For the past several months or even years, you have dutifully fulfilled your responsibilities as a trustee to administer the trust of your deceased loved one. Now, at long last, your job is coming to an end. It is important to follow the steps for closing a trust administration and terminating a trust very carefully. Failing to do so could expose you to liability.
Six Steps for Closing a Trust Administration
Are you interested in learning more about the steps required for closing a trust? While the list that may apply to any one particular trust is tailored to its circumstances, following are general steps that all trustees should follow:
- Ensure that all expenses and taxes have been paid and accounted for. It is important to be certain that there are no valid creditor claims remaining before attempting to close a trust.
- Provide the beneficiaries of the trust with a final accounting of the trust assets, including income and expenses. These details must be presented in a specific way as outlined under the California Probate Code and the rules of the Superior Court in Orange County or other court that may have jurisdiction over the trust administration proceedings.
- In the alternative, provide the beneficiaries with a summary report instead of an accounting, and request that the beneficiaries accept such report and waive the necessity of a formal accounting. To do this, the trustee must be sure to obtain the waiver in writing.
- Once all approvals have been obtained, distribute the trust assets. Once again, it is important to obtain a receipt, in writing, from each beneficiary who receives a distribution.
- Consider retaining a certain amount of cash as a reserve account for any unforeseen expenses that arise during the trust administration process. If you opt to take this step, the reserve amount should be reflected on the accounting or the summary report.
- Close the bank accounts belonging to the trust.
Once this work is done, the trustee can terminate the trust and release himself from his fiduciary obligations. Now that you have an understanding of the steps necessary to close a trust administration, you may be interested in learning more about how a trust works. We encourage you to request our free DVD, Understanding the Revocable Living Trust – In Language That Anyone Can Understand in 8 Minutes.