep it.
4. Serve the beneficiary notice your state requires — see the table below. In California this is time-limited and consequential.
5. Find out what the trust actually owns, and just as importantly what it does not.
6. Get a tax identification number for the trust, and open a trust bank account. Nothing should move through your personal account, ever.

Before distributing anything, establish the debts, the tax position and the full asset picture. Distributing before those are known is the mistake that turns a trustee into a defendant, and the pressure to do it early rarely comes from the trust.

What the trust does not own

A trust holds only what was actually transferred into it. The gap between what the settlor intended and what was retitled is a frequent problem a successor trustee meets, and it is why a trust does not always mean no probate.

• A house never re-deeded into the trust is not a trust asset, whatever the trust document says about it.
• Accounts opened after the trust was signed are often in sole name and were never retitled.
• Retirement accounts are normally left outside deliberately, and their beneficiary designations govern.
• A vehicle, a small bank account, or a stock certificate left outside may still need a probate or a small-estate procedure.

Most well-drafted plans include a pour-over will that sweeps anything left outside into the trust. That will still has to be dealt with, and depending on the value it may still require a court. Establishing early which assets are inside and which are outside is what prevents a nasty discovery in month four.

How this differs from probate — and how it does not

The genuine differences are worth knowing, because they explain both why a trust was worth having and why the job is not as light as it sounds.

• No court supervision by default, and generally no public filing of what the trust owns or who receives it. That privacy is real and is one of the main reasons to have a trust.
• No court timetable — which cuts both ways, because nothing external prompts a slow trustee and beneficiaries can wait a long time before anyone asks why.
• No court appointment. Your authority comes from the document, and you prove it with a certification of trust rather than with letters from a judge.
• Creditors are still paid, taxes are still due, and assets are still valued. Those obligations do not come from probate; they come from the death.

Ask for a certification of trust rather than handing institutions the whole document. It proves your authority without disclosing who inherits what — which is the privacy the trust was bought for.

When to get help, and how to pay for it

A trustee may generally pay for professional help from trust assets, and doing so is usually prudent rather than extravagant. The circumstances where doing it alone is a false economy are predictable.

• A beneficiary has threatened a contest, or has gone quiet in a way that reads like one.
• The trust holds a business, real property in more than one state, or anything hard to value.
• A beneficiary is a minor, has a disability, or receives means-tested benefits a distribution could disrupt.
• The trust divides into sub-trusts on the death — a common structure, frequently missed, and one with tax consequences if it is not done.
• You are also a beneficiary. That is normal and permitted, and it is exactly where impartiality becomes hardest to demonstrate.

You may also decline the role, and declining is far better than accepting it and administering it badly. Decline formally and in writing, before you begin acting, because acting as trustee and then stepping back is more complicated than never starting.