Trust Administration in California – Part 2: The First Few Months

Written By DeCosimo Law

Last week, we covered the immediate first steps after death. Now we move into the first 60–120 days, where California law begins imposing real duties, deadlines, and potential liability on a trustee.

This version is fully grounded in California Probate Code requirements and real-world practice, because this is where small mistakes can turn into legal exposure.

Step 1: A Short Window to Breathe (But Not Too Long)

California law does not require instant action—but it does require reasonable diligence.

trustees have:

  • A duty to administer the trust expeditiously

  • A duty of loyalty and care

Practically:

  • First few weeks → urgent tasks only

  • First 1–3 months → full administration begins

Step 2: Death Certificates – The Key to Authority

You will need multiple certified death certificates to act on behalf of the trust.

Best practice in California:

  • Order 10–15 certified copies

  • Issued through:

    • Funeral home, or

    • County Vital Records

Why this matters legally:

  • Financial institutions require proof before recognizing trustee authority

  • County recorders require it for real property transfers

Step 3: The Will Still Matters (Even With a Trust)

Any person in possession of a will must lodge it with the superior court within 30 days of death.

Important:

  • This duty exists even if there is a trust

  • Failure to file can result in liability for damages

If the original is missing:

  • A copy can be lodged

  • Include a declaration explaining the search

If significant assets may be outside the trust:

  • Pause and consult counsel before filing → you may trigger probate unintentionally

Step 4: Notify Government Agencies

Social Security Administration

  • Typically handled by the funeral home

  • Any post-death payments must be returned (federal law)

Survivor benefits:

  • $255 lump sum

  • Possible ongoing spousal benefits

Medi-Cal Estate Recovery (California-Specific Risk)

  • The state can seek reimbursement from the estate

  • Often applies to real property

Key insight:

  • Claims can often be:

    • Negotiated

    • Reduced

    • Structured

Ignoring this step can delay property transfers or sales.

Step 5: Identify Beneficiaries and Heirs

California distinguishes between:

  • Beneficiaries → named in the trust

  • Heirs → those who would inherit under intestacy

You must identify both.

Watch for:

  • Stepchildren (usually NOT heirs unless adopted)

  • Pretermitted heirs

  • Children from prior relationships

Step 6: Power of Appointment (Often Missed, Legally Critical)

A power of appointment allows someone to redirect assets.

Types:

  • Lifetime

  • Testamentary (through a will)

Real-world issue:

  • A surviving spouse may have changed beneficiaries through a later document

If you miss this:

  • You distribute to the wrong people

Step 7: The 60-Day Notice Requirement

This is one of the most important California rules.

  • Trustee must notify:

    • All beneficiaries

    • All heirs

Deadline: Within 60 days of death (or when trustee becomes irrevocable trustee)

The notice must include:

  • Identity of the trust

  • Trustee contact info

  • Statement of rights

Legal consequences:

  • Recipients have 120 days to contest the trust

If notice is NOT sent:

  • The contest period may remain open indefinitely

Best practice:

  • Send via certified mail with return receipt

Step 8: Inventory the Assets (Fiduciary Duty in Action)

Trustees must:

  • Take control of trust property

  • Preserve it

This requires identifying ALL assets.

Start with:

  • Mail (forward it immediately)

  • Prior tax returns

  • Financial accounts

  • Insurance policies

Then expand:

  • Employer benefits (retirement, stock plans)

  • Annuities and pensions

  • Safe deposit boxes

Step 9: Secure Real Estate and Personal Property

Trustees have a duty to protect assets

For real estate:

  • Change locks

  • Maintain insurance

  • Prevent vacancy risks

For personal property:

  • Secure valuables (safe, storage)

  • Document items (photos recommended)

Failure here = potential breach of fiduciary duty

Step 10: Get an EIN (Required for Tax Administration)

After death:

  • A revocable trust becomes irrevocable

IRS requirement:

  • Obtain a new Employer Identification Number (EIN)

This aligns with fiduciary tax reporting under:

  • Internal Revenue Code

Even if:

  • No immediate income

  • No immediate tax filing

You still need the EIN to:

  • Open accounts

  • Report income

Step 11: Take Legal Control of Assets

You must formally step in as trustee.

For financial institutions:

  • Provide:

    • Death certificate

    • Certification of Trust

    • EIN

Important:

  • If assets are properly titled in the trust → no probate required

If a bank requests Letters Testamentary:

  • That applies to probate estates

  • Not trusts

Step 12: Date-of-Death Valuation (Tax Critical)

Under federal tax law:

  • Assets receive a step-up in basis at death

You must determine:
👉 Fair Market Value on the date of death

Why it matters:

  • Capital gains calculations

  • Estate tax thresholds

  • Beneficiary reporting

California-specific note:

  • Real estate appraisals must be qualified and defensible for IRS purposes

Step 13: Pay Debts Before Distributions (Strict Rule)

  • Debts must be satisfied before distribution

If you distribute early:

  • Creditors may pursue:

    • Beneficiaries

    • Potentially the trustee

Priority considerations:

  • Secured debts (mortgage)

  • Taxes (IRS has extended collection rights)

  • Administrative expenses

Credit cards:

  • Lower priority

  • Often negotiable

Step 14: Ongoing Financial Management & Accounting

Trustees must provide accountings to beneficiaries.

You must track:

  • Income

  • Expenses

  • Distributions

For longer trusts:

  • Formal accounting is expected annually

Failure to account properly:

  • Can lead to personal liability or removal

Step 15: Investment Responsibilities (Prudent Investor Rule)

Trustees must:

  • Invest prudently

  • Diversify when appropriate

  • Consider risk vs return

Key insight:

  • Immediately selling assets post-death often results in minimal capital gains due to step-up in basis

Step 16: Real Estate Decisions (Short-Term vs Long-Term)

Trustees must act in the best interest of beneficiaries.

Options:

  • Sell property

  • Rent property

  • Retain property

If underwater:

  • Short sale may be appropriate

Failure to act prudently:

  • Can trigger claims of mismanagement

Final Thought: This Is Where Legal Liability Begins

The first few months are not just administrative—they are fiduciary law in action.

Every step ties back to:

  • Duty of loyalty

  • Duty of care

  • Duty to inform

Handled properly:

  • Administration flows smoothly

Handled incorrectly:

  • You risk disputes, delays, and liability

Disclaimer

This article is provided for educational and informational purposes only and is not intended as, nor should it be construed as, legal advice. Reading this article does not create an attorney–client relationship between you and DeCosimo Law.

DeCosimo Law
Next

Trust Administration 101 Basics — Part I: Before You Accept the Role of Trustee