What Do I Do With My Parent’s Trust When They Die?

Losing a parent is an emotionally challenging time. Dealing with legal and financial matters can add to the stress. If your parent had established a trust, you might wonder what you should do next. 

At The Farano Law Group APC, we understand the complications of managing a trust after a loved one passes away. We are here to guide you during this difficult time.

Handling a trust involves understanding its terms, clarifying your responsibilities as a trustee, and making sure your parent's wishes are carried out correctly. Read on to learn about the steps you need to take to manage your parent’s trust after their passing and how we can assist you through the process.

The Importance of the Trustee

When a parent passes away, the trustee—either appointed in the trust or through succession—is responsible for administering the trust. If you’re the trustee, you must adhere to its terms. This could include safeguarding assets, paying debts, and distributing funds to beneficiaries.

As a trustee, you must first locate the trust document and review its provisions to understand your obligations and the timeline for completing key tasks. Depending on the type of trust, your responsibilities may vary. For example, revocable trusts often become irrevocable upon the creator’s passing, which can change how the trust is managed.

By clearly understanding the trustee's role, you can take the necessary steps to fulfill your assigned duties and begin locating and organizing the trust's assets.

Locating and Organizing Trust Assets

As a trustee, identifying and managing a trust's assets involves locating bank accounts, investment portfolios, real estate, and any other property held within the trust. Properly organizing these assets ensures they’re accounted for and protected during the administration of the estate.

To locate trust assets, it's important to first review financial statements, property records, and any other relevant documents left by your parent. You may also need to contact financial institutions or work with an attorney to identify assets tied to the trust.

Once you've secured the trust's assets, make sure that ownership records reflect the trust’s name to avoid legal complications before you notify beneficiaries and other parties involved in the trust.

Notifying Beneficiaries and Interested Parties

As part of your duties as trustee, you are required to notify the trust's beneficiaries. This includes informing them about the trust’s terms, their rights as beneficiaries, and the timeline for distributions. Proper communication sets clear expectations and prevents disputes.

In addition to beneficiaries, it may be necessary to notify creditors, government agencies, or other parties interested in the trust. Many states have specific legal requirements for notifying these parties, which must be followed to avoid liability. At this stage, an attorney can help you comply with notification laws.

After everyone has been notified, the next step is to address outstanding debts or obligations. Let’s explore how this impacts the administration of the trust.

Paying Debts and Expenses

Outstanding debts and expenses must be settled before trust assets can be distributed. As a trustee, you are responsible for identifying these obligations and ensuring they’re paid from the trust’s funds. Typical expenses include funeral costs, taxes, and creditor claims.

Some key steps to manage debts and expenses include:

• Reviewing your parent’s financial records to identify outstanding obligations.

• Working with an attorney or accountant to determine the tax liabilities for the trust or estate.

• Prioritizing payments, starting with legally required expenses such as taxes and secured debts.

Addressing debts and expenses early can prevent delays in administering the trust. Once these obligations are resolved, you can focus on distributing the remaining assets to beneficiaries.

Distributing Assets to Beneficiaries

Distributing trust assets is one of the final steps in the administration process. As a trustee, you must make sure that assets are distributed according to the terms of the trust. This could involve transferring real estate, liquidating investments, or distributing funds to beneficiaries.

Before making distributions, you should verify that all debts, taxes, and administrative costs have been fully discharged. The remaining assets can then be distributed without legal complications. Depending on the trust’s instructions, you may also need to set up ongoing payments or manage funds for beneficiaries with specific needs.

Once distributions are complete, the administration of the trust is nearly finished. Let’s explore how record-keeping plays a vital role in this process.

The Importance of Record-Keeping

Accurate records are essential throughout the trust administration process. As the trustee, you’re responsible for documenting financial transactions, communications with beneficiaries, and any legal filings related to the trust. This documentation protects you in case of disputes and enforces transparency. Some key records to maintain include:

• Copies of the trust document and any amendments.

• Financial statements, including income and expenses related to the trust.

• Correspondence with beneficiaries and other interested parties.

By maintaining organized records, you can demonstrate that you have fulfilled your duties as trustee. Another important part of the trustee's role involves effectively handling the trust's tax obligations.

Managing Tax Obligations Related to the Trust

Tax obligations often arise during the trust administration process and must be appropriately addressed. Trusts may be subject to income taxes, estate taxes, or both, depending on the value of the estate and the type of assets involved. As trustee, you’re responsible for making sure that these taxes are calculated and paid accurately.

An experienced accountant or tax advisor can help you identify tax obligations for your parent’s trust. For instance, if the trust generates income, you may need to file an income tax return on behalf of the trust. 

Estate taxes may also apply if the total value of the estate exceeds federal or state thresholds. Managing these obligations makes sure that distributions to beneficiaries aren’t delayed.

Understanding and addressing tax matters is an essential component of trust administration. By staying proactive, you can fulfill your responsibilities and move closer to completing the administration process. 

How Estate Planning Affects Trust Administration

Proper estate planning can simplify the administration of a trust and prevent conflicts among beneficiaries. If your parent’s trust was part of a comprehensive estate plan, it likely includes clear instructions for asset distribution and contingencies for unforeseen circumstances. This foresight reduces the risk of disputes and streamlines the trustee’s responsibilities.

Regularly updating estate plans ensures trusts reflect current family dynamics and financial goals. For instance, changes in laws or family relationships may require adjustments to the trust’s terms. By prioritizing estate planning, families can prevent complications and disputes and protect their legacies.

How The Farano Law Group APC Can Help

Administering a trust can be overwhelming, but you don’t have to face it alone. At The Farano Law Group APC, we help families handle trusts and estate administration with compassion and care. We serve California clients in Orange County and the surrounding areas, including Riverside County, Los Angeles County, San Diego County, and San Bernardino. Contact Charles M. Farano, Attorney at Law, to schedule a consultation.