Read the Trust document and the Will and decide whether to accept the Trusteeship
A Successor Trustee who accepts their appointment by the terms of the trust or through a court order, should be certain to read the trust document first (and corresponding Will). This will familiarize one with what the trust says about administration of the assets, who the beneficiaries are, what specific and remainder distributions are to be made, whether the successor trustee must be bonded, whether the successor trustee can receive a fee, which state law applies to trustee’s actions, and many other issues.
Collect and Inventory all Assets Determining which Assets are in Trust
Generally, a trust will have a schedule of trust assets which lists all property previously funded into the trust before the Settlor died. However, not all trust assets may be listed. Accordingly, if there are assets that are outside of the trust, it may be necessary probate those assets with a Pour Over Will thereby funding them into the Trust. If a Trust owns real property, one may need to record an Affidavit giving notice of the Change in Trustees with your county recorder.
Give proper Notice to Beneficiaries as Required by Law
A successor trustee in Arizona is required to follow the Arizona Trust Code and notify all “qualified beneficiaries” of the change in trustees, that a settlor has died, that the administration is taking place, amongst other events within 60-days. (see A.R.S. §14-10813).
Appraise Assets and Provide an Accounting to the Beneficiaries
It is proper to obtain professional/qualified appraisals of all assets with limited exception. Appraisals are only be helpful for accounting purposes, but will likely become necessary when it comes time to file income tax returns to establish the tax basis of an asset on the date of death.
Also, as costs and expenses of administration and claims are processed, a successor trustee should keep a thorough accounting so that there is no doubt that the trust assets are being administered appropriately.
Prepare a Certification of Trust
After a successor trustee obtains certified copies of death certificates, the death certificate along with relevant portions of a trust can be used to create a Certification of Trust under the Arizona Trust Code which helps identify to a third party (1) the new trustee, (2) the tax identification number for the trust, (3) whether there were any amendments or restatements to the trust, (4) that the trust is still in full force and effect assuming that is the case, and (5) other relevant information. This Certification is vital in being able to collect and gain control over trust
assets.
Notify governmental agencies and File all Appropriate Tax Returns
Where required by law, a successor trustee will have the obligation of notifying governmental agencies of the death of the Settlor (i.e., Social Security Administration, Veterans Affairs, Medicare/Medicaid, and both state and federal taxing authorities). Also, a successor trustee must either prepare, or obtain assistance in preparing and filing, all required income tax returns for the Decedent and for the Trust.
Creditor Claims
A trust cannot be used to defraud creditors or hide assets and generally will include provisions which direct the successor trustee how to handle creditor claims. So, if there are any legitimate creditor claims, then a successor trustee should follow Arizona law and those trust provisions
concerning the payment of claims. With the assistance of counsel, a trustee will learn and understand what actions a creditor may take depending on the trust’s solvency.
Distribute Trust Assets
Look at the distribution provisions of the trust. Depending on how the attorney who drafted the trust wrote the provisions, the successor trustee should distribute assets accordingly. But, if there is any question as to how the assets should be distributed, then with the assistance of counsel, the successor trustee can consider petitioning the courts for instructions.
For more information or if you have questions, please contact us at (520) 624-8886 to make an appointment about Probate Administration.
IMPORTANT: Neither this blog article nor any information on this website shall be construed as the offering or rendering of any legal advice and does not establish an attorney-client relationship between the reader and Mesch Clark Rothschild, (“MCR”) or any attorney at MCR. You should consult with an attorney if you have a specific question regarding your legal issues.
