EST105 - CHECKLIST: Action Plan for Trustee to Follow

Successor Trustee Tips and Checklist

Presented by Tim Weller

Rules of thumb

Understand the trust’s purpose and follow its provisions to the best of your ability.
Be mindful of your fiduciary duties.
Keep accurate records of all transactions, which will help in preparing accountings and tax filings.
Maintain well-organized files, including notes from meetings with beneficiaries and information you used to make decisions.
Retain professional advisors to assist you, if necessary, and keep any communication with these advisors in your files.
Always explicitly act in your trustee role, rather than in an individual capacity. (For example, add “Trustee” after your name when signing for the trust.)
Treat each beneficiary with respect.

Basic trust facts

A trust is a legal entity. The tax ID of the trust is often the grantor’s social security number. An irrevocable trust may have its own tax ID.
The typical assets held in a trust are real estate, bank and brokerage accounts, personal property, and life insurance. Assets such as IRAs, 401(k)s, and annuities generally are not owned by trusts because of the potential tax implications. A business asset may be owned by a trust with the proper provisions in place.
Assets owned in trust are titled in the trust’s name. For real estate, the deeds likely will be held by the trustee for the trust. Personal property or accounts generally list the account owner as the trust (e.g., The Sam and Sarah Sample Revocable Trust, dated December 15, 2017).

Successor trustee checklist: Trusteeship as a result of incapacitation

Obtain a note of incapacitation from the grantor’s physicians.
Gather the grantor’s financial information and identify trust assets.
Manage and control the assets in accordance with the trust provisions and the grantor’s best interest.
Provide support to the grantor’s dependents in accordance with the trust. A court may appoint a guardian for minor children, if necessary.
Keep detailed records of all bills, medical expenses, and other payments made from trust assets.
Ensure that tax returns are prepared and filed and that all taxes related to trust property are paid (e.g., property taxes on property owned by the trust). Your role ends when the grantor is healthy again.

Successor trustee checklist: Trusteeship as a result of death

Gather and identify all trust assets. If probate is needed, work with the executor to inventory assets, transfer the designated assets to the trust, and allocate debt and tax liability in accordance with the will and trust.
Begin administrative work, including ordering death certificates and paying debts, final medical bills, and possible funeral expenses.
Read the trust. If you have difficulty understanding or interpreting the trust, seek legal counsel.
Collect payouts on assets where the trust is listed as the beneficiary.
Contact the beneficiaries and provide them with a copy of the trust agreement, as required by law, or if requested by a beneficiary.
Identify and implement an investment strategy for assets to be retained by the trust. Employ an investment advisor to assist with this responsibility.
Once liabilities are accounted for and paid, make distributions required by the trust. Be sure that you understand the trust’s distribution requirements (e.g., by age, specific need, or ascertainable standard).
Upon receipt of accountings, ask the beneficiaries to review, approve, and sign them.
Upon making final distributions, ask the beneficiaries to approve the final accounting and agree to pay any trust expenses that may arise after they have received trust assets and the trust is terminated.

Annual accounting checklist

Inventory all trust assets, noting any changes in status and the fair market value of each asset.
Prepare a detailed accounting of trust bank accounts, including bank statements.
Review all investments and keep accurate and complete documentation for all investment decisions.
Inventory all types of insurance in force for the trust’s assets or the trust’s beneficiaries, including premium amounts and due date information.
Document all trust expenditures and ongoing liabilities, including the identity of creditors and the nature of any liabilities.
Document all disbursements to beneficiaries, including to whom each disbursement was made, when it was made, and whether it was from principal or income.
Document any claims you are aware of, including the claimant’s identity, the nature of the claim, and any action you have taken with regard to the claim.
Prepare a statement reporting your compensation as trustee.
Prepare a statement reporting all tax and regulatory filings, court filings, and tax and filing fees paid.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Tim Weller is a financial professional with Weller Group LLC at 6206 Slocum Road, Ontario, NY 14519. He offers securities as a Registered Representative of Commonwealth Financial Network®, Member FINRA/SIPC. He can be reached at 315-524-8000 or at tim@wellergroupllc.com.