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 actually be listed or accounted for. 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.
Do not forget to file death benefit claims on existing life insurance, annuities and other non-probate transfers.
Clear the Chain of Title to Real Property
If a Trust owns real property, one may need to record an Affidavit giving notice of the Change in Trustees with your county recorder; or, sometimes simply recording a Death Certificate may be sufficient.
Give proper Notice to Beneficiaries as Required by Law
A sucessor 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.
Appraise Assets and Provide an Accounting to the Beneficiaries
Where assets can be appraised, it is good measure to obtain a professional/qualified appraisal. And, the appraisals will not only be helpful for accounting purposes, but will likely become necessary when it comes time to file income tax returns.
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 or Affidavit of Incumbency
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. Indeed, this Certification can be very helpful in collecting all 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. (Although not applicable here, complex trust administrations may require the filing of an estate tax return).
A trust cannot be used to defraud creditors or hide assets. Many times, a trust will direct the successor trustee how to handle creditor claims. So, if there are any legitimate creditor claims, then a successor trustee should follow those trust provisions concerning the payment of claims and understand what actions a creditor may take under Arizona law if there are insufficient assets to cover the claims.
Distribute Trust Assets
Look at the distribution provisions of the trust. Depending on how the attorney who drafted the trust wrote the particular provisions at the request of the Settlor, the successor trustee should distribute assets accordingly. If there is any question as to how the assets should be distributed, certainly the successor trustee can consider petitioning the courts for direction.
Obtain a Receipt for Each Distribution and close the estate
A successor trustee should generally provide each beneficiary with a Distribution Receipt that will confirm the beneficiary's receipt of the trust asset or distributive share.
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