KEY TAKEAWAYS
- A trustee holds a fiduciary duty to manage trust assets for the benefit of the beneficiaries — not themselves — and can be held personally liable for mismanagement.
- California law requires trustees to send formal notice to all beneficiaries and known heirs within 30–60 days of the grantor’s death, triggering a 120-day window to contest the trust.
- Trustees must obtain a new EIN, re-title all accounts and property, and file both a final personal tax return and annual trust tax returns before making any final distributions.
- Failing to get date-of-death appraisals on real property can create unexpected and avoidable capital gains tax liability when the property is sold.
- Trust administration in California typically takes one year — sometimes two — and working with a trust administration attorney from the start can prevent costly, prolonged mistakes.
In this episode of Legacy Protected, estate planning and trust administration attorney Romelia “DeDe” Soto of The Soto Law Group walks through one of the most misunderstood — and often overwhelming — responsibilities a person can be handed: serving as a trustee. Whether you were named in advance and have had time to prepare, or you’ve just learned for the first time that you’re responsible for administering a loved one’s trust, this guide is for you.
DeDe and her team serve families and business owners throughout Newport Beach, Huntington Beach, Irvine, and the broader Southern California region. Her practice covers estate planning, probate, trust administration, conservatorship, special needs trusts, business succession planning, and real estate deed transfers — so when it comes to navigating the complexities of trust administration, she has seen it all.
What Does It Actually Mean to Be a Trustee?
DeDe Soto: The way I like to explain it is that you’re wearing two hats. When the grantor is alive, they’re both the owner of the assets in the trust and the trustee — meaning the manager. Once someone passes and a successor trustee steps in, the fiduciary duty becomes significantly more serious.
As trustee, you’re managing assets on behalf of the beneficiaries. That means you cannot act in your own interest. You cannot commingle personal funds with trust funds. And you have a duty of loyalty and impartiality to all beneficiaries — not just the ones you’re close to.
A lot of people assume, “I’m the trustee, I’m in control, I can do what I want.” And while you are in control, there is a higher legal duty attached to that role. This is especially important when a trustee is also a beneficiary — we always remind our clients that we’re representing them as the trustee, not as the beneficiary. Those two roles cannot overlap.
Why Trust Administration Feels So Overwhelming
DeDe Soto: We get calls from people who are in a complete panic — and understandably so. They’ve just lost a parent, a grandparent, a close friend. And now they’re sitting with a pile of legal documents and no idea where to begin.
The first thing I tell people is: review the trust documents. If the trust was drafted well, it should be relatively easy to follow. If it’s not, that’s exactly the situation where you want to call an attorney.
From there, you need to take a careful inventory of the assets. Are we talking about real property? Bank and brokerage accounts? Retirement accounts like 401(k)s or IRAs? Life insurance policies? Personal property like gold, silver, collectibles? In some cases, we’ve even administered trusts that included copyrights and music rights. Each type of asset comes with its own set of rules.
What If Some Assets Aren’t in the Trust?
DeDe Soto: This happens more often than people realize. The grantor may have intended for all of their assets to be in the trust, but some accounts or property were never formally transferred. In that situation, you may need to go through a court process in California called a Heggstad Petition — also known as an 850 Petition — which allows you to bring those assets into the trust based on the grantor’s clear intent.
To do this successfully, there needs to be specific language in the trust — what I call the “secret sauce” language — that supports the argument. It’s one of the many reasons why how a trust is drafted really matters.
Sending Notice: A Legal Obligation You Cannot Skip
DeDe Soto: Once you’ve reviewed the trust and begun gathering assets, one of the most time-sensitive steps is sending formal notice to all beneficiaries and known heirs. California law requires this be done within 30 to 60 days of the grantor’s death.
Why does this matter so much? Because from the date that notice is received, beneficiaries have 120 days to file a legal challenge to the trust. They might claim they were supposed to receive a specific asset, that their share percentage is wrong, that they were an omitted child, or that they were improperly disinherited. The trustee must make sure notice reaches everyone — including heirs who aren’t named in the trust.
If a beneficiary doesn’t receive proper notice and distributions have already been made, that beneficiary can bring a lawsuit against the trustee for improper administration. California takes notice requirements very seriously — in both probate and trust administration.
Whether you include a full copy of the trust with the notice is a decision the trustee can make, but if a beneficiary requests a copy, they are legally entitled to receive one. Failing to provide it can require a court order to resolve.
Core Duties of a Trustee Under California Law
DeDe Soto: Beyond sending notice, trustees have a full list of responsibilities. Here’s what you need to be prepared for:
- Duty of loyalty and impartiality — you must treat all beneficiaries fairly and equally
- Confidentiality — protecting the privacy of the trust and its beneficiaries
- Notifying financial institutions of the change in trustee status
- Notifying the Social Security Administration to stop benefit payments — if benefits continue to arrive and aren’t returned, the estate will owe repayment
- Paying ongoing obligations — property taxes, credit cards, final bills, and funeral expenses — all from trust assets, never your personal funds
- Conducting a formal accounting — typically required within one year unless all beneficiaries waive it in writing
- Filing all required tax returns, including the deceased’s final personal income tax return, annual trust income tax returns (Form 1041), and a gift tax return (Form 706) if applicable
Everything you do as trustee must be completely transparent. You’re in control, but that control comes with accountability.
Fiduciary Duty in Practice: What Can Go Wrong
DeDe Soto: The most common violations we see involve commingling — a trustee who “borrows” a few thousand dollars from the trust intending to put it back, and then doesn’t. Once an accounting is required, that’s exposed immediately.
Other issues include:
Favoritism. A trustee who favors one beneficiary over others is breaching their duty of impartiality — even if the intention was good.
Skipping appraisals. This is a big one. If there’s real property in the trust, you must get an appraisal as of the date of death. That appraisal establishes the step-up in basis, which can dramatically reduce — or even eliminate — capital gains tax when the property is eventually sold. We’ve had clients come to us after already selling a property without getting an appraisal, only to face a significant capital gains liability that could have been avoided entirely.
Distributing too early. Many trustees feel pressure to distribute assets quickly. But if you distribute before all debts are paid and taxes are filed, you can create a financial hole that leaves you personally liable. You have to hold back sufficient funds to cover every known obligation before making distributions.
Taking Control of Trust Assets: The Practical Process
DeDe Soto: When a successor trustee is ready to step in, the first practical step is obtaining the death certificate. In California, you cannot transfer trust assets until at least 40 days have passed from the date of death.
From there, the trustee will need a Certificate of Trust — a notarized document that identifies the successor trustee and the name of the trust. This certificate is presented to banks, brokerages, and other financial institutions to transfer accounts into the name of the trust under the successor trustee’s management.
Importantly, you’ll also need a new Employer Identification Number (EIN) from the IRS. The deceased’s Social Security number can no longer be used to manage these accounts. The new EIN is applied to bank accounts, brokerage accounts, and any life insurance proceeds payable to the trust.
For real property, the trustee changes the title of the property into their name as successor trustee — not as personal owner, but as the manager on behalf of the beneficiaries.
Managing Debts, Taxes, and the Timeline
DeDe Soto: People often want to move quickly, but trust administration takes time — and trying to rush it creates risk. We typically tell clients to plan on a full year from the date of death.
Here’s why: if someone passed in March of this year, their final personal tax return can’t be filed until the following tax year. You need to hold back funds to cover that return, the trust’s annual tax returns, and any outstanding debts. Only once you’re confident that all of those obligations are met can you begin planning final distributions.
In some cases, the trust will be divided into sub-trusts for different beneficiaries — each with their own ongoing tax filing requirements until the beneficiary assumes their own trustee role.
Final Distribution: How It Actually Works
DeDe Soto: Before making any final distributions, you need to confirm: the 120-day notice period has passed, all taxes have been paid, all debts are settled, all accountings are complete, and there are no pending disputes or litigation.
When all of that is in order, we prepare a Distribution Agreement. This document spells out exactly what each beneficiary is receiving, attaches the final accounting, and requires each beneficiary to sign off. Once signed, the trustee is formally released from their fiduciary duties. Then — and only then — are final distributions made.
Partial Administration: When One Spouse Passes First
DeDe Soto: A lot of what we’ve discussed applies to the final administration at the death of the last surviving spouse. But there’s also what’s called partial administration, which happens at the first death.
When one spouse dies, the surviving spouse typically takes on the role of managing three separate trust buckets: the Survivor’s Trust, the Marital Trust, and the Family Trust (also called the deceased’s bucket). The surviving spouse may have full control over the first two, but often has limited access to the family trust — particularly in blended families, where the deceased’s children have a vested interest in preserving their share.
The surviving spouse owes a fiduciary duty to those beneficiaries as well. They cannot simply spend down the family bucket. This is one of the most litigated issues in trust administration, which is why partial administration needs to be handled carefully and documented properly.
Red Flags That Signal You Need an Attorney
DeDe Soto: If any of the following apply, you should call a trust administration attorney right away:
- A disgruntled or disputing beneficiary
- Unclear or contradictory language in the trust
- Assets that were not titled in the trust
- Inability to locate all of the assets
- A blended family situation
- A large or complex estate
- Any situation where you, as trustee, could be personally exposed to liability
Trustees can be held personally liable — not just as trustees, but out of their own pockets — for mismanagement. That includes embezzlement, fraud, or simply making uninformed decisions. This is one area where professional guidance is not a luxury; it’s protection.
How a Trust Administration Attorney Helps You
DeDe Soto: If we drafted the trust, we bring detailed knowledge of the grantor’s intent to the process. If we didn’t, we start by reading the trust thoroughly and advising the trustee on exactly what their duties are.
We immediately get that 120-day notice out to all beneficiaries and known heirs — including children who may not be named in the trust but are still legal heirs. California is deeply committed to the principle of notice, and missing someone can open the door to a lawsuit.
We help trustees avoid tripping over their own feet simply because they didn’t know the rules. And when a trust administration is mishandled, we can help clean it up — but cleaning up a mess is always more expensive, more time-consuming, and more damaging to family relationships than doing it right from the beginning.
Ready to Get Started? The Soto Law Group Is Here to Help.
Whether you’ve just been named a successor trustee or you’re already in the middle of an administration and things have gotten complicated, Romelia “DeDe” Soto and the team at The Soto Law Group are ready to guide you through every step of the process.
Serving families and trustees throughout Newport Beach, Huntington Beach, Irvine, and the surrounding Southern California communities, The Soto Law Group brings clarity, experience, and genuine care to trust administration.
📞 Call us at (949) 945-0059 🗓️ Or schedule a consultation online at thesotolawgroup.com/contact-us-newport-beach-lawyers
Don’t wait until small mistakes become expensive problems. Reach out today and protect your role — and your peace of mind.