A successor trustee has a duty to marshal, i.e., to take possession and control of assets belonging to the trust, and to safeguard trust assets. First, assets that are already titled in the trust must be retitled into the name of the successor trustee, secured, and inventoried and appraised by a qualified appraiser. Second, other assets may present special problems and may be beyond immediate reach for one reason or another.
Did the decedent own a Limited Liability Corporation (“LLC”)? In California, a Trustee starts by visiting the Secretary of State’s website and searching the Secretary’s online database for information about the LLC’s formation and good standing. When an LLC fails to meet its legal requirements and is not in good standing it is suspended by the Secretary of State. For example, if the LLC failed to file its income tax returns and pay income taxes. Once suspended, the LLC cannot legally do any business and cannot buy and sell real property. That prevents the Trustee from selling the LLC either as a going concern or selling its assets.
The Trustee has a duty to restore the LLC to good standing. This is typically very time consuming (i.e., many months) and expensive. It may, as relevant, entail preparing and filing past due tax returns and paying past due taxes, penalties and interest.
If there is real property titled in the decedent’s name outside the trust then the Trustee will need to consider whether and how legally to transfer title to the trust. This usually entails a court petition, including perhaps even a probate of the decedent’s will, if the will names the trust as beneficiary.
Firearms can be sentimental and / or valuable assets. They are also a problem. Are the firearms legally registered or antiques? If not registered, and required to be, the trustee needs to contact local law enforcement to collect the firearms. Does the trustee have a firearm’s license to handle the firearms in question? If not, the trustee will need to contact a licensed firearm’s dealer to collect, transport and store the firearms. These are only some firearm issues.
Next, once marshalled the trustee has a duty to safeguard trust assets.
With real property assts, the trustee should examine the title to the real property for outstanding liens (i.e., clouds on title), review any and all outstanding leases for their renewal dates, determine whether any rents are unpaid (and collect such rents), inspect and repair any physical defects in the real property to bring the property up to code, and make sure that the real property is adequately insured, given its present day value, and is payable to the trust.
With investment assets (e.g., brokerage accounts), the trustee needs to consult a qualified financial advisor for investment advice consistent with the terms of the trust regarding the trustee’s investment authority and powers. Digital assets have volatile price fluctuations and are very risky to own. A trustee must proceed carefully whether to distribute or sell such assets.
With personal property, including vehicles and firearms, the trustee needs to have them safely stored and secured against theft and vandalism. Are any firearms unloaded, kept in a locked (secure) container, and not accessible by children or persons not allowed to access a firearm? Penalties for violating the federal and/or state gun laws are severe, including fines up to $250,000 and ten years in prison. How to proceed depends on the items, their values and, practically speaking, the trust’s immediate ability to pay.
Carrying out the foregoing entails expense. One of the trustee’s initial tasks is to evaluate whether the trust has adequate cash on hand and, if necessary, whether to sell assets or to borrow money. Trust administration takes professional guidance.
The foregoing overview is not legal advice. Consult a qualified attorney for fact specific legal guidance. Dennis A. Fordham, Attorney, is a State Bar-Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. He can be reached at Dennis@DennisFordhamLaw.com and 707-263-3235.
“Serving Lake and Mendocino Counties for nineteen years, the Law Office of Dennis Fordham focuses on legacy and estate planning, trust and probate administration, and special needs planning. We are here for you. 870 South Main Street Lakeport, California 95453-4801. Phone: 707-263-3235.”