A client recently sat in my office, the binder containing her mother’s trust on the table between us. Her mother had just passed, and my client—an accomplished architect—was now the successor trustee. She was responsible for distributing the family’s assets, including a Brooklyn brownstone and a significant investment portfolio. “I want to do right by my mother and my siblings,” she told me, “but I have no idea where to begin. What do I actually do?”
This is a common position. Being named a trustee is an act of profound trust—and the assumption of a serious legal responsibility. The process is not as simple as writing a few checks. It is a deliberate series of steps governed by the trust document itself and by New York law. It is an exercise in stewardship.
Your First Duty: Marshalling the Assets
Before a single dollar can be distributed to a beneficiary, the trustee must take control of and inventory every asset the trust holds. This initial phase is foundational. Any misstep here can create complications for months or even years.
This process, often called “marshalling the assets,” involves several key actions:
- Obtain a Taxpayer ID Number (TIN/EIN): The trust is now its own taxable entity. The first step is to get a new TIN from the IRS. This is required to open a trust bank account and report any income the trust earns during administration.
- Identify and Secure All Assets: This means locating all bank and brokerage accounts, real estate deeds, and other property titled in the name of the trust. You will need to present a certificate of trust and the grantor’s death certificate to financial institutions to assert your authority.
- Value the Assets: Every asset must be appraised for its fair market value as of the date of the grantor’s death. For cash, this is simple. For real estate or a private business, it requires a formal appraisal. This valuation is critical for tax purposes, establishing the “step-up in basis” that can reduce capital gains taxes when an asset is later sold.
This is the unglamorous but essential work of a fiduciary. It’s about creating an accurate and complete picture of what the grantor left behind before you can consider how it will be divided.
The Fiduciary’s Burden: Accounting to Beneficiaries
A trustee has a fiduciary duty to act in the best interests of the beneficiaries, and a cornerstone of this duty is transparency. In New York, this is formalized through an accounting—a detailed report of everything that has come into the trust, everything that has gone out, and everything that remains.
Beneficiaries have a legal right to this information. Under New York’s Surrogate’s Court Procedure Act (SCPA) § 2205, a beneficiary can petition the court to compel a trustee to provide a formal accounting. A prudent trustee communicates proactively to avoid conflict and potential litigation.
We typically advise trustees to provide an informal accounting to all beneficiaries before making final distributions. This document should clearly list:
- The starting inventory of assets and their values.
- All income received by the trust (dividends, interest, rent).
- All expenses paid from the trust (legal fees, accountant fees, property taxes, funeral expenses).
- Any proposed distributions to beneficiaries.
Presenting this information gives beneficiaries a chance to ask questions and builds confidence that the trust is being administered properly. It also protects you, the trustee, by documenting your actions and getting the beneficiaries’ consent before assets are moved.
The Mechanics of Distribution
Once all debts and expenses of the trust are paid and the accounting has been accepted by the beneficiaries, you can make the distributions. How this happens depends entirely on the terms of the trust instrument.
Some trusts call for an outright distribution, where assets are paid directly to the beneficiaries in a lump sum. This can be done in two ways:
- In cash: The trustee liquidates assets—sells the real estate, sells the stocks—and distributes the cash proceeds.
- In-kind: The trustee transfers the assets themselves directly to the beneficiaries. For example, instead of selling 1,000 shares of Apple stock and dividing the cash, each of two beneficiaries would receive 500 shares directly into their own brokerage account. This is often more tax-efficient.
Many trusts I draft for my clients are more complex. They may dictate staggered distributions—for example, a beneficiary receives one-third of their share at age 25, one-third at 30, and the final third at 35. Other trusts, known as lifetime trusts, may never distribute the principal outright. Instead, the assets remain in the trust for the beneficiary’s entire life, protecting the funds from creditors, lawsuits, or a future divorce. In these cases, your job as trustee is not to wind up the trust, but to manage it for the long term.
Closing the Trust
For trusts that require outright distribution, the final step is to have each beneficiary sign a “Receipt and Release” form. This legal document serves as proof that they have received their full inheritance and release you, the trustee, from any further liability. Once all beneficiaries have signed and all assets are distributed, you can file the trust’s final tax return and formally close the estate.
Serving as a trustee is a significant commitment. It requires diligence, impartiality, and a clear understanding of your legal duties. It is the final act of carrying out a loved one’s legacy.
If you have recently been named a trustee and are unsure of your duties, our firm offers a Trustee’s Initial Review. In this meeting, we interpret the trust document, outline your specific obligations, and create a clear administrative plan.
