Valuation of Assets at Death

When someone dies, it is necessary to value all the decedent’s assets.  This valuation is used to determine if a federal estate tax return is due, and the amount of estate tax, if any, which is payable.  The valuation is also used to determine the new income tax basis for assets owned by the decedent.  This valuation should be used whenever some dies and leaves assets, whether there is a federal estate tax return filed or not, and whether the decedent had assets in joint tenancy, subject to a living trust or covered by his or her will.

The valuation of assets at the death of an individual is determined by provisions of the Internal Revenue Code and regulations.  In some areas, it is very precise, while in other areas it is less precise.  The valuation procedure is the same whether the decedent died with sufficient assets to require the filing of a federal estate tax return, or the decedent had insufficient assets to require the filing of an estate tax return.

General rule for valuation
If the decedent was a United States citizen or permanent resident of the United States, he or she is taxed on all the assets owned anywhere in the world.  The value of the assets is the “fair market value” as of the date of death.  This is the price at which an asset would change hands between a willing buyer and willing seller, neither being under compulsion to buy or sell.

Valuation date
The valuation date is the date of death.  The federal government allows an alternate valuation date to be used for estate tax purposes, which is six months from the date of death.  All assets can be valued at either of those dates, but it is not possible to value some assets at the date of death and some assets later.  If the alternate valuation date is used, the value on both the date of death and the alternate date must be obtained and reported.

If the alternate valuation date is used, any assets that have been distributed or sold prior to the six-month period are valued, not at the end of the six-month period, but at the date of distribution or sale.  Any assets which change only due to a time factor, have the same value on both dates.  A bank account would be valued at the same value on both dates, since there is no change in value of the account, only additional interest from the date of death to the alternate date.

The alternate valuation date can only be used if it lowers the value of the estate for estate tax purposes, and lowers the amount of estate tax due.  If there is no estate tax due as of the date of death because the decedent’s total assets were worth less than the estate tax exemption, or if there is a surviving spouse and the estate is exempt from estate tax, then only the date of death value for all assets can be used.

Assets includable
All assets owned at death are subject to taxation.  This includes life insurance, securities, real estate, pension and profit sharing funds, IRA accounts, automobiles, furniture, income tax refunds for the year of death, and all other assets.  Even assets which are exempt from federal income tax, such as state bonds, are taxable for estate tax purposes.

If the decedent was married at the time of death, only the decedent’s half of any community property is includable along with all the decedent’s separate property.  Even though assets may avoid probate, such as assets in joint tenancy registration or subject to a beneficiary designation, they are taxable for estate tax purposes.

If the decedent owned a partial interest in an asset, such as a 25% interest in real property, then only the decedent’s partial interest is valued.

VALUATION OF SPECIFIC TYPES OF ASSETS

Real property
Real property is valued by obtaining a written appraisal for the property.  If the property is a single-family dwelling, a written appraisal can be obtained from a local real estate broker or agent.  This appraisal should be on the agent or broker’s letterhead, describing the property, the value, and how this value was determined.

For unimproved land or lots with a value of approximately $250,000 or less a written appraisal by a real estate broker or agent, as listed above, can be used.

For commercial property, such as an apartment complex, office building, farm, or similar types of property, an appraisal from a reputable appraiser needs to be obtained, and is more detailed than a simple “letter” report from an agent or broker.  It may run from a few pages to 10-20 pages.

Any costs of sale such as future brokerage commissions and other costs are not considered in valuing real property.

If a farm or ranch is involved, it is also necessary to value separately the farm equipment, livestock, and growing or harvested crops.

Stocks, bonds, and other securities
Stocks and bonds which are traded on a major stock or bond exchange or over the counter are valued by obtaining the average value between the high and the low for the security as of the date of death.  If a stock was selling between $18.50 and $19.50 per share on the date of death, the average, or $19.00 per share would be the value used. The closing price is not used.

If the decedent died on a weekend or holiday when the market was closed, the high and low price for the last trading date prior to the date of death and the next trading date after the date of death are then “re-averaged.”

For mutual funds, the value is the “bid” or public redemption price of that fund on the date of death.  If the decedent died on a weekend or holiday the bid or public redemption value of that fund is obtained for the last business day prior to the date of death.

With stocks which are trading “ex-dividend”  the amount of this dividend must also be reported, even though this amount is paid in the future.  For any bonds, accrued interest on the bond from the date of the last interest payment to the date of death must be reported.

In valuing bonds if there is no high and low for the date of death, the bond is valued by averaging the closing price on the date of death and the closing price on the last trading date prior to the date of death.

United States Treasury notes and bonds are valued the same as other bonds.

United States Treasury bills are valued at their redemption value, without interest, since interest is included in the price.

United States Savings Bonds, Series E, EE, and HH are valued at their redemption value for the month of death.  The federal government publishes tables each month showing the redemption value of these bonds depending upon their face amount and month and year of issue.  The value as shown on these tables is the same for the entire month.  Series G, K, and H savings bonds are valued at their face value at date of death, with no value for interest.

Cash
All cash must be listed.  If foreign currency is involved, it is valued at the current commercial or retail exchange rate on the date of death, or if the death is a holiday or weekend, it is obtained by averaging the exchange rate for the last business day prior to death and the first business day after death.

Any coins or bills which have a value at greater than their face value, such as silver certificates, are valued at their numismatic value.

Bank and savings and loan accounts
Accounts at banks, credit unions, and savings and loan associations are valued by taking the exact value in the account as of the date of death.  Any checks written prior to the date of death but which have not been deducted from the account as of the date of death should be reported separately, so that only the “net” value is listed.

Interest from the date of last payment until the date of death also must be computed and reported separately.

Mortgages and notes
If there were any loans outstanding at the date of death, either secured or unsecured, these are normally listed with the value as of the date of death and accrued interest from the date of last payment until the date of death.

A note may be reported at less than the balance or as uncollectable if satisfactory evidence is submitted to justify the lower value.

Partnerships, corporations, LLCs and business interests
Partnerships (limited and general), shares in a closely held corporation, interest in a limited liability company (LLC) and other business interests must be valued by determining the fair market value of the entity, and then valuing the decedent’s share or interest.  Frequently this is discounted.  Normally the accountant who handles the business tax returns would be the best person to determine the value.

Some partnership units for very large partnerships are traded on a secondary market and can be valued using the value that the units sell for on the date of death.

Vehicles, boats and airplanes
All vehicles, whether an automobile, RV, motorcycle, mobile home, and all boats and airplanes are valued separately by determining the sales value of the item at the time of death.  This can be done by checking various internet publications for automobiles and other items.  What a dealer would pay is not considered a proper valuation, but instead you would use what a buyer would pay to purchase the item.

Household furniture and furnishings.
Although the instructions from the Internal Revenue Service require an itemized appraisal of furniture and furnishings, most accountants disregard this and report the furniture and furnishings in a single entry, with a value of approximately $2,000-5,000.

The major exceptions are if the decedent’s will or living trust listed specific items, such as a diamond ring or piano, or if the decedent did have objects of significant value, such as a painting worth $10,000.  The federal estate tax return asks if there are any items of artistic or intrinsic value with any item valued at more than $3,000, or any collection of similar items valued at more than $10,000.

Life insurance
The proceeds received from any life insurance policy insuring the decedent’s life must be listed, even if the life insurance was owned by someone other than the decedent and is not taxable.  If a federal estate tax return is filed, it is also necessary to obtain a special IRS form (form 712) from the insurance policy for each policy.

If the decedent owned a life insurance policy on some else’s life, this policy must be listed and the cash value of the property as of the date of death must be reported.

Pension, profit-sharing, IRA, 401k, and other retirement accounts
All plan benefits under a retirement plan which the decedent had at death and which are paid after death to anyone are valued, using the rules set forth in IRS regulations.  If an IRA account was invested in stocks and bonds, these securities would be individually valued, using the rules for stocks and bonds.

Other assets
Any other assets are valued at death by attempting to determine their “fair market value.”  This would include book royalties, mineral interests, income tax refunds for the year of death, leaseholds, judgments, prepaid rents, taxes, annuities which continue with payments after death; and any other asset.

FILING OF FEDERAL ESTATE TAX RETURN

If the values for all the decedent’s assets as listed above for the decedent’s half of the community property and all the decedent’s separate property exceeds a certain amount, depending upon the year of death, a federal estate tax must be filed within nine months of the date of death (or an additional six-month period if there is an extension is obtained to file the return).  This is true even though there may be no tax due because of amounts passing to the surviving spouse, amounts passing to charities, or because of debts and expenses.  The amount of exemption before an estate tax return must be filed, depending upon the year of death, is:
2015    $5,430,000
2016    $5,450,000
2017    $5,490,000

If a federal estate tax return is filed, the Internal Revenue Service has up to three years to audit the return.  The service frequently checks values for traded securities and if these are incorrect they advise the person who filed the return and, if additional taxes are due, they bill for the taxes plus interest and possible penalties.

INCOME TAX BASIS OF ASSETS

If an estate tax return is filed, the new income tax basis of the assets for whoever inherits is the value shown on the estate tax return.  If no estate tax return is required, the value is the date of death value for each asset owned by the decedent, using the rules set forth above.

When a married person dies, and has assets in the decedent’s and spouse’s name as community property, or if the assets are held in a living trust as community property, then both the decedent’s half of each asset and the surviving spouse’s half both gets a new income tax basis at the date of death.  John Doe bought 100 shares of XYZ stock for $2,000.  He dies years later with the stock valued at $10,000.  The stock was held in a living trust as community property.  Both his 50 shares and his wife’s 50 shares would each get a new valuation, and the stock would now have an income tax basis of $10,000, with the $8,000 potential capital gain being canceled.  If the stock was all the decedent’s separate property, the same would be true.

If the decedent held the stock in joint tenancy with his wife, only the decedent’s half of the joint tenancy gets a new value.  In the above example, if the stock were in joint tenancy, then the decedent’s one-half, of 50 shares would get a new value of $5,000, while the wife’s one-half would stay at the original cost of $1,000.

If the decedent is not married at the time of death than all the assets listed on the estate tax return or owned at the date of death if there is no estate tax return get a new value at the date of death, even if the asset is in joint tenancy.

CONCLUSION

The valuation of assets at the date of death can be complicated and confusing.  It is important that the surviving spouse, children, executor, or trustee, whoever is handling matters, gets competent advice from an accountant or attorney to be sure that the values used are correct and those values will be used for trusts, estates and income tax purposes.

 

 

Administration of a Joint Husband and Wife California Living Trust upon the Death of the Surviving Spouse

California law requires that the trustee or trustees of a living trust take certain legal action when the trust terminates, or upon the death of the surviving spouse.

A husband and wife establish a revocable living trust and transfer assets into their names as trustees of the trust.  Then one of the spouses dies and the trust assets are divided into either two or three subtrusts.  Trust A, which is also called the survivor’s trust, marital trust, or something else, is the revocable trust for the benefit of the surviving spouse and contains the surviving spouse’s assets

Trust B, also called the family trust, residual trust, or some other name, was previously established when the first spouse died and contained an amount which either was the maximum exempt from estate tax when the first spouse died, or the total assets the first spouse owned in the trust at the time of his or her death.  This became an irrevocable trust when the first spouse died and generally is for the benefit of the surviving spouse, with the surviving spouse as the sole trustee.

What action has to be taken with regard to these two trusts when the surviving spouse dies?

A number of things have to be done, depending upon the terms of the living trust.  The successor trustees who are designated in the trust document must take some actions which are legally required by the trust document, California law, and federal tax law.

The first concern is who the successor trustee is?  In the trust agreements or trust declarations there is normally a statement as to who the successor trustee is—who takes over the management of all of the trusts upon the death of the surviving spouse.  In many cases it is a child or children.  In some cases it is a bank or trust company.  If there are several trustees, then they must all act jointly in connection with the management of the trusts.  Whoever the trustee or trustees are have the legal responsibility to see that a number of actions are undertaken.  If these are not done or are done incorrectly then the trustee or trustees may be liable for additional taxes or may be liable to the trust beneficiaries for mistakes which are made, even if made in good faith.

 TRUST A
Trust A was the survivor’s revocable trust and in most cases the surviving spouse was the trustee until he or she died.

Re-registration of Assets
The successor trustee or trustees need to re-register the assets in the name of the successor trustee or trustees.  If John and Mary Doe establish a living trust, John Doe and Mary Doe both die, and Helen Doe Smith is the successor trustee, then the assets should be re-registered in the name of “Helen Doe Smith, Trustee of the Mary Doe and John Doe Living Trust dated August 17, 1999—Trust A.”  A certified copy of the death certificate and a certification of the trust need to be provided to each institution or party holding title to assets, such as stock brokers, mutual funds, banks, general partners of a limited partnership, and others.  Financial institutions may have the trustee or trustees complete additional paperwork.

No distributions should be made from the trust immediately; the trust assets should be retained until debts, taxes and other expenses are paid.

Tax Identification Number
Normally, the surviving spouse was using his or her social security number for the assets in Trust A.  If not previously obtained, a tax identification number for Trust A needs to be obtained from the IRS.  This is done by completing IRS form SS-4 and submitting it to the IRS Service Center or doing this online.  If mailed in, the IRS will mail the number to the trustee or trustees within approximately four weeks.  This number is used in place of a social security number for all of the trust assets in Trust A.  A trust income tax return will also have to be filed for the trust as of December 31st of each year until the trust ends and the assets are completely distributed.

The income from January 1st until the date of death is taxed to the surviving spouse.  The income from the date of death until December 31st will be taxed either to the parties who receive the trust assets or to the trust, depending on whether the income is distributed or accumulated in the trust.

Trust Certification
California law allows a “certification” with regard to the trust.  This certification is merely a typed statement which lists the current trustee or trustees, tax identification number, powers of the trustee or trustees, and other pertinent provisions of the trust and is signed by the successor trustee or trustees and notarized.  This certification, along with a certified copy of the death certificate of the deceased spouse, is submitted to each organization to transfer assets into the name of the successor trustee or trustees.

Change of Ownership Statement for Real Property
Whenever an owner of California real estate dies it is necessary to file a special statement entitled “Change of Ownership Statement—Death of Real Property Owner” with the county assessor of each county where real estate is owned.  This notifies the county assessor whether the property is subject to reassessment for real estate tax purposes or is exempt from reassessment.  A statement for each separate parcel of real estate which is in Trust A is to be filed within 145 days of the date of death.

Change in Title to Real Property
An “Affidavit-Death of Trustee” is a real estate form which is recorded for each parcel of real estate in the trust, along with a certified copy of the death certificate.  This changes title of the property or properties into the names of the new trustee or trustees.

Preliminary Change of Ownership Report
Whenever any change of ownership to real property occurs, it is necessary to file a real estate form called “A preliminary change of ownership report.”  This document notifies the county assessor whether real estate is subject to reassessment or not.  This is normally filed whenever there is a document which is recorded which changes title to the real property, such as an “Affidavit-Death of Trustee.”

Real property passing to children of the deceased, sons-in-law, daughters-in-law, and, in some cases, to children of a deceased child is exempt from reassessment as to the decedent’s residence and up to $1,000,000 of other real estate, based on the real estate’s assessed valuation as of the date of death.  Transfers to other relatives who inherit or someone not related to the deceased trigger a reassessment.  The property is reassessed as of the date of death at its fair market value, and the real estate taxes are increased accordingly to 1 to 1.2% of this value.  A supplemental real estate tax bill is later mailed, if required, for the year of death.

Filing Original Will
California law requires that within 30 days of the date of death the original will of the deceased along with any codicils be filed with the county clerk in the county where the deceased resided at the time of death.  This includes all original wills and codicils, even if they have been revoked.  These documents are “filed” with the county clerk. The court filing fee is $50.00.  In addition, a copy of the will must be mailed to the person named in the will as executor, even if probate may not later be undertaken.

Notifying all Trust Beneficiaries and Heirs
Since 1998 it is necessary within 60 days of the date of death to notify in writing all trust beneficiaries and the deceased’s heirs at law of the living trust and to send them a special notice of the living trust and copies of portions of the trust.  Once the notice is mailed, then a party only has 120 days from the date of the mailing of the notice to contest the trust.  Each party must be advised of his or her right to contest the trust.  If the notice is not mailed, then a beneficiary may have up to four years or longer to contest the trust.  There are potential damages, including attorney’s fees and costs, if the trustee or trustees do not mail notice and comply with all of the legal requirements.

Notice to Creditors
There is a special provision in California law allowing a notice to creditors to be filed in a living trust similar to that used in a probate procedure.  This requires a filing with the county clerk and publication of a notice three times in a local newspaper.  The costs can run $700-1,000 in addition to attorney’s fees.  Special notice must also be mailed to any known creditors of the deceased.  Creditors then have maximum of four months to file a claim in the trust, with some exceptions.  If a claim is not filed and all procedures have been followed, the creditors lose their right to payment.

While this procedure is not legally required, if it is not done a creditor could have a period of up to three to four years to seek payment.  If the trustee does not use this procedure and a creditor later appears, the trustee or trustees may be personally liable because they failed to follow this procedure.

Valuation of Assets
It is necessary to value all assets in Trust A as well as all assets which the decedent owned which were not in the trust as of the date of death.

The value which is used is the fair market value as of the date of death.  Stocks and bonds must be valued by taking the average between the high and the low as of the date of death.  If the deceased died on a weekend or holiday, the average between the high and low for Friday and Monday must be re-averaged.  Mutual funds take the closing price on the date of death.  Other assets such as real property, partnerships, automobiles and certain other assets need a written or appraised value by a competent appraiser such as a real estate agent or broker for real property.  A valuation for all assets, in and out of the trust, should be obtained.  This includes life insurance, IRA accounts, 401k plans, etc.  Furniture and furnishings are not normally valued unless they have a high value.  Generally, a value of $2,000-10,000 is used for personal items.

Under federal and California income tax law all assets of the decedent, including all assets in Trust A get a “new” income tax value as of the date of death.  Most brokerage firms and mutual funds can provide the value of investments.  All potential capital gains are eliminated at death, and the assets are treated as if they were purchased for their value as of the date of death.

Federal Estate Tax Return
A federal estate tax return must be filed if the deceased’s assets exceed a gross value of a certain amount.  This value is based on all assets, whether in the living trust or not.  If there is a Trust C, then the assets in Trust C also need to be valued since these assets will also be subject to estate tax.

If this total, before deducting any expenses or costs, exceeds the following amount, a federal estate tax return must be filed within nine months of the date of death.  If necessary, an extension can be obtained for up to six months to file the return.

Year of Death                                     Exempt Amount
2015                                                      5,430,000
2016                                                      5,450,000

The tax rate on the excess, above the estate tax exemption, is 40%.

Probate
Normally, a living trust avoids probate.  However, occasionally, someone dies and has too many assets outside the living trust.  These assets, not in the trust, may have to go through probate.

California does not require a probate unless the assets outside the living trust exceed the value of $150,000 as of the date of death.  In addition, this figure does not include any assets in joint tenancy, any vehicles, or any assets where a beneficiary is specifically named such as life insurance or IRA accounts.  If a probate is not required, then the trustee or trustees of the living trust have to wait for 40 days from the date of death.  They can then sign a special certification form and transfer the assets into Trust A, or to whoever is legally entitled to the assets.

If the total amount of assets outside Trust A, and over and above the excluded assets listed above, is worth more than $150,000 as of the date of death, these assets will have to go through probate before they can be placed in Trust A.

DISTRIBUTING TRUST A
After the federal estate tax return is filed or, if there is no return, approximately nine months from the date of death, consideration is given to distributing the assets in Trust A.  Assets in Trust A can be sold or divided among various parties if the parties agree.  One beneficiary may wish to take California tax exempt bonds; another beneficiary may wish the real property, etc.  Normally, division is made based on the values as of the date of distribution, again provided the parties agree.  If there is no agreement and the assets in Trust A pass to the three children, then each child would get one-third of each asset.

Once a decision has been made as to the division of the trust assets, a detailed list should be prepared showing the allocation of assets to the various beneficiaries.  This list should itemize all of the assets with their value on the estate tax return or date of death value if no estate tax return is necessary and then show the allocation to the respective parties.  The list is then signed by the trustee or trustees and retained should any questions arise as to how the assets were divided.

If Trust A continues in whole or part as a trust, then the trustee or trustees need to re-register assets in the trustee’s names, keep records, invest funds subject to the provisions in the trust document and California law, and provide the trust beneficiary or beneficiaries with an annual accounting.

Re-registration of Assets in Beneficiaries Names
After a division has been decided and a list signed, then the assets need to be registered in the names of the various beneficiaries. Again, each transfer agent, bank, brokerage firms, etc., is contacted and a transfer of title undertaken.  New deeds are recorded with regard to each parcel of real estate.  After re-registration is completed, a receipt should be obtained from each beneficiary for the assets delivered and these receipts are retained by the trustees to show that the assets have been delivered.

Accounting
In addition, the trustee or trustees of any trust created after July 1, 1987, must file annual accountings with the trust beneficiaries, and also do an accounting upon a change of trustees and upon the termination of the trust.  Unless the accounting is waived by all of the trust beneficiaries, the accounting must show the assets on hand as of the date of death with their values, income received, disbursements, assets sold with the gain or loss being listed, and when distribution occurs, the accounting must show the assets on hand with both their date of death and current fair market values.

TRUST B
Trust B has normally been an irrevocable trust with the surviving spouse as the beneficiary of the trust and the sole trustee.  Upon the surviving spouse’s death, the designated trustee or trustees must take over the administration of the trust.

Tax Identification Number
A tax identification number was obtained for Trust B when it was created.  This number will continue to be used for the assets in Trust B, and a new tax identification number is not needed.

Trust Income Tax Returns
The income from January 1st until the date of death is taxed to the surviving spouse.  The income from the date of death until December 31st will be taxed either to the parties who receive the trust assets or to the trust, depending on how matters are handled.  Trust income tax returns, federal and California, must be filed until Trust B is terminated and assets are completely distributed.

Trust Certification
California law allows a “certification” with regard to the trust.  This certification is merely a typed statement which lists the current trustee or trustees, tax identification number, powers of the trustee or trustees, and other pertinent provisions of the trust and is signed by the successor trustee or trustees and notarized.  This certification, along with a certified copy of the death certificate of the deceased spouse, is submitted to each organization to transfer assets into the name of the successor trustee or trustees as trustees of Trust B.

Assets will be registered in the name of the new or successor trustee or trustees.  “Helen Doe Smith, Trustee of the John Doe and Mary Doe Living Trust dated August 17, 1999—Trust B.”

Change of Ownership Statement as to Real Property
If there is any California real estate owned in Trust B it is necessary to file a special statement entitled “Change of Ownership Statement—Death of Real Property Owner” with the county assessor of each county where real estate is owned.  This notifies the county assessor whether the property is subject to reassessment for real estate tax purposes or is exempt.  A statement for each separate parcel of real estate which is in Trust B is to be filed within 145 days of the date of death.

Change in Title to Real Property
An “Affidavit-Death of Trustee” is a real estate form which is recorded for each parcel of real estate in Trust B, along with a certified copy of the death certificate.  This changes title of the property or properties into the names of the new trustee or trustees.

Preliminary Change of Ownership Report
Whenever any change of ownership to real property occurs, it is also necessary to file a real estate form called “A preliminary change of ownership report.”  This document notifies the county assessor whether real estate is subject to reassessment or not.  This is normally filed whenever there is a document which is recorded which changes title to the real property such as an “Affidavit-Death of Trustee.”

Real property passing to children of the deceased, sons-in-law, daughters-in-law, or to children of a deceased child is all exempt from reassessment, subject to the exemptions listed above.  Transfers to other relatives who inherit or someone not related to the deceased trigger a reassessment.  The property is reassessed as of the date of death at its fair market value and the real estate taxes are increased accordingly to 1 to 1.2% of this value.  A supplemental real estate tax bill is later mailed, if required, for the year of death.

DISTRIBUTING TRUST B
Trust B is not normally subject to estate taxes.  The assets can be distributed approximately three to nine months after the death of the surviving spouse.  Assets in Trust B can be sold or divided among various parties if the parties agree.  One beneficiary may wish to take California tax exempt bonds; another beneficiary may wish the real property, etc.  Normally, division is made based on the values as of the date of distribution, again provided the parties agree.  If there is no agreement and the assets in Trust B pass to the three children, then each child would get one-third of each asset.

Once a decision has been made about the division of the trust assets, a detailed list should be prepared showing the allocation of assets to the various beneficiaries.  This list should itemize all of the assets with their value on the estate tax return or date of death value if no estate tax return is necessary and then show the allocation to the respective parties.  The list is then signed by the trustee or trustees and retained should any questions arise as to how the assets were divided.

If Trust B continues in whole or part as a trust, then the trustee or trustees need to re-register assets in the trustees’ names, keep records, invest funds subject to the provisions in the trust document and California law, and provide the trust beneficiary or beneficiaries with an annual accounting.

Re-registration of Assets in Beneficiaries Names
After a division has been decided and a list signed, then the assets need to be registered in the names of the various beneficiaries. Again, each transfer agent, bank, brokerage firms, etc., is contacted and a transfer of title undertaken.  New deeds are recorded for each parcel of real estate.  After re-registration is completed, a receipt should be obtained from each beneficiary as to the assets delivered and these receipts are retained by the trustees to show that the assets have been delivered.

Accounting
In addition, the trustee or trustees of any trust created after July 1, 1987, must file annual accountings with the trust beneficiaries, and also do an accounting upon a change of trustees and upon the termination of the trust.  Unless the accounting is waived by all of the trust beneficiaries, the accounting must show the assets on hand as of the date of death with their values, income received, disbursements, assets sold with the gain or loss being listed, and, when distribution occurs, the accounting must show the assets on hand with both their date of death and current fair market values.

SUMMARY
It is important to administer the various living trusts correctly upon the death of the surviving spouse.  There are many legal requirements for the trustee or trustees when the second spouse dies and the trust assets are distributed.  The failure to follow the law properly can result in possible litigation, the trustee being personally liable for damages, and the trust being attacked by the Internal Revenue Service.

It is very important for the trustee or trustees to have an attorney and accountant or tax preparer who are familiar with the law and the handling and administration of trusts in California as advisors.

© Milton Berry Scott, 1998-2016

Revised January 3, 2016

 

 

Administration of a Joint Husband and Wife California Living Trust upon the Death of the First Spouse

California law imposes duties upon the successor trustee or trustees of a living trust when a trustor dies and part of the trust becomes irrevocable.

A husband and wife establish a revocable living trust and transfer assets into their names as trustees of the trust.  Then one of the spouses dies.  What action has to be taken by the successor trustee or trustees of this trust?

A number of things have to be done, depending upon the terms of the living trust.  The successor trustee or trustees who are designated in the trust document must take some actions which are legally required by the trust document, California law, and federal tax law.

The first concern is determining who the successor trustee is.  In most trust agreements or trust declarations, the surviving spouse is the sole successor trustee.  In other cases, the surviving spouse and a child or children are the successor trustees.  The trustee or trustees have the legal responsibility to see that a number of actions are undertaken.  If these are not done or are done incorrectly, then the trustees may be liable for additional taxes or may be liable to the ultimate trust beneficiaries for mistakes which are made, even if made in good faith.

Most living trusts established by husband and wife are revocable living trusts until the death of the first spouse.  Then the trust is divided into either two or three sub-trusts.

One of the two trusts contains the deceased spouse’s half of the community property and all of the deceased spouse’s separate property, but no more than the federal estate tax exemption existing in the year of death.  This sub-trust is frequently referred to as Trust “B.”  It also may be called the “family trust,” “residuary trust,” “bypass trust,” or something else.  They all mean the same thing.  The largest amount which can be placed in this trust is the federal estate tax exemption for the year of death.  In 2016 this is $5,450,000.  This trust becomes irrevocable, and the terms cannot be changed.

The remainder of the assets passes to a second sub-trust designated as “Trust A.”  This trust contains the surviving spouse’s half of the couple’s community property plus the survivor’s separate property, if any.  In addition, if the deceased’s assets exceed the estate tax exemption then the excess over this exemption is placed in the survivor’s trust.  Trust A continues as a revocable trust, revocable by the surviving spouse.

As long as the surviving spouse is a United States citizen, then there is no estate tax at the death of the first spouse no matter how large the decedent’s estate.

ADMINISTRATIVE TRUST
In most trusts, no matter how the assets are divided, the assets are initially held in one trust, called an administrative trust, for a period of from 6-12 months, until all bills and debts are paid, values of all of the assets are obtained, an estate tax return is filed (if required), and all other legal matters are completed.

The successor trustee or trustees need to re-register the assets in the name of the successor trustee or trustees.  If John and Mary Doe established a living trust, John Doe dies, and Mary Doe is the successor trustee, then the assets should be re-registered in the name of “Mary Doe, Trustee of the Mary Doe and John Doe Living Trust dated August 17, 1999.”  A certified copy of the death certificate and a certification of the trust need to be provided to each institution or party holding title to assets, such as stock brokers, mutual funds, banks, general partners of a limited partnership and others.

Tax Identification Number
A tax identification number for the administrative trust needs to be obtained from the local IRS Service Center, online at the IRS website, or through the decedent’s accountant or tax preparer.  This is done by completing IRS form SS-4 and submitting it to the appropriate IRS Service Center or online. If mailed in, the Center will mail the number to the trustee or trustees within approximately four weeks.  This number is used in place of a social security number for all of the trust assets.  Trust income tax returns (federal and California) will also have to be filed as of December 31st of each year.

Trust Certification
California law allows a “certification” with regard to the trust.  This certification is merely a typed statement which lists the current trustee or trustees, tax identification number, powers of the trustee or trustees, and other pertinent provisions of the trust and is signed by the successor trustee or trustees and notarized.  This certification, along with a certified copy of the death certificate of the deceased spouse, is submitted to each organization to transfer assets into the name of the successor trustee or trustees.

 
Many financial institutions will also have their own forms to be signed and occasionally notarized.

Change of Ownership Statement as to Real Property
Whenever the owner of California real estate dies, it is necessary to file a special statement entitled “Change of Ownership Statement–Death of Real Property Owner” with the county assessor of each county where real estate is owned.  This notifies the county assessor whether the property is subject to reassessment for real estate tax purposes or is exempt.  A statement for each separate parcel of real estate is to be filed within 145 days of the date of death.

This statement lists who inherits the property and is signed by the trustee or trustees.  If the property is in a living trust, the beneficiary of the trust who can live in the property or who receives the income from rental of the property is the person considered under assessment rules as the person who inherits the property.  Copies of the trust document and all amendments must be sent in with this form

Change in Title to Real Property
An “Affidavit-Death of Trustee” is a real estate form which is recorded for each parcel of real estate in the trust, along with a certified copy of the death certificate.  This changes title of the property or properties into the names of the new trustee or trustees.

Preliminary Change of Ownership Report
Whenever any change of ownership for real property occurs, it is necessary to file a real estate form called “A preliminary change of ownership report.”  This document notifies the county assessor whether real estate is subject to reassessment or not.  This is normally filed whenever there is a document which is recorded which changes title of the real property, such as an “Affidavit-Death of Trustee.”  It is sent in with the Affidavit to the county recorder when the Affidavit is filed for recording.

Real property passing to the surviving spouse or a trust for the surviving spouse’s benefit, to children of the deceased, sons-in-law, daughters-in-law, and, in some cases, to children of a deceased child is exempt from reassessment as to the decedent’s residence and up to $1,000,000 of other real estate based on the real estate assessed valuation as of the date of death.  Transfers to other relatives or someone who is not related to the deceased triggers a reassessment of the property and increase in the real estate taxes.  If the property is reassessed as of the date of death it is reassessed at its fair market value and the real estate taxes are increased accordingly to 1 to 1.2% or more of this value.  A supplemental real estate tax bill will later be mailed, if the property is reassessed, for the year of death.

Filing Original Will
California law requires that within 30 days of the date of death the original will of the deceased along with any codicils be filed with the county clerk in the county where the deceased resided at the time of death.  This includes all original wills and codicils, even if they have been revoked.  These documents are “filed” with the county clerk, and if there is no probate required, then there is a filing fee of $50.  In addition, a copy of the will must be mailed to all the persons named in the will as executor, even if no probate is necessary.

Notifying all Trust Beneficiaries and Heirs
Since 1998 it is necessary, within 60 days of the date of death, to notify in writing all trust beneficiaries and the deceased’s heirs at law of the living trust and to send them a special notice of the living trust and copies of portions of the trust.  Since the beneficiaries who receive the trust assets are not fixed until the death of the second spouse, many contingent parties may have to be notified.  Once the notice is mailed, then a party  has only 120 days from the date of the mailing of the notice to contest the trust.  Each party must be advised of his or her right to contest the trust.  If the notice is not mailed then a beneficiary may have up to four years or longer to contest the trust.  There are potential damages, including attorney’s fees and costs, if the trustee or trustees do not mail notice and comply with all of the legal requirements.

Notice to Creditors
There is a special provision in California law allowing a notice to creditors to be filed in a living trust similar to that used in a probate procedure.  This requires a filing with the county clerk and publication of a notice three times in a local newspaper.  The costs can run $700-1,000 in addition to attorney’s fees.  Special notice must also be mailed to any known creditors of the deceased.  Creditors then have a maximum of four months to file a claim in the trust, with some exceptions.  If a claim is not filed and all procedures have been followed, the creditors lose the right to payment.

While this procedure is not legally required, if it is not done a creditor could have a period of up to three to four years to seek payment.  If the trustee does not use this procedure and a creditor later appears, the trustee or trustees may be personally liable because they failed to follow this procedure.

Valuation of Assets
It is necessary to value all assets in the trust, as well as all assets which the decedent owned which were not in the trust, as of the date of death.  All community property (both halves) and all of the deceased’s separate property, if any, should be valued.  The surviving spouse’s separate property, if any, is not valued.

The value which is used is the fair market value as of the date of death.  Stocks and bonds must be valued by taking the average between the high and the low as of the date of death.  If the deceased died on a weekend or holiday, the average between the high and low for Friday and Monday must be re-averaged.  Mutual funds take the closing price on the last business day before the date of death.  Other assets such as real property, partnerships, automobiles and certain other assets need a written or appraised value by a competent appraiser such as a real estate agent or broker for real property.  A valuation for all assets, in and out of the trust, should be obtained.  This includes life insurance, IRA accounts, 401k plans, etc.  Furniture and furnishings are not normally valued unless they have a high value.  Generally, a value of $2,000-10,000 is used for personal items.

Under federal and California income tax law all community property assets (both halves) and all of the decedent’s separate property get a “new” income tax value at the date of death.  Most brokerage firms and mutual funds can provide the value of investments.  All potential capital gains are eliminated at death and the assets are treated as if they were purchased for the value as of the date of death.

Federal Estate Tax Return
A federal estate tax return must be filed if the deceased’s assets exceed a gross value of a certain amount.  This value is based on all assets, whether in the living trust or not.  The value is based on one-half of the couple’s community property and all of the deceased’s separate property, if any.

If this total, before deducting any expenses or costs, exceeds the following amount, a federal estate tax return must be filed within nine months of the date of death.  If necessary, an extension can be obtained for up to six months to file the return.

Year of Death                                     Exempt Amount    Tax Rates
2015                                                      5,430,000          40%
2016                                                      5,450,000          40%

California has no estate or inheritance tax, and no reporting is required.

Probate
Normally, assets in a living trust avoid probate.  However, occasionally someone dies and has too many assets outside the living trust.  These assets not in the trust may have to go through probate.

California does not require a probate unless the assets outside the living trust exceed the value of $150,000 as of the date of death.  In addition, this figure does not include any assets in joint tenancy, any vehicles, or any assets where a beneficiary is specifically named such as life insurance or IRA accounts.  If a probate is not required, then the trustee or trustees of the living trust have to wait for 40 days from the date of death.  They can then sign a special certification form and transfer the assets into the living trust, or to whoever is legally entitled to the assets.

If the total outside the living trust and over and above the excluded assets listed above is worth more than $150,000 as of the date of death, these assets will have to go through probate before they can be placed in the living trust.

DIVIDING THE TRUST
After the federal estate tax return is filed, or if there is no return, approximately three to six months from the date of death, consideration is given to dividing the trust into two sub trusts.  This division is based on the date of death values and is up to the trustee or trustees.

Trust B (or whatever term is used) contains an amount up to the federal estate tax exemption, but no more than the deceased’s half of the community property and all of the deceased’s separate property, reduced by the debts and costs (legal fees, funeral expenses, accountant’s charges, etc.).  If a couple has a $4,000,000 of community property in trust after expenses, only one-half, or $2,000,000 may go into Trust B.  If there was $12,000,000 of community property, after expenses, then a maximum of $5,450,000 would go into Trust B.

Tax Identification Numbers
When it is time to fund the various trusts a tax identification number must be obtained from the Internal Revenue Service for Trust B.  If the survivor is the trustee or co-trustee of Trust A, a tax identification number is not needed for Trust A, and the survivor’s social security number can be used for this trust.

Once assets are transferred into Trust B an annual federal and California income tax return must be filed for this trust each year.  Normally, no trust tax return is necessary for the survivor’s trust, Trust A, and the tax information for these assets can be reported on the survivor’s personal income tax returns.

Re-registration of Assets
After a division has been decided and a list signed, then the assets need to be re-registered in the name of the trustee or trustees with regard to the respective trusts.  Assets should be registered in the name of “Mary Doe, Trustee of the Mary Doe and John Doe Living Trust dated August 17, 2009-Trust A” (or Trust B).  The social security number or tax identification number for that respective trust should be used.

Again, each transfer agent, bank, brokerage firm, etc., is contacted and a transfer of title undertaken.  New deeds are recorded for each parcel of real estate.

Trustees’ Duties
Once a trust becomes irrevocable, the trustee or trustees must follow certain laws regarding the handling of the trusts.  The trustee or trustees must invest the funds in accordance with the trust agreement or declaration and following the California Uniform Prudent Investors Act.  Also, the trustee or trustees must keep records for the trusts and file annual trust income tax returns.

In addition, the trustee or trustees of any trust created after July 1, 1987, must file annual accountings with the trust beneficiaries who receive payments from the trust and also do an accounting upon a change of trustees and upon the termination of the trust.  This accounting can be waived in writing and is not required if the sole trust beneficiary and the trustee are the same person.  Other people who have a future interest in the trust, even though the interest is remote, may demand and receive an accounting each year.

Trust beneficiaries also have the right to request certain information such as assets on hand, sales, purchases, etc., from the trustee or trustees on a regular basis.

 SUMMARY
Upon the death of the first spouse, it is important to set up and administer a living trust or trusts established by husband and wife.  There are many legal requirements for the trustee or trustees when the first spouse dies and a portion of the trust becomes irrevocable.  The failure to follow the law properly can result in possible litigation, the trustee being personally liable for damages and the trust being attacked by the Internal Revenue service as invalid because of its improper administration, and a much larger estate tax at the second spouse’s death may be imposed.

It is very important for the trustee or trustees to have an attorney and accountant or tax preparer that is familiar with the law and the handling and administration of trusts in California as advisors.

© Milton Berry Scott, 1998-2016

Revised January 18, 2016

Administration of a California Living Trust for a Single Person upon the Death of that Individual

A single individual establishes a revocable living trust and transfers assets into his or her name as trustee of the trust.  Then the individual dies.  What action has to be taken by the successor trustee or trustees of this trust?

California law requires that the trustee or trustees take certain legal actions.

A number of things have to be done, depending upon the terms of the living trust.  The successor trustee or trustees who are designated in the trust document must take some actions which are legally required by the trust document, California law, and federal tax law.

The first concern is determining who the successor trustee is?  In most trust agreements or trust declarations the original trustor or settlor was the sole trustee.  Upon that person’s death, a child or children are frequently the successor trustees.  The trustee or trustees have the legal responsibility to see that a number of actions are undertaken.  If these are not done or are done incorrectly, then the trustees may be liable for additional taxes or may be liable to the ultimate trust beneficiaries for mistakes which are made, even if made in good faith.

ADMINISTRATIVE TRUST
In most trusts, the assets are initially held in one trust, called an administrative trust, for a period of from 6-12 months, until all bills and debts are paid, values of all of the assets are obtained, an estate tax return is filed (if required), and all other legal matters are completed.

The successor trustee or trustees need to re-register the assets in the name of the successor trustee or trustees.  If Mary Doe established a living trust and upon her death John Doe, the son, is the successor trustee, then the assets should be re-registered in the name of “John Doe, Trustee of the Mary Doe Living Trust dated August 17, 1999.”  A certified copy of the death certificate and a copy or a certification of the trust need to be provided to each institution or party holding title to assets, such as stock brokers, mutual funds, banks, general partners of a limited partnership, and others.

 Tax Identification Number
In most cases the original trust creator, called the trustor or settlor, was the original trustee and no tax identification number was needed.  The party used his or her social security number for trust assets.  Upon the person’s death, a tax identification number must be obtained and used for all trust assets.

This tax identification number for the administrative trust needs to be obtained from the IRS.  This is done by completing IRS form SS-4 and submitting it to the IRS, completing an online form at the IRS website, or having a CPA or enrolled agent obtain a number for the trust.  The IRS will mail the number to the trustee or trustees within approximately four weeks.  This number is used in place of a social security number for all of the trust assets.  Trust income tax returns (federal and California) will also have to be filed as of December 31st of each year, starting in the year of death.

Trust Certification
California law allows a “certification” with regard to the trust.  This certification is merely a typed statement which lists the current trustee or trustees, tax identification number, powers of the trustee or trustees, and other pertinent provisions of the trust and is signed by the successor trustee or trustees and notarized.  This certification, or a copy of the trust document, along with a certified copy of the death certificate of the deceased, is submitted to each organization to transfer assets into the name of the successor trustee or trustees.

Change of Ownership Statement for Real Property
Whenever an owner of California real estate dies, it is necessary to file a special statement entitled “Change of Ownership Statement—Death of Real Property Owner” with the county assessor of each county where real estate is owned.  This notifies the county assessor whether the property is subject to reassessment for real estate tax purposes or is exempt.  A statement for each separate parcel of real estate is to be filed within 145 days of the date of death.  A copy of the trust agreement and all trust amendments should be mailed to the assessor with the form.

Death is a change of ownership and causes the real property to be reassessed for real estate tax purposes at its current value, subject to limited exemptions to spouse or children.

Change in Title to Real Property
An “Affidavit-Death of Trustee” is a real estate form which is recorded for each parcel of real estate in the trust, along with a certified copy of the death certificate.  This changes title of the property or properties into the names of the new trustee or trustees.

Preliminary Change of Ownership Report
Whenever any change of ownership for real property occurs, it is necessary to file a real estate form called “A preliminary change of ownership report.”  This document notifies the county assessor whether real estate is subject to reassessment or not.  This is normally filed whenever there is a document which is recorded which changes title of the real property, such as an “Affidavit-Death of Trustee.”

Real property passing to a spouse, children of the deceased, sons-in-law, daughters-in-law, and, in some cases, to children of a deceased child is exempt from reassessment.  The exemption applies to the residence of the decedent and to other real estate with a value of not more than $1,000,000 based on the assessed value as of the date of death.  Transfers to other relatives or someone who is not related to the deceased triggers a reassessment.  The property is reassessed as of the date of death at its fair market value and the real estate taxes are increased accordingly to 1% or more of this value.  A supplemental real estate tax bill is later mailed, if required, for the year of death.

Filing Original Will
California law requires that within 30 days of the date of death the original will of the deceased along with any codicils be filed with the county clerk in the county where the deceased resided at the time of death.  This includes all original wills and codicils, even if they have been revoked.  These documents are “filed” with the county clerk, and if there is no probate required, then there is no filing fee.  In addition, a copy of the will must be mailed to all persons named in the will as executor, even if probate will not later be undertaken.  The county charges a $50.00 fee for this.

Notifying all Trust Beneficiaries and Heirs
It is necessary within 60 days of the date of death to notify in writing all trust beneficiaries and the deceased’s heirs at law of the living trust and to send them a specially worded notice of the living trust and copies of portions of the trust.  Once the notice is mailed, then a party has only 120 days from the date of the mailing of the notice to contest the trust.  Each party must be advised of his or her right to contest the trust.  If the notice is not mailed, then a beneficiary may have up to four years or longer to contest the trust.  There are potential damages, including attorney’s fees and costs, if the trustee or trustees do not mail notice and comply with all of the legal requirements.

Notice to Creditors
There is a special provision in California law allowing a notice to creditors to be filed in a living trust similar to that used in a probate procedure.  This requires a filing with the county clerk and publication of a notice three times in a local newspaper.  The costs can run $700-1,000 in addition to attorney’s fees.  Special notice must also be mailed to any known creditors of the deceased.  Creditors then have maximum of four months to file a claim in the trust, with some exceptions.  If a claim is not filed and all procedures have been followed, the creditors lose their right to payment.

While this procedure is not legally required, if it is not done a creditor could have a period of up to three to four years to seek payment.  If the trustee does not use this procedure and a creditor later appears, the trustee or trustees may be personally liable because they failed to follow this procedure.

Valuation of Assets
It is necessary to value all assets in the trust as well as all assets which the decedent owned which were not in the trust as of the date of death.

The value which is used is the fair market value as of the date of death.  Stocks and bonds must be valued by taking the average between the high and the low as of the date of death.  If the deceased died on a weekend or holiday, the average between the high and low for Friday and Monday must be re-averaged.  Mutual funds take the closing price on the last business day prior to the date of death.  Other assets such as real property, partnerships, automobiles and certain other assets need a written or appraised value by a competent appraiser such as a real estate agent or broker for real property.  A valuation for all assets, in and out of the trust, should be obtained.  This includes life insurance, IRA accounts, 401k plans, etc.  Furniture and furnishings are not normally valued unless they have a high value.  Generally, a value of $2,000-5,000 is used for personal items.

This new valuation is also the “cost basis” for these assets when they are later sold.  All capital gains are forgiven at death and the assets are treated for income tax purposes as if they were purchased on that date at this new value.

Federal Estate Tax Return
A federal estate tax return must be filed if the deceased’s assets exceed a gross value of a certain amount.  This value is based on all assets, whether in the living trust or not.

If this total, before deducting any expenses or costs, exceeds the following amount, a federal estate tax return must be filed within nine months of the date of death.  If necessary, an extension can be obtained for up to six months to file the return.

Year of Death                             Exempt Amount
2015                                          5,430,000
2016                                          5,450,000

The tax rate on any amounts over the exemption is a 40% rate.

If a federal estate tax return is not required then the values used are the date of death values for all of the assets.

Probate

Normally, a living trust avoids probate.  However occasionally, someone dies and has too many assets outside the living trust.  These assets, not in the trust, may have to go through probate.

California does not require a probate unless the assets outside the living trust exceed the value of $150,000 as of the date of death.  In addition, this figure does not include any assets in joint tenancy, any vehicles including mobile homes, or any assets where a beneficiary is specifically named such as life insurance or IRA accounts.  If a probate is not required, then the trustee or trustees of the living trust have to wait for 40 days from the date of death.  They can then sign a special certification form and transfer the assets into the living trust, or to whoever is legally entitled to the assets.

If the total, outside the living trust and over and above the excluded assets listed above, is more than $150,000 as of the date of death, these assets will have to go through probate before they can be placed in the living trust.

 Trust Income Tax Returns
The income from January 1st until the date of death is taxed to the trustor.  The income from the date of death until December 31st will be taxed either to the parties who receive the trust assets or to the trust, depending on how matters are handled.  Trust income tax returns, federal and California, must be filed until the trust is terminated and assets are completely distributed.

DISTRIBUTION OF TRUST ASSETS
After the federal estate tax return is filed or, if there is no return, approximately nine months from the date of death, consideration is given to distributing the assets in the trust.  Assets in the trust can be sold or divided among various parties if the parties agree.  One beneficiary may wish to take California tax exempt bonds; another beneficiary may want the real property, etc.  Normally, division is made based on the values as of the date of distribution, again provided the parties agree.  If there is no agreement and the assets in the trust pass to three children, then each child would get one-third of each asset.

Once a decision has been made about the division of the trust assets, a detailed list should be prepared showing the allocation of assets to the various beneficiaries.  This list should itemize all of the assets with their value on the estate tax return or date of death value if no estate tax return is necessary and then show the allocation to the respective parties.  The list is then signed by the trustee or trustees and retained should any questions arise as to how the assets were divided.

If the trust continues in whole or part as a trust, then the trustee or trustees need to re-register assets in the trustees’ names, keep records, invest funds subject to the provisions in the trust document and California law, and provide the trust beneficiary or beneficiaries with an annual accounting.

Re-registration of Assets in Beneficiaries Names
After a division has been decided and a list signed, then the assets need to be registered in the names of the various beneficiaries. Again, each transfer agent, bank, brokerage firm, etc., is contacted and a transfer of title undertaken.  New deeds are recorded for each parcel of real estate.  After re-registration is completed, a receipt should be obtained from each beneficiary for the assets delivered and these receipts are retained by the trustees to show that the assets have been delivered.

Accounting
In addition, the trustee or trustees of any trust created after July 1, 1987, must file annual accountings with the trust beneficiaries, and also do an accounting upon a change of trustees and upon the termination of the trust.  Unless the accounting is waived by all of the trust beneficiaries, the accounting must show the assets on hand as of the date of death with their values, income received, disbursements, assets sold with the gain or loss being listed, and when distribution occurs.  The accounting must also show the assets on hand with both their date of death and current fair market values.

 SUMMARY
It is important to administer the living trust correctly upon the death of the trustor.  There are many legal requirements for the trustee or trustees when the creator of the trust dies and the trust assets are distributed.  Failure to follow the law properly can result in possible litigation, the trustee being personally liable for damages, and the trust being attacked by the Internal Revenue Service.

It is very important for the trustee or trustees to have an attorney and accountant or tax preparer that is familiar with the law and the handling and administration of trusts in California as advisors.

© Milton Berry Scott, 1998-2016
Revised January 5, 2016