Post-Death Trust Administration Checklist (Revised 3.22.11)
This checklist was last revised March 22, 2011. On December 17, 2010, President Obama signed into law new estate tax legislation as part of The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“TRA 2010”). The bill retroactively reinstated the federal estate tax for 2010; increased the federal estate tax exemption to $5,000,000 per person; increased the federal gift tax exemption to $5,000,000 per person; lowered the maximum rate of estate and gift tax to 35%; and introduced “portability” of the estate tax exemption between spouses. The current legislation is currently set to expire on December 31, 2012 at which time the federal estate tax exemption will revert to $1,000,000 with a 55% maximum rate of tax.
1. (30 days from date of death) Initial meeting with client to:
a. Explain how many death certificates to order.
b. Explain the need to contact social security and any pension plans.
c. Explain the need to remove some funds from joint account with decedent to avoid problems with liquidity if bank incorrectly freezes the account.
d. Discuss initial funding of trust account with proceeds from joint account – using TIN for administrative trust.
e. Discuss need to make copies of all checks being deposited into trust account since client’s bank is not the issuer.
f. Discuss need to avoid any cash transactions, do everything by check.
g. Discuss all fiduciary duties, including need to not advance trust funds for fiduciary’s own needs.
h. Provide client with copy of Probate Code sections discussing trustee’s duties (PC §§16000 – 16105).
i. Discuss whether or not beneficiaries are likely to challenge documents and basis for challenge/Review Non Contest Clause, if any.
j. Discuss need to treat all beneficiaries fairly/equally.
k. Discuss Notice of Proposed Action (PC §16502) procedure for any actions likely to be challenged later.
l. Explain the need to gather together account statements and financial information for our office for three (3) months proceeding and three (3) months following death.
m. Discuss basis for compensation of fiduciaries and attorneys.
n. Explain the need for a spiral notebook to record dates, actions, and time spent to document acts of trustee and compensation. Provide client with spiral notebook. Spiral notebook should be three-hole punched so it can go in larger Binder.
o. Provide client with CRT binder with pre-made tabs to keep them organized with the following labels:
i. Contact information for team members at CRT.
ii. Rough timeline of important dates.
iii. Trust documents (copies).
iv. Key Trust Information (to be used to hold copy of SS-4 with TIN and summary of trust vesting).
v. Trust Certifications (to be used to hold original Trust Certifications).
vi. Death Certificates (plastic pouch).
vii. Trustee Duties (to include copy of pertinent Probate Code §§16000 – 16105).
viii. Checklists with simple do’s and don’ts.
ix. Attorney Memos & Letters (to hold copies of our correspondence to clients).
x. Documentation for Attorney (to be used to store documents that client intends to give to us at next meeting).
p. Request copies of any employee benefit packages from decedent’s employers, as well as contact information for employer;
q. Request contact information for other advisors (i.e., accountant/CPA, insurance agent and financial consultant);
r. Request copies of last two (2) years federal income tax returns (IRS Form 1040);
s. Request copies of all federal gift tax returns (IRS Form 709);
t. Request copies of recent property tax bills for each property;
u. Provide client with checklist of requested items;
v. Let client know that we will lead client and that client doesn’t need to remember anything at this point.
w. Prepare fee agreement, provide to client.
2. (30 days from DOD) Obtain TIN for Administrative Trust and provide copy to client.
3. (30 days from DOD) Lodge original Will with court.
4. (30 days from DOD) Calendaring critical dates (immediately after initial meeting):
i. Due date for 706 (9 months from DOD), with 1, 2 and 3 month reminders.
ii. Due date for Disclaimer (9 months from DOD) with 1, 2 and 3 month reminders.
iii. Due date for filing claims against decedent (one year) with 1, 2 and 3 month reminders. CCP §366.2
iv. Due dates for fiduciary income tax returns if calendar year or fiscal year.
§ calendar: April 15th of following year.
§ fiscal: 15½ months from first day of month decedent died.
§ may be extended for 6 months.
v. Due date for personal income tax returns (generally April 15th / October 15th on extension).
vi. Due date for annual accountings.
5. (37 days from DOD) Review trusts, amendments, wills & codicils.
6. (40 days from DOD) Prepare new Trust Certifications (PC §18100.5).
7. (40 days from DOD) Contact client via phone or e-mail to request contact information for all beneficiaries and successor trustees;
8. (45 days from DOD) Review powers of attorney of surviving spouse for future gifting possibilities and determine if client needs to immediately execute power of attorney in favor of new individual/agent.
9. (45 days from DOD) Review advance health care directives of surviving spouse to determine if needs immediate change.
10. (45 days from DOD) Prepare IRS/FTB Powers of Attorney (IRS Form 2848/FTB Form 3520) and Notice of Fiduciary Relationship (IRS Form 56/Use IRS form for FTB);
11. (45 days from DOD) Follow up with client on contact information (inc. SSNs) for successor trustees and beneficiaries. Finalize preparation of Trustee Notification under Probate Code §16061.7.
12. (45 days from DOD) Draft and send correspondence to other advisors introducing the firm and coordinating 90-day meeting with client and all advisors;
13. (55 days from DOD) Complete review of employee benefits packages, for possible elections on type of survivor benefit, as well as time frame for exercising stock options;
14. (55 days from DOD) Calendar due dates for exercise of stock options, due dates for exercise of survivor benefit options and due dates for first required minimum annual distribution from retirement plans;
15. (60 days from DOD) Second meeting with client:
a. Client delivers account statements, financial information and tax returns.
b. Discuss recordkeeping and bookkeeping requirements.
c. Discuss valuation issues and recommend one or more appraisers (or two or more real estate brokers to obtain detailed broker’s price opinion).
d. Discuss use of single bank account where possible (or single account per property); and
e. Discuss Uniform Prudent Investor Act (PC §§16045 – 16054) and possible exceptions. Provide client with copy.
f. Discuss roles of advisors:
i. Preparation of decedent’s personal income tax returns (IRS Form 1040/FTB Form 540) – CPA;
ii. Preparation of fiduciary income tax returns (IRS Form 1041/FTB Form 541) for trust and estate – CPA;
iii. Preparation of federal estate tax return (IRS Form 706) and state returns – Atty or CPA;
iv. Preparation of federal gift tax return (IRS Form 709) – Atty or CPA.
16. (90 days from DOD) Meet with client and other advisors to discuss:
a. Roles of Attorney and CPA – Who assumes responsibility for which returns;
b. Special tax considerations:
i. Disclaimer – 9 months (IRC §2518) vs. new “portability” provisions of TRA 2010 (transfer of spouse’s Applicable Exclusion);
ii. Prior Tax Property Credit (IRC §2013 – Form 706, Schedule Q);
iii. IRC §6166 availability (estate tax deferral for closely held business);
iv. Alternate valuation (§2032) – six months from DOD;
v. §2032A valuation – for qualified real property;
vi. Generation-Skipping Transfer Tax (IRC §§2600 et seq.);
vii. Need to prepare/file gift tax returns for prior gifts/gifts in year of death (IRS Form 709);
viii. Subchapter S Stock and QSST election issues (IRC §1361);
ix. Survivor benefit elections and first required minimum distribution date;
x. Due date for exercise of stock options and individual to assume responsibility for assessing whether options should be exercised.
xi. Elections concerning deductions of administrative expenses on 706 or 1041 [under IRC §624(g)];
xii. Foreign Country Tax Treaty Elections for Non-citizens;
xiii. Post-death QDOT formation or application for citizenship;
xiv. Election to treat trust as an estate and file on fiscal year (IRS Form 8855);
xv. Partnership basis election (IRC §754);
xvi. Community property held in joint tenancy form – spousal property petition options for double step up;
xvii. Due dates for preparation and circulation of drafts of estate tax returns and fiduciary income tax returns between attorney and CPA;
xviii. Possible extension of 706 if surviving spouse is likely to die soon to elect prior tax property credit.
xix. Whether out-of-state property held in states with estate tax or inheritance tax (i.e. Kentucky, Nebraska, Ohio, Nebraska, Washington, et. al).
xx. Property Tax Reassessment Issues:
§ Claim for Reassessment Exclusion (Props 58 and 193)
§ Prop 58: Parent to Child
§ Prop 193: Grandparent to Grandchild
§ Avoiding sibling to sibling transfer;
§ Need for trust to refinance property to make non-pro rata distribution – avoiding refinance by beneficiary since deemed sale.
c. Discuss Uniform Prudent Investor Act and assess prudence of retaining certain assets and level of existing diversification;
d. Discuss responsibility for preparation of Investment Policy Statement.
e. Discuss petition for instructions to court to determine any ambiguities in trust documents or questionable remedies or actions, including §850 petitions to reduce estate assets, as well as potential wrongful death claims to act as deduction against estate assets.
f. Discuss client’s need to review existing liability and casualty insurance on trust assets and possibly increase the insurance coverage if prudent; and
g. Discuss availability and affordability of trustee liability insurance.
17. (90 days) Assess prudence of filing of trustee creditor’s claim documentation and publication of notice or consider running a dry probate to cut off creditor’s claims.
18. (90 days) Medi-Cal notice to California Department of Health Services.
19. (90 days) Complete initial draft of Investment Policy Statement for circulation among advisors.
20. (120 days) Meet with client within 90 days to discuss estate liquidity issues, include CPA and financial advisor:
a. Executing real property documentation:
i. Change of Ownership Statement – Death of Real Property Owner (R&T Code §480);
ii. Affidavit of Change of Trustee;
iii. PCOR (preliminary change in ownership report);
iv. Prop. 58 (Prop. 193) Claim for Reassessment Exclusion.
b. Need to sell real property;
c. Need to sell other assets;
d. Need for counsel to see listing agreement before executed:
i. Determine which neighbors, family or friends should be listed as "exceptions" to the broker’s right to a commission;
ii. Determine needed level of marketing:
§ Newspaper ads;
§ Broker’s Opens;
§ Open houses.
iii. Have open discussion with client and possible realtor on appropriate listing price and timeframe for reducing listing price based on lack of offers.
21. (120 days) Begin work on asset allocation spreadsheet, by determining method of ownership (individual, joint, trust, beneficiary designation) and inserting description of asset, value, owner and beneficiary into spreadsheet.
22. (120 days) Contact beneficiaries to discuss general investment policies.
23. (140 days) Finalize Investment Policy Statement.
24. (140 days) Confirm receipt of all asset valuations and complete spreadsheet.
25. (160 days) Commence work on federal estate tax return and any state returns.
26. (200 days) Complete initial draft of IRS Form 706 and any state estate tax returns and circulate to other advisors.
27. (220 days) Make initial recommendation on asset allocation, taking into account:
a. IRC §121 capital gain exclusion on sale of principal residence;
b. Sale of assets with stepped up basis;
c. Liquidity needs of surviving spouse in relation to terms of trust;
d. Preferences of beneficiaries;
e. Special purpose assets;
f. Recommendations of CPA and financial advisor;
g. Having income to offset against property with depreciation deduction;
h. Potential for appreciation (bypass trust);
i. Trust distribution terms in relation to income producing assets;
j. Whether use of promissory note from one trust to another is prudent given asset mix;
k. Deductibility of interest on home mortgage against personal income.
l. Fractional interest discounts on second death.
28. (240 days) Circulate initial draft to other advisors and obtain questions, comments and suggested revisions.
29. (250 days) Assess whether 706 needs to go on extension (IRS Form 4768). If so, prepare and file extension, send certified mail. Extension of time to file is 6 months (automatic). Extension of time to pay is up to 12 months (is NOT automatic – requires explanation, under IRC §6161).
30. (250 days) Finalize draft of 706 for client signature.
31. (250 days) Finalize state estate or inheritance tax returns.
32. (250 days) Finalize request for prompt assessment (IRC §2204).
33. (260 days) Have client write check to IRS and other states, sign estate tax return and requests for prompt assessment;
34. (265 days) File estate tax return and state returns with taxing authorities, send via certified mail.
35. (14 months) Finalize 706 if on extension and request for prompt assessment;
36. (14.5 months) Have client and preparer execute 706 and deliver check to office for submission with return.
37. (15 months less 5 days) File 706 via certified mail with check and request for prompt assessment.
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