When the grantor or trustor of a trust dies the trust needs to be administered. It’s terms need to be followed and the assets transferred according to its terms. That process is called post mortem, or after death, trust administration. The successor trustee is obligated to carry out the terms of the trust and also obligated to meet any requirements of state law. Here in California one of the first requirements of a successor trustee when the trustor of a trust dies is to send out a notice under Probate Code Section 16061.7 to all the named beneficiaries in the trust and anyone who would be an heir at law of the decedent trustor, advising of their death, advising of the existence of the trust, providing them with a copy of the terms of the trust, and also advising them that if they wish to challenge the trust they must do so, if at all, within 120 days of the date of the notice or 60 days after receipt of a copy of the terms of the trust, whichever date is later.
That’s merely step one in post mortem trust administration. Then comes valuing assets and in gathering of assets, what we call marshalling assets. Valuing them either determine if estate taxes are due, file all income tax returns, any late gift tax returns, and of course prepare an estate tax return and the form 8971, which is a new requirement under the tax code to advise what basis is actually being transferred to the beneficiaries of the trust. It’s a complicated process. It takes many months and it requires a team effort of estate counsel, CPA, as well as the family and other advisors to make sure that the trust is administered properly and in accordance with its terms.
Note: The Tax Cut and Jobs Act of 2017 signed into law in December 2017 increased the exemption amounts mentioned in these videos. The personal estate, gift, and generation-skipping tax lifetime exemption was increased to $11.18 million per person. The annual gift tax exclusion was increased to $15,000 per donee per year.
Both amounts are indexed for inflation and may increase year over year until December 31, 2025, when the law sunsets and reverts to 2017 values.