Can a Trustee Indemnify Himself Against Debt Collection?

[edkrane]

After my father's passing in 2016, I became Successor Trustee for his simple Trust. Per attorney advice, the estate qualified as a Small Estate and thus non-probated, and all beneficiaries have been in full agreement as to disbursements of assets. I paid all his outstanding bills and taxes for 2 years from estate assets, and then sold the residence which was within the Trust. I divided the Trust assets in equal portions, and disbursed the assets in phases. My approach in gradual disbursements was to extend the time period in retaining some funds in the Trust account just in case of some unforeseen bill. Since approximately May 2017, no bills have been invoiced to me as Trustee, as I've verified my father's medical bills had all been covered by his insurance. Now only a small amount remains in the Trust account for disbursement, and I'd like to indicate the Trust is terminated with the beneficiaries. My schmuck attorney advised me in 2017 to "go ahead and disburse the rest of the funds "if you feel confident you will have no more bills." Well, that's an idiotic statement to make. How can a Trustee know he will never be invoiced for some bill some debt collector digs up years after a Trust closes, and all funds are disbursed? A Trustee is personally liable for all bills of a Trust in California. I am paranoid that after an extended period of due diligence in administering the dissolution of an estate and Trust...singlehandedly, that I could still be billed by some debt collector which arose out of some accounts payable ledger somewhere. Does anyone know, once a Trustee has paid all known bills, distributed Trust assets...and then dissolves and terminates the Trust, can he still be personally liable for some distant, unknown debt which arises?

 

[LdiJ]

After my father's passing in 2016, I became Successor Trustee for his simple Trust. Per attorney advice, the estate qualified as a Small Estate and thus non-probated, and all beneficiaries have been in full agreement as to disbursements of assets. I paid all his outstanding bills and taxes for 2 years from estate assets, and then sold the residence which was within the Trust. I divided the Trust assets in equal portions, and disbursed the assets in phases. My approach in gradual disbursements was to extend the time period in retaining some funds in the Trust account just in case of some unforeseen bill. Since approximately May 2017, no bills have been invoiced to me as Trustee, as I've verified my father's medical bills had all been covered by his insurance. Now only a small amount remains in the Trust account for disbursement, and I'd like to indicate the Trust is terminated with the beneficiaries. My schmuck attorney advised me in 2017 to "go ahead and disburse the rest of the funds "if you feel confident you will have no more bills." Well, that's an idiotic statement to make. How can a Trustee know he will never be invoiced for some bill some debt collector digs up years after a Trust closes, and all funds are disbursed? A Trustee is personally liable for all bills of a Trust in California. I am paranoid that after an extended period of due diligence in administering the dissolution of an estate and Trust...singlehandedly, that I could still be billed by some debt collector which arose out of some accounts payable ledger somewhere. Does anyone know, once a Trustee has paid all known bills, distributed Trust assets...and then dissolves and terminates the Trust, can he still be personally liable for some distant, unknown debt which arises?

Your father passed in 2016, it is now the end of 2019...more than 3 years later, possibly close to 4 years later. I think its safe to assume that there are no more debts out there. You erased the question about what state is involved, so nobody can check the statute of limitations, but its even possible that the SOL has passed to bill an estate.

 

[Mass_Shyster]

A Trustee is personally liable for all bills of a Trust in California.

For those who feel it necessary to answer without reading the post.

 

[LdiJ]

For those who feel it necessary to answer without reading the post.

I read the post. I did not catch that it was California. Your rudeness was unnecessary.

 

[Mass_Shyster]

I read the post. I did not catch that it was California. Your rudeness was unnecessary.

Pot, meet kettle

 

[bcr229]

The SOL in CA is two years on an oral contract, four years on a written contract. If OP wants to be 100% safe he can wait until the fourth anniversary + 1 day of his father's death before he closes out the trust.

 

[Taxing Matters]

Most states, including California, provide for only a limited time for creditors to make claims against the decedent's estate or trust. In California to get the benefit of those provisions, the trustee needs to publish certain notices to creditors. If you followed the procedures in the Probate Code for that shortly after the death of the trust grantor you should be good now to disburse the assets. I suggest you consult a probate attorney for advice on what to do at this point given what the trust has done so far.

 

[edkrane]

Most states, including California, provide for only a limited time for creditors to make claims against the decedent's estate or trust. In California to get the benefit of those provisions, the trustee needs to publish certain notices to creditors. If you followed the procedures in the Probate Code for that shortly after the death of the trust grantor you should be good now to disburse the assets. I suggest you consult a probate attorney for advice on what to do at this point given what the trust has done so far.

Thanks for your reply...My attorney advised me..."there is no California law requiring a Trustee to publish a notice to creditors...you don't have to do it." The estate was not probated since it qualified as a Small Estate in California, and all beneficiaries were in agreement on all matters. How would a probate attorney assist me. I did pay a SoCal attorney $5,500 for practically no work. I'd hate to waste more unless necessary.

 

[edkrane]

Most states, including California, provide for only a limited time for creditors to make claims against the decedent's estate or trust. In California to get the benefit of those provisions, the trustee needs to publish certain notices to creditors. If you followed the procedures in the Probate Code for that shortly after the death of the trust grantor you should be good now to disburse the assets. I suggest you consult a probate attorney for advice on what to do at this point given what the trust has done so far.

Here's the rub....My attorney directly advised me no notice to creditors was necessary in the state of California. His statement on this point was in response to my direct question specifically about this matter. So, I did not. However, as I said no more bills were received after May 2017. What I do not know is is there some creditor with a bill and is unaware of my father's passing? In my role as Trustee, the estate assets and Trust disbursements are 99% done. Did my attorney advise me wrongly in advising me I did not need to file Notice To Creditors?