If both of your parents have died and you are now the successor trustee, your first job usually is not to start distributing assets. Your job is to figure out what the trust requires, what your parents owned, how each asset is titled, and what needs to happen before beneficiaries receive anything.
Start by reviewing the trust and any amendments, confirming that you are now the acting trustee, and identifying the beneficiaries. Then locate and secure the assets—including real estate, bank and investment accounts—and determine their date-of-death values. Depending on the trust and circumstances, you may also need a new tax identification number (EIN), a trustee bank account, tax returns, creditor notices, appraisals and an accounting.
Be especially careful with retirement accounts. An IRA or 401(k) does not automatically become a trust asset just because the owner had a living trust. The beneficiary designation generally determines who receives the account, and different tax and distribution rules can apply if a trust was named as beneficiary.
Finally, don't rush distributions. A trustee can be personally responsible for mistakes. Before distributing the estate, you need to understand outstanding expenses, taxes, creditor issues, reserves, beneficiary rights and the trust's distribution instructions.
In plain English: first take control, then inventory, then value and administer, and only then distribute.
Suppose Mom and Dad lived in West Hills and created a living trust years ago. Dad died first, and Mom continued as trustee. Mom has now died, and their daughter, Susan, is named successor trustee.
At Mom's death, Susan discovers:
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West Hills home: approximately $1.3 million
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Checking and savings: $85,000
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Brokerage account: $425,000
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IRA: $180,000
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Car and personal property
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Two children: Susan and her brother, each receiving 50%
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Co-trustees: Susan and her brother are both named successor trustees
Susan shouldn't simply divide everything in half.
First, she needs to determine which assets actually belong to the trust. She'll need to confirm title to the house and financial accounts, obtain date-of-death values, determine whether a new EIN and trustee account are needed, review outstanding debts and taxes, and follow the trust's distribution provisions.
The IRA requires separate attention. If Susan and her brother are individually named beneficiaries, it generally passes under the beneficiary designation rather than through the trust. If the trust is the beneficiary, different and potentially complicated income-tax and distribution rules may apply.
And because Susan and her brother are co-trustees, they need to read the trust carefully before either starts acting alone. The trust terms and California law determine how co-trustees may exercise their powers.
The lesson: Being named successor trustee gives Susan authority, but it also gives her a job. Before distributing anything, she needs to know what she controls, what she owes, and what the trust actually requires.
Often, yes—but not simply because you became successor trustee.
While your parent was alive, a typical revocable living trust generally used your parent's Social Security number for tax reporting. After your parent dies and the trust becomes irrevocable, the trust may become a separate taxpayer and generally needs its own Employer Identification Number (EIN).
The successor trustee may need the EIN to open or retitle trust bank and investment accounts and to file any required federal fiduciary income tax return, Form 1041.
But don't automatically obtain an EIN before reviewing the trust and the assets. Some assets may pass directly to named beneficiaries rather than remain in the trust, and the post-death administration may involve an estate, one or more separate trusts, or both.
The practical rule: first determine what became irrevocable at death and which assets you're actually administering. Then determine which taxpayer needs an EIN.
Sometimes, but the trustee should be careful about distributing too much too soon.
A successor trustee generally needs to identify and value the trust assets, determine what the trust requires, address debts and expenses, consider taxes, and determine what each beneficiary is entitled to receive. If everything is distributed before those issues are resolved, there may be nothing left to pay an unexpected bill, tax liability, or administration expense.
That doesn't necessarily mean beneficiaries must wait until every last administrative detail is finished. A trustee may be able to make partial or preliminary distributions while keeping an appropriate reserve for remaining expenses and liabilities.
The trust terms matter, and so do the circumstances of the administration.
The practical rule: don't distribute the last dollar until you know what still needs to be paid and have kept enough in reserve to handle it.
Usually, co-trustees need to act together, but not always. Start with the trust itself.
The trust may specify how co-trustees make decisions, including whether both trustees must agree or whether one trustee can act independently in particular circumstances.
If the trust does not provide otherwise, California law generally requires unanimous action by co-trustees. There are exceptions. For example, if a co-trustee is unavailable because of absence, illness, or another temporary incapacity, the remaining co-trustee may sometimes act when prompt action is necessary to accomplish the purposes of the trust or avoid injury to trust property.
This becomes particularly important with bank accounts, investment decisions, selling the parents' home, paying beneficiaries, and signing documents.
The practical rule: before either sibling starts acting alone, read the trust's co-trustee provisions. Don't assume that being a trustee means you have all the powers of the trustee.
