Quick Insights
- The 90-day framework described here is a planning aid and not a legal deadline. Beneficiary notice requirements vary by state and can arrive sooner, while the estate tax return and tax elections run on their own clocks.
- When a revocable trust becomes irrevocable at the grantor's death, it generally needs its own EIN and begins reporting its own income, so the trust's tax identity comes before retitling accounts or reporting income.
- Date-of-death values generally set the tax basis of inherited assets, which determines the taxable gain or loss when the trust later sells them.
- Choices about the trust's first tax year are easier to weigh early. A Section 645 election, made on Form 8855, is generally due by the Form 1041 deadline for the first tax year, including extensions.
A successor trustee usually steps into a trust someone else built, at a time when the person who built it has died. In the most common case, the trust was revocable during the grantor's life and became irrevocable at death. That change turns the trust into a separate taxpayer with new accounts and filing obligations, and the first three months set the pattern for what follows.
The steps below assume the grantor has died and the trust has become irrevocable. Where the grantor is living but incapacitated, or a prior trustee has resigned, some steps differ, so confirm which situation applies first. The phases also overlap, and anything urgent, such as an insurance lapse or a notice deadline, takes priority over the sequence. Readers still deciding whether to accept the role can start with our guide to what to do when you've been named a trustee.
Days 1 to 30: Secure the Assets and Establish Authority
Start with the paperwork. Collect the trust agreement and every amendment, certified death certificates, and whatever account and property information the grantor left behind. Read the agreement to confirm you are the named successor, what the document requires to accept the role, and whether co-trustees are involved. An estate attorney can confirm what state law requires, and bringing one in early is easier than untangling a misstep later.
Next, protect what the trust holds. Confirm that real estate is insured, and ask the insurer about vacancy provisions, since coverage on an unoccupied home can be limited under some policies. Safeguard valuables, identify bills and tax obligations with near-term dates, and hold off on discretionary distributions until the attorney confirms what can safely be paid.
The trust's tax identity also needs attention. The grantor's Social Security number generally stops being the right identifier at death. The trust generally needs its own employer identification number (EIN). Existing trust accounts generally need their records updated to recognize the successor trustee, and the trustee uses the EIN to open any new accounts in the trust's name, kept separate from personal funds.
Many states also require written notice to beneficiaries within a set period after the trustee takes over or the grantor dies. The attorney can confirm which deadline applies.
Start the records on day one. Keep a running log of receipts, payments, and decisions, along with a list of deadlines such as notice periods, tax dates, and insurance renewals, and add to it as new dates surface.
Days 31 to 60: Inventory the Assets and Document Date-of-Death Values
Build a complete inventory: bank and brokerage accounts, real estate, business interests, and tangible property. Sort the inventory into three groups: assets the trust owns, assets that pass directly to named beneficiaries (such as accounts with beneficiary designations), and probate assets administered by an executor.
Values drive a large part of the tax picture. According to IRS Publication 551, the basis of inherited property is generally its fair market value on the date of the decedent's death, with exceptions. That generally includes assets held in the grantor's revocable trust.
Basis is what a later sale is measured against. Assume a home with an adjusted basis of $200,000 before death, worth $650,000 at death, and sold shortly afterward for $660,000. Ignoring selling costs and later basis adjustments, the gain would generally be $10,000 instead of $460,000 (hypothetical figures). The adjustment can also reduce basis when an asset has lost value.
Document values while the information is fresh: appraisals for real estate and closely held business interests, and statements showing date-of-death values for securities. Reconstructing them later can be harder and more expensive.
The executor, working with the attorney and CPA, also decides whether a federal estate tax return (Form 706) is required. The test generally compares the gross estate plus adjusted taxable gifts to the exemption for the year of death. The gross estate can include assets beyond the probate estate or the trust inventory, such as certain life insurance and retirement accounts.
The executor also decides whether to file one anyway to preserve a deceased spouse's unused exemption for the surviving spouse, known as portability. The return is generally due nine months after the date of death, so the question belongs in this window. Some states impose their own estate or inheritance taxes, with thresholds that differ from the federal one.
Days 61 to 90: Make the First-Year Tax Decisions and Refine the System
A trust that becomes irrevocable at death starts a new tax year. Trusts generally report on a calendar year, while an estate can choose a fiscal year. The Section 645 election, made on Form 8855, bridges the two. According to the IRS, it lets a qualified revocable trust be treated and taxed as part of the decedent's estate for income tax purposes during a limited period, and once made it cannot be revoked.
Depending on the facts, the election can allow a fiscal year and affect estimated tax requirements in the first two years. It is generally due by the due date, including extensions, of Form 1041 for the first tax year of the estate or, if no executor has been appointed, of the electing trust.
If there is an executor, the election requires agreement between the trustee and the executor. Where no executor has been appointed, a filing trustee can make it. Whether it fits depends on the trust, the estate, and the timing of distributions, so the attorney and CPA should weigh it together before the first return.
Refine the accounting system now that the picture is clearer. Move the running records into proper books, separate from personal records, and note the reasoning behind discretionary decisions. Track principal and income separately, since the trust document and state law generally treat them differently when allocating expenses and distributions to beneficiaries.
Discretionary distributions generally wait until the trustee has confirmed authority, documented values, and understood the trust's remaining tax and expense obligations. Payments the trust requires, such as a mandatory distribution or a specific gift, may have their own timing, so the attorney should confirm what can wait. A trustee who distributes assets while the trust still owes taxes can face personal exposure. How distributions carry income out to beneficiaries, including the 65-day rule, is covered in our Form 1041 article.
Finally, confirm the first-year filing calendar. A calendar-year trust that is required to file generally files its Form 1041 by April 15 of the following year. Beneficiaries who receive taxable income from the trust generally receive Schedule K-1s reporting their share of it, and receiving trust property does not by itself mean receiving taxable income. State returns may also apply.
After the First 90 Days
By day 90, a successor trustee will ideally have confirmed authority, secured the assets and updated account records, completed or arranged the necessary valuations, made or calendared the first-year tax decisions, and organized the books. Complex assets can take longer, and an appraisal still in progress at day 90 is normal.
The sequence matters because early choices, such as the trust's tax identity and the date-of-death values, shape everything built on them. State law and the trust document govern the details, so the attorney and CPA work best as a pair.
At Revonary, we work alongside trustees and their attorneys on the accounting and tax side of administration: trust accounting, Form 1041 preparation, distribution planning, and ongoing trust bookkeeping. Trustees who want help sequencing these steps, or who are past day 90 and want to confirm nothing was missed, can contact Revonary to talk through where the trust stands.
