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Decedent Estates and Trust Administration Attorney

Exploring some basic aspects of estate and trust administration following a loved one or close friend’s death can be challenging while grieving. However, you must understand the basic process to ensure your rights and your loved one’s wishes are protected.

A California Lawyer for Estates and Trust Administration You Can Trust

In the case of death or incapacity, you need a structure in place to ensure your wishes are followed and your family is protected. For more information about estate planning, you can explore our FAQ page or contact us online today. We are also available by phone at (916) 773-6100.

Why Is the Administration Process Necessary?

After the passing of an individual (generally referred to as the “decedent”), an administrative process must be followed and completed. When someone passes, their name and Social Security number need to be retired. Not doing this is the #1 way that identity theft occurs. Seeing a professional who understands the ins and outs of the tools needed to transfer title successfully to a decedent’s beneficiaries ensures a smooth transition that minimizes potential taxes and costs. Some of these tools are small estate affidavits, beneficiary claims, Heggstad petitions, rights of survivorship, and probate.

The main reason estates need to be administered is to facilitate an orderly transfer of assets upon death. This holds true whether it is a multi-million-dollar estate or only worth a few thousand dollars. The administration of any estate also applies whether there is a will, a trust, or no estate planning documents.

During the administration period, someone must be officially and legally appointed to handle the administration’s details. That person is known as a personal representative and essentially “stands in the shoes” of the deceased. A personal representative is necessary because someone must be authorized to sign the decedent’s name and transfer assets. If the decedent dies with a will, or “testate,” an executor is appointed as the personal representative. If the decedent dies without a will, or “intestate,” an administrator is appointed as the personal representative.

Once the personal representative of the decedent is appointed, they are responsible for locating and gathering assets, performing an inventory of all assets, and obtaining an appraisal of those assets.

Understanding the Terminology

When an individual is faced with settling a loved one’s estate, it is important to understand the terms used. This glossary gives a brief explanation of these terms.

  • Principal and income: Principal is the property of a decedent’s estate or trust, and the income refers to the returns from that property, including rent, dividends, interest, and other earnings. This may also include income gained from the appreciation of property.
  • Executor/executrix: This is the person, trust company, or bank in charge of settling the estate of the decedent according to the terms of their will. If there is no will, this individual is sometimes called an administrator, and they must settle the estate according to the appropriate laws. The term “personal representative” is sometimes used to mean the same thing.
  • Trustee: An individual, bank, or trust company charged with holding the legal title for property that benefits another and behaves according to the terms stated in the trust.
  • Beneficiary: The individual who is intended to receive property, now or later, either directly or in trust; the person for whom a trust or will was made. A person may be a beneficiary and a trustee of the same lifetime trust they established (inter-vivos) or a trust someone else established for them upon their death (testamentary trust).
  • Testator/testatrix: An individual who has made a will.
  • Grantor/trustor/settlor: One who transfers property to a trustee to own or hold according to the terms of an agreement, or trust establishes their wishes. This should not be confused with using the term on income taxes, which refers to the individual taxed on income that a trust generates.
  • Fiduciary: A bank, trust company, or individual who acts on behalf of another. Personal representatives such as executors and trustees are fiduciaries.

Wills and the Probate Process

A will must be read and understood so that certain directions are understood, including the following:

  • Fiduciary powers
  • Which assets should be used to pay expenses and taxes
  • Whether certain distributions are mandated or left to the discretion of the trustee
  • Whether the decedent’s assets are distributed outright or placed into new trusts
  • Whether there are co-fiduciaries
  • Who the beneficiaries are

For the will to be implemented, a court must first determine that it is valid. This is called “probate.” If an executor is not named in the will, the probate court may appoint one, or a family may petition to have a specific individual serve in this role. This can be difficult to navigate on one’s own, and many executors choose to hire a probate attorney for guidance.

The first of the responsibilities that an executor must abide by is to file with the probate court of jurisdiction in the county where the decedent passed away. Once the will is determined to be valid, and any challenges to the will are settled through litigation, the executor must administer the estate according to the provisions laid out in the will. They must notify the beneficiaries and creditors before distributing any assets. Throughout this entire process, it is crucial to keep detailed records and obtain receipts for all the estate expenses and funds.

If a creditor makes any claims against an estate, the executor must pay these debts out of the estate’s assets. The executor will need to take a full inventory of the assets an estate holds. If the decedent has assets that are not listed in the will, the executor must distribute them separately according to the state’s intestacy laws. Once the executor pays the accountants, attorneys, creditors, and any other costs incurred during the probate process from the estate’s assets, they distribute the remaining assets to the beneficiaries. These representatives are tasked with distributing the assets according to the testator’s wishes.

What If There Is No Will?

When individuals fail to write a will or establish trusts before they pass away, it is referred to as intestacy or dying intestate. The state dictates the laws that govern how an estate is distributed in this situation, and the probate court appoints an individual to serve as the estate administrator. They will often offer the decedent’s surviving spouse the opportunity to serve in this role or the next closest member of the family if the spouse does not wish to do so.

If none of these individuals is interested, the court will appoint an estate administrator. This person will handle the tasks of settling the decedent’s financial affairs, taking inventory of their assets, notifying and paying creditors, distributing assets to any potential heirs, and paying any fees and taxes associated with settling the estate. Once all debts and expenses have been paid, the remaining assets are distributed to the heirs according to state laws.

The Components of Settling an Estate?

The many facets of settling an estate involve certain details that must be handled individually. The following items must be settled according to state laws and the decedent’s wishes outlined in their will if they have written one. In many cases, an executor will find that an experienced estate and trust administration lawyer can help them navigate these tasks’ details and settle the estate more easily.

Managing Estate Assets

  • Accessing assets. The fiduciary must take control of all the assets that comprise an estate or trust. The administrator needs to secure and value all the testator’s assets as soon as possible after their death. If certain prerequisites are met, some assets may be accessed immediately. The prerequisites for these assets, such as brokerage accounts, may include producing a death certificate and obtaining formal authorization from the court. In some cases, as with insurance, a claim must be filed.
  • Tangible property. If items such as collectibles, artwork, jewelry, automobiles, furniture, and other tangible property are part of the estate, a professional appraiser is often hired to assess their value. Unusual and rare items may require consulting a specialist appraiser. Business interests and commercial and residential properties must also be appraised. This allows for the assets’ valuation on the inventory required by the court, state, and federal estate tax return use and gauging whether the insurance coverage the decedent had on the property was sufficient. The fiduciary should maintain this insurance throughout their tenure.
  • Accounts. Valuing financial assets such as securities and bank accounts is also the job of the fiduciary. It is important to note that certain estimates are allowed for federal estate tax returns if the estate does not owe any federal estate tax. This can sometimes lessen the cost of appraisals.

Settling Debts and Expenses

  • Bills. One of the executor’s duties is to determine when expenses incurred while settling the estate and the decedent’s unpaid bills should be paid, then see to it that they are paid or that creditors are notified of any delay in payment. This is important because certain unpaid bills, such as real estate taxes and casualty or property insurance, may directly affect the estate. In most places, one must provide written notice to any reasonable ascertainable or known creditors.
  • Executor liability. It is always recommended that an administrator works with a reliable trust administration attorney to assist in handling these matters, as there are unique circumstances in which a fiduciary may be held responsible and personally liable for failing to properly protect estate assets or spending trust or estate assets improperly. Ensuring adequate insurance coverage throughout the process is one example.
  • Tax returns. Filing a decedent’s tax returns is one of the duties of being the executor of an estate. This may include the decedent’s final income tax return, current generation-skipping or gift tax returns, and tax returns for previous years that are on extension. The fiduciary must investigate whether the decedent missed filing taxes in any previous year due to declining health or other reasons. A federal estate tax return will also need to be filed if the estate is valued at a greater amount before deductions than the estate tax exemption shelters. In other cases, such as situations in which the surviving spouse intends to use an estate tax exemption that the decedent did not use, a federal estate tax return will still need to be completed.

Bequest Funding

  • Cover expenses first. A fiduciary must ensure that all the decedent’s expenses, taxes, and debts are paid before distributing any money or tangible property to beneficiaries. Failure to do so may result in the executor being held personally responsible if insufficient assets are left to cover estate expenses. For this reason, any will or trust that bequests specific gifts of property or cash should be carried out after all expenses are paid. It is possible to distribute these gifts first and obtain a receipt and refunding agreement that ensures the beneficiary will refund any excessive distributions made in error by the executor, but these agreements can be difficult to enforce.
  • Handle bequests. In some states and circumstances, court approval is necessary before any distributions may be made. At this point, all specific bequests of gifts or cash may be distributed first. Once those are carried out, the remainder, or residue, may be distributed. This can be done outright or in a different trust, such as that for a surviving spouse or the decedent’s minor children. It is wise to seek a trust administration attorney’s advice to ensure that funding for all bequests is handled properly, especially in the instance of ongoing trusts. The tax consequences involved with estate distribution can be shocking, so it is vital to plan accordingly.

Administering Trusts

  • How are trusts paid? When funds are placed into a trust, the trust’s specifics dictate the difference between the income and the principal. Trusts may vary greatly, but in many cases, the trust states that the income should be distributed to the individual named in the trust at one time, and the principal in the trust to be given to that individual or someone else at another time. For example, the trust may state that the income should be paid to the decedent’s surviving spouse when they die. The principal should only be paid to the surviving spouse if they are experiencing a medical emergency. It may further state that any funds left in the trust at the surviving spouse’s death be paid to their surviving children, other beneficiaries, or charities.
  • Taxes. When a trust is being administered, the fiduciary must provide a Schedule K-1, an annual income tax statement to each beneficiary who can be taxed on the income the trust earns. They must also file annual income tax returns for the trust. If the taxes are not filed and paid on time, the fiduciary may be held personally liable.
  • Investing. A fiduciary handling trust administration should invest within their state’s prudent investor rule that governs the estate or trust while adhering to the terms of the trust or will. They should always have a written investment policy that states their investment goals. Professional advice is often needed to ensure that wise investments are made. The proper assets are sold to obtain the cash needed for expenses, and capital gains and income taxes are minimized. This can also prevent an heir from claiming that the fiduciary violated trust investment laws or invested unwisely.

Closing an Estate

When an executor has distributed all assets, satisfied all expenses, taxes, and debts, and gotten clearance from the state and the IRS, they may close the estate. When an event such as the death of a beneficiary or the time that a beneficiary reaches a certain age occurs, a trust may be terminated. In some cases, a petition may need to be filed in court to distribute all remaining assets and close a trust or estate. Even if this is not necessary, it is a good idea to have an attorney prepare a document for all beneficiaries to sign that states they approve of the executor’s actions and have received the assets they are due.

When all these obligations are settled, the fiduciary must file a final income tax return and keep a reserve back for any unpaid estate expenses or taxes.

If you need the help of a Granite Bay decedent estates and trust administration lawyer, contact our office. We can offer your advice for every stage of the process.

Decedent Estate & Trust Administration

Our methods for handling estates and trust administration issues are unique. We offer legal assistance for a range of decedent estate and trust administration needs.

Mr. McCunn specializes in a holistic, project management approach which empowers you to make your own decisions throughout the process. He has a reputation as a peacemaker and his honest and pragmatic attitude towards divorce and other family law issues ensures you only pay for the services you need during your case.

“McCunn Law is a high-quality and highly knowledgeable legal team. I went into a consultation regarding child custody and was extremely happy with the plan and ultimately the results of my case. They create a plan with the client’s needs and wants in mind. Drummond is also great working with regarding what kind of budget a client would be able to afford. If I have any more legal needs in the future this is the office I will use every time.”

Megan P.

“McCunn Law is a high-quality and highly knowledgeable legal team. I went into a consultation regarding child custody and was extremely happy with the plan and ultimately the results of my case. They create a plan with the client’s needs and wants in mind. Drummond is also great working with regarding what kind of budget a client would be able to afford. If I have any more legal needs in the future this is the office I will use every time.”

Megan P.

“McCunn Law is a high-quality and highly knowledgeable legal team. I went into a consultation regarding child custody and was extremely happy with the plan and ultimately the results of my case. They create a plan with the client’s needs and wants in mind. Drummond is also great working with regarding what kind of budget a client would be able to afford. If I have any more legal needs in the future this is the office I will use every time.”

Megan P.