How to Administer a Trust in California: A Step-by-Step Guide for Trustees

If you’ve been named as a trustee of a California trust, you’ve been given a significant legal and financial responsibility. Administering a trust involves much more than simply distributing assets—it requires compliance with fiduciary duties, tax filings, legal notifications, and careful recordkeeping.

In this post, we’ll walk you through how to administer a trust in California, step by step, from notification of beneficiaries to final distribution of trust assets.

What Does It Mean to Administer a Trust?

Trust administration is the process of managing and distributing a deceased person's assets according to the terms of their trust. The trustee is the person responsible for carrying out those terms while following California law.

Trusts can help avoid probate, but that doesn’t mean there’s no work involved.

California law imposes strict duties on trustees, especially when a revocable living trust becomes irrevocable upon the death of the settlor (the person who created the trust).

Step-by-Step Guide to Administering a Trust in California

Step 1: Read and Understand the Trust Document

Start by carefully reviewing the trust instrument:

• Identify successor trustees

• Understand distribution terms

• Note any special instructions, such as asset restrictions or age-based distributions

If unclear, consult a California trust attorney to interpret legal provisions.

Step 2: Accept the Role of Trustee

You may need to formally accept your role in writing. Check whether the trust requires this or if a certification of trust or affidavit of trustee must be prepared for banks or financial institutions.

Step 3: Obtain Death Certificate(s)

Secure at least 5–10 certified copies of the settlor's death certificate, which will be required to transfer assets, close accounts, and notify financial institutions.

Step 4: Notify Beneficiaries and Heirs

Under California Probate Code § 16061.7, the trustee must notify all heirs and trust beneficiaries within 60 days of the settlor’s death. The notice must include:

• The name and date of the trust

• Contact information for the trustee

• A statement that beneficiaries have 120 days to contest the trust

Failure to provide this notice can expose the trustee to legal risks.

Step 5: Inventory Trust Assets

Create a detailed inventory of:

• Bank accounts

• Real property

• Retirement accounts and life insurance (if payable to the trust)

• Personal property

• Business interests

You may need to obtain date-of-death values and appraisals for certain assets.

Step 6: Obtain a Tax Identification Number (TIN)

After the settlor's death, the trust becomes irrevocable and must have its own EIN (Employer Identification Number) from the IRS for tax reporting purposes.

Apply online at irs.gov.

Step 7: Manage and Protect Trust Property

As trustee, you have a fiduciary duty to act prudently and avoid conflicts of interest. You must:

• Maintain separate trust accounts (do not co-mingle with personal funds)

• Insure and safeguard trust assets

• Pay valid debts and expenses

• Keep detailed records

Step 8: Pay Debts, Expenses, and Taxes

You’ll need to:

• Pay final medical bills, utility bills, and credit cards

• File the final personal income tax return for the decedent

• File trust fiduciary income tax returns (IRS Form 1041), if applicable

• Possibly file an estate tax return (IRS Form 706), if the estate exceeds federal exemption limits

Step 9: Provide a Trust Accounting

Unless waived in the trust, trustees must provide trust accountings to beneficiaries under California Probate Code §§ 16060–16064. This includes:

• Beginning and ending asset values

• All receipts and disbursements

• Trustee compensation

• Gains/losses and current asset balances

Step 10: Distribute Trust Assets

Once debts, taxes, and expenses are paid, and after any waiting periods (e.g., the 120-day contest period), distribute the trust assets according to its terms:

• Partial or final distributions can be made

• Use receipts and releases from beneficiaries to document distributions

• Record new ownership for real property by filing trust transfer deeds

Optional Step: Close the Trust

If the trust is fully administered and has no continuing duties (e.g., no minors or ongoing support provisions), you may formally close the trust by:

• Distributing all remaining assets

• Filing final tax returns

• Notifying beneficiaries in writing that the trust is terminated

Trustee Tips for Success

• Consult professionals: Work with a trusted attorney, accountant, and financial advisor as needed

• Keep clear records: Every transaction should be documented with backup

• Communicate proactively: Keep beneficiaries informed to reduce disputes

• Don’t rush distributions: Ensure debts and taxes are handled first

Common Mistakes to Avoid

• Co-mingling personal and trust funds

• Failing to notify beneficiaries within the required timeframe

• Making premature distributions before liabilities are resolved

• Failing to provide a formal trust accounting

Final Thoughts

Administering a trust in California is a serious legal responsibility. While it avoids the probate court process, it still requires diligent effort, attention to detail, and full compliance with California law.

If you’re overwhelmed or unsure of your duties, working with an experienced California trust administration attorney can help ensure you fulfill your obligations and avoid costly mistakes.

Contact the top-rated California trust and probate attorneys Moravec, Varga & Mooney today to schedule a telephonic consultation. Have questions? call (626) 460-1763 or email LV@MoravecsLaw.com.

Southern California Probate Lawyer Serving all counties in California, including Los Angeles, Riverside, San Bernardino, Sacramento, Santa Cruz & Beyond.