What happens to a trust after the trust owner dies?
A properly “designed and funded revocable trust” can avoid the probate proceedings not only on the death of first spouse (in married couple’s trusts), but also on the death of the surviving spouse. In unmarried trusts, the probate court proceedings are avoided on death of trust owner. All assets that are properly placed in the trust prior to death, will bypass and avoid the probate court proceedings. After death, trustees who are designated in the trust document by the trust owner(s), take control of all assets in the trust and will have to follow the instructions contained in the trust as well as California law. Trustees will act as “fiduciaries” who have the utmost degree of duty to protect and safeguard the trust assets for the benefit of trust beneficiaries. They have the duty to satisfy creditors of the estate of the deceased trust owner, file income tax returns, manage and liquid trust assets, protect the trust assets against waste, defend the assets in courts (if applicable), provide accountings of trust assets to all beneficiaries and wind up all financial affairs of trust owner who has passed. This process is called “Trust Administration” or “Post-Mortem Planning”.
How about children as trust beneficiaries?
Planning for children is an important goal for most married clients. A custom-made, well-designed trust should take into account all the beneficiaries’ characteristics, traits, their financial needs and expectations of inheritance from trust owner(s), their ability to manage wealth, and their suitability to be designated as trustee or successor trustees of their parents’ trust. Special attention need to be given to existing conflicts among children or likelihood of conflict of interests among them in the future when the parents pass. That’s why every family’s dynamics, character traits, and relationships among family members need to be carefully considered and taken into account at the planning stage of the trust, so after parents pass, unresolved family conflicts and expectations do not surface to consume family wealth in court proceedings, litigations, and attorney fees.
How about Minor Children’s interests in the trust
Most parents who have minor children worry about financial management of their wealth and the protection of minor children’s interest in the future. Therefore, most parents designate one or more of their loved ones (usually trusted family members) to act as successor trustees in their absence who can manage their minor children’s inheritance until they reach a particular age(s). This does not mean that minor children will have no access to their share of inheritance before reaching that age (for instance age 26). That’s why a well-designed trust should provide a standard, by which the trustee can spend minor children’s share for those children’s health, education, maintenance and support.
Planning for minor children should be highly customized for each family. A custom-made, well-designed trust should take into account family dynamics and relationships, financial management of assets, the extent of parents’ wealth and availability of liquid assets for minor children’s financial needs, etc.