Many couples and individuals establish trusts as a means of transferring their wealth to the next generation when they die. Assets in a trust eventually transfer to named beneficiaries according to the trust’s bylaws and do not have to go through probate. An irrevocable trust is managed by one or more trustees during the grantor’s life and after his or her death. The trustee ensures that the trust assets are appropriately titled and transferred to the intended beneficiaries.
Trust beneficiaries have legal rights if they suspect a trustee is abusing their authority and mishandling trust assets. The trust contest lawyers of Albertson & Davidson, LLP help individuals and families in California resolve disputes involving irrevocable trusts. Our attorneys are well-versed in California law pertaining to the creation and administration of trusts and have trust contest litigation experience in courtrooms throughout California.
Our experienced trust litigation lawyers handle trust contests on a contingency fee basis, which means you can obtain skilled legal representation without any upfront costs. Call (800) 601-0170 to reach a trust litigation attorney. We have offices in Los Angeles, Carlsbad, Bay Area, and Orange County.
What Is an Irrevocable Trust?
Many people establish revokable trusts as part of estate planning to manage the transfer of assets and avoid the probate process. A revocable trust allows the person who created the trust —the grantor — to control all the assets during their lifetime and then have them distributed to designated individuals and charitable organizations upon death.
A revocable trust typically becomes irrevocable upon the grantor’s death. An irrevocable trust established according to the grantor’s will after their death is known as a testamentary trust. Assets may also be placed in an irrevocable trust for asset protection.
An irrevocable trust cannot be easily modified or terminated without the consent of the beneficiaries and the court’s approval. Once an asset is placed in an irrevocable trust, it is owned by the trust and used for the benefit of the trust’s beneficiaries.
Irrevocable trusts are structured to minimize estate taxes. Many assets put in a trust become exempt from estate tax. The transfer of assets decreases the grantor’s estate and tax liability, particularly if they have a large estate.
Individuals who work in professions that make them vulnerable to lawsuits, such as doctors and lawyers, often establish irrevocable trusts. If a lawsuit is filed, it will not name the trust in the claim, so creditors and other plaintiffs have no access to the irrevocable trust’s assets.
Who Can Be Trustee of An Irrevocable Trust?
An irrevocable trust requires careful selection of a trustee who will manage the trust’s assets during the grantor’s life and after their passing. Here’s a breakdown of who can serve as a trustee and key considerations:
Who Can Be a Trustee:
- Family Members:
- Examples include a spouse, sibling, or adult child.
- While legally permissible, family members may lack the impartiality or expertise needed for complex trusts.
- Professional or Corporate Trustees:
- Often recommended for their financial expertise and impartiality.
- Suitable for managing complex financial matters and maintaining objectivity.
Responsibilities of the Trustee:
- Asset Management: Ensure trust assets are appropriately managed, distributed, and invested per the trust’s terms and state laws.
- Successor Trustees: Grantors can appoint successor trustees to assume control upon their death, ensuring continuity.
- Professional Assistance: Provisions can be included for hiring professionals (e.g., tax advisors or asset appraisers) to handle specific tasks.
This structured approach helps maintain the integrity of the trust, providing clarity for beneficiaries and minimizing potential disputes.
Role and Impact of the Grantor in the Trust
The grantor of a trust is an individual or organization that funds the trust. The grantor may also serve as a trustee and participate in the trust’s management, investing assets, and distributing proceeds to the beneficiaries.
With an irrevocable trust, the grantor should appoint a trustee. While in many cases, the grantor’s spouse, sibling, grown child, friend, or business associate becomes the trustee, it is advisable to secure professional help to advise about investing and tax matters.
When disputes arise involving irrevocable trusts, the trust litigation attorneys at Albertson & Davidson use their knowledge of the California probate code and their extensive litigation experience to try to resolve the issue to the benefit of our clients.
Duties of Successor Trustees Upon the Grantor’s Death
When the grantor of an irrevocable trust dies, the trustee or the person named successor trustee assumes control of the trust. The new trustee distributes the assets placed in the trust according to the bylaws of the trust.
To get started, a new trustee needs to obtain the trust instrument itself, along with any other estate planning documents, and get certified copies of the grantor’s death certificate from the coroner’s office.
The new trustee is required to:
- Prepare an Affidavit of Assumption of Duties.
- Inform each beneficiary of the trust’s existence and its intended distribution of benefits. This must be done within 60 days of the grantor’s death or 60 days from the date they took over as trustee.
- Obtain an appraisal of the assets placed in the trust.
- Distribute trust assets to beneficiaries.
- Submit the grantor’s final income tax return.
When notifying beneficiaries of trust administration, the trustee must tell them they may request from the trustee and receive a copy of the trust instrument. The beneficiaries must be advised that they have 120 days from the date they received notice or 60 days after a copy of the trust is mailed or delivered to them to bring legal action to dispute the trust.
If the trust leaves assets to an underage child (a minor), those assets become a sub-trust dedicated to the child. A sub-trust survives until the beneficiary is old enough to receive the assets without the supervision of the successor trustee.
If the trust’s assets are not fully distributed, the trustee becomes responsible for investing the trust’s assets in order to generate income for the trust. The trustee must then provide beneficiaries with a formal accounting every year that the trust remains open. Beneficiaries can also request reasonable financial information at any time.
The fees of professionals such as appraisers, investment advisors, legal counsel, and accountants whom the trustee engages for help administering the trust can generally be paid directly from the trust unless the trust bylaws explicitly forbid hiring professionals.
Talk to a California Irrevocable Trust Trial Lawyer
If you are the beneficiary of an irrevocable trust that you believe the trustee is mismanaging, the knowledge and litigation experience of the trust litigation lawyer representing you in a trust contest can make all the difference in the outcome of the matter.
The experienced California trust and will litigation attorneys at Albertson & Davidson, LLP can advise you of your options and represent you in court if legal action is necessary to protect your inheritance. Our law firm has extensive trust contest experience throughout California and has recovered more than $250 million for our clients through negotiated settlements and jury verdicts. Call us at (800) 601-0170 or reach out online today for a free initial consultation. We are tough trial lawyers who Stand. Fight. Win.
