Trust Administration in Calabasas

Trust Administration in Calabasas

A Calabasas successor trustee usually inherits more than property. The trust often holds membership interests in companies that own the property, which means the trustee is now dealing with an operating agreement, other members and a set of governance obligations, on top of the ordinary duties to beneficiaries.

That combination is what makes these administrations go slowly, and the slowness is where the disputes start.

The notice, and the clock it starts

Probate Code § 16061.7 requires the trustee to serve notice on every beneficiary and on the settlor’s heirs when a revocable trust becomes irrevocable on death, within 120 days. That notice also starts a 120-day window for anyone to contest the trust, running from service.

Serving it promptly is in the trustee’s interest, because it closes the contest period. Not serving it leaves the trust open to challenge indefinitely. Trustees who delay because a family conversation is going to be difficult are trading a hard month for an open-ended exposure.

Stepping into the company as well as the trust

If the trust holds a membership interest, the trustee has to read the operating agreement before doing anything with it. Transfer restrictions, consent requirements, buy-sell provisions and management rights all sit in that document and generally control over the trust.

This is also where trustee liability concentrates in Calabasas. A trustee who is also a manager of the company is on both sides of every dealing between the two, including management fees and the valuation of the interest. That is not automatically improper and the trust may authorize it, but it belongs in the accounting where beneficiaries can see it, and it is the first thing a beneficiary’s attorney will ask about.

Prop 19, and a one-year decision

Under Proposition 19, a child who inherits a parent’s primary residence and moves in as their own principal residence within one year keeps a partial exclusion from reassessment. A child who does not move in gets no exclusion and the property is reassessed to market value.

On a long-held Calabasas home the difference is large and permanent, and the decision has to be made while the family is often still working out whether to keep the house at all. A trustee who does not raise it early has cost the beneficiaries real money, and that is a conversation worth having in the first weeks rather than the ninth month.

Questions Calabasas clients ask

How long do I have to send the notice? 120 days from the date the trust becomes irrevocable, under § 16061.7. Serving it starts the 120-day contest window running, which protects you, so there is no advantage in waiting.

The trust holds an LLC. What do I need to read first? The operating agreement, before you do anything with the interest. Transfer restrictions, consent requirements and buy-sell terms sit there and generally control over the trust document.

I am the trustee and also manage the company. Is that a problem? Not automatically, and the trust may authorize it. What it does mean is that every dealing between the trust and the company, including your management compensation and how the interest is valued, belongs in the accounting where beneficiaries can see it.

A beneficiary wants to move into the house. Does that matter for taxes? Yes, and on a one-year clock. Under Proposition 19 a child who moves into an inherited parent’s residence within a year gets a partial exclusion from reassessment. Miss it and the property is reassessed to market value.

Does the accounting have to show what happens inside the LLC? At the trust level, yes, to the extent it moved money. Distributions from the company to the trust are receipts and money the trust puts in is a disbursement, and § 16063 requires both. Beneficiaries will also ask under § 16061 for the operating agreement and the entity statements, and where the trust controls the company that request is usually a fair one.

Talk to Eric or call 805-244-5291. I serve Calabasas and the surrounding Conejo Valley communities.

If the trust holds companies as well as property, business succession covers the governance side. Run the numbers with the Proposition 19 calculator before the one-year window closes. If a beneficiary is already pressing you for an accounting, see beneficiary rights in Calabasas.