Phase II: Notices and Transfers
One of the most critical phases in the trust administration process. Done correctly, this will set the remaining trust administration up for success and a smooth and efficient administration. Note that a smooth and efficient administration saves money for the estate and also minimizes the chances for discord among beneficiaries. Unfortunately, there are a few tricky areas in this phase that really do require legal expertise and a diplomatic touch.
During this phase, beneficiaries will first be hearing from us and learning about what they should expect and, importantly for them, what they may be entitled to as far as an inheritance. There are certain notices that are required by law, and sending these out within the required timeframe and in the proper format, to the proper beneficiaries or heirs is key. This sets in place the beginning of a timeline for any beneficiaries or heirs to object to the trust documents. Once this period passes, they cannot later object to the validity of the documents.
The “transfers” that occur during this phase are not distributions to the beneficiaries. That generally occurs during Phase IV. Instead, the transfers that occur during this phase are transfers to you as trustee of the trust. There could be bank accounts, real estate, and other assets for which we will determine the correct method to transfer the account or ownership to your name (in your capacity as trustee). Simple transfers are completed during Phase II, and then the balance of collecting the assets (known as marshaling) will be completed during Phase III.
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It is critical in your role as trustee to carefully account for the assets in the trust, and to understand what debts or liabilities need to be resolved before distributions are made. During this phase, we will create an asset and debt schedule based upon the information you provide to us. We will request bank statements and other ownership information. The preliminary information provided in the Confidential Trust Administration Questionnaire is our base for this spreadsheet.
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During the Roadmap Appointment, we will discuss a custom roadmap for the trust administration. This will include recommendations for gathering specific assets, options for addressing ambiguities in the documentation or other challenges that are identified in the review, and the plan for disposition of each trust asset. From this meeting, we create a comprehensive roadmap, which serves as a checklist showing clearly what is our responsibility, and what you will be responsible for.
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As mentioned above, notices will be sent to beneficiaries. There is a specific notice required under Probate Code section 16061.1. This notice is required to be provided to certain individuals within 60 days after the trust becomes irrevocable (usually as a result of a death of the trustor or settlor). The information is required to be provided to beneficiaries and heirs, which is not always as obvious as it sounds. Often, disinherited heirs can cause the biggest concern when providing notices (and yes, they are usually entitled to notice).