Our attorneys provide legal advice to trustees and successor trustees who need assistance with trust settlement.
If you are named as trustee of a trust, it is important to learn about what will be expected of you, both by the family and under Oregon law.
A trust, or revocable living trust, is a commonly used legal tool for estate planning. Personal property and real estate are owned by the trust. The individual who is responsible for managing those assets upon the death of the trust’s creator, and ultimately distributing the assets to the beneficiaries, is called the successor trustee.
A successor trustee is named in the trust to manage someone’s affairs when they are unable to do so themselves. The role of the successor trustee is to carry out the terms of the trust and to manage the trust property. What that involves will depend on the unique aspects of the trust being administered, and the assets in play. It often includes the following tasks: identifying beneficiaries and secondary beneficiaries, paying administrative expenses, addressing creditors, distributing assets to the beneficiaries in accordance to the trust’s provisions, making arrangements for tax preparation, and holding a reserve fund to pay taxes, if necessary.
If someone named you as successor trustee of their trust, you are not obligated to accept the role as successor trustee. We encourage our clients to bring their successor trustees in for a conversation about what that job entails, if that is helpful to the family. Our office can advise you on what your duties may be if you decide to move forward. A successor trustee must locate and manage all trust assets, such as accounts, property, and real estate. The trustee must notify trust beneficiaries of the trust settlement and follow the instructions described in the trust document itself. Upon accepting the role of successor trustee, you will be serving in a fiduciary capacity and will owe certain duties to the beneficiaries of the trust. If these duties are not followed carefully, the successor trustee can become personally liable to the trust beneficiaries. It is important to make sure you understand the duties involved with serving as successor trustee before accepting the nomination.
Settling a trust is a private process, and the court is generally not involved. However, a trustee must still follow strict guidelines set forth in the trust document and Oregon law. A trustee (also referred to as a successor trustee) must administer the trust and manage its assets in good faith and in the best interests of the trust beneficiaries. There are duties regarding disclosures of information and duties requiring preparation of financial reports.
Successor trustees usually call upon legal, accounting, and investment professionals for assistance to efficiently settle the trust. The first step you should take as successor trustee is find an attorney to help walk you through your duties.
Below is a summary of the basic obligations of a successor trustee of a trust:
A successor trustee is authorized to deal with all facets of the trust estate. The successor trustee owes each beneficiary and each creditor a fiduciary duty. They must treat the trust assets with the same standard that a bank uses when it must safeguard assets. They must administer the trust solely in the best interests of the beneficiaries. A successor trustee also owes the beneficiaries a duty of impartiality – they cannot prefer one beneficiary over another. They must control and protect all trust property. A successor trustee also has a duty to keep records. Finally, a successor trustee has a duty to inform and report regarding trust administration.
A separate Tax Identification Number for the trust must be assigned by the IRS after the grantor passes away. A new trust account is set up under this Tax ID Number. That centralized account generally receives all of the assets as they are consolidated and old accounts are closed.
A trustee must keep “qualified beneficiaries” of the trust reasonably informed about trust settlement and of the material facts necessary for the beneficiaries to protect their interests. Qualified beneficiaries must promptly receive certain information, including a complete copy of the trust along with notification that the trust became irrevocable upon the death of the Grantor or Grantors.
At least annually, and upon termination of the trust, a Trustee Report must be sent to certain individuals. The report must include a list of trust property and liabilities, the market value of all assets, and all receipts and disbursements of trust property.
An Inventory of the trust assets should be compiled and provided to the beneficiaries. If any asset is owned solely in the decedent’s name, then a court process may be required to transfer property from the decedent to the trust.
A successor trustee will need to see that the final income tax returns are prepared for filing with the State and the IRS. If fiduciary income tax returns or other returns are necessary, a successor trustee should also ensure that those are prepared. The successor trustee also has a duty to ensure all estate-related tax returns are filed in a timely manner. If estate and gift tax returns are filed, qualified appraisals may be needed for certain assets.
When all the necessary tax returns have been filed and creditors have been paid, the trust will be ready for distribution. A successor trustee then prepares a final Trustee’s Report, accounting for all receipts and disbursements of the trust property to the beneficiaries, which will include a proposed distribution. The Trustee must also disclose any fee they propose to take. Once the proposed distributions are approved or a time to object has passed, the assets are distributed to beneficiaries, along with receipts which they sign.
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