If a deceased individual has left a living trust, a trustee will be taking over at some point. However, the majority of tasks required when managing an estate and trust are not really emergencies. This means that if you are the trustee, you can take a bit of time to be with your family members and grieve with them. But after about a month, it will be time to start collecting documents, bills, and information about the estate and living trust taxes. You will want to have everything organized into files for when it comes time to deliver the estate properties over to the beneficiaries.
How to Execute a Living Trust after Death
Initially, you may not need a lawyer for some of the tasks you have to complete during the early days of your trust administration. As mentioned above, organizing things will be your primary job. For some things, this may take only a phone call or two, while for other matters you may have to send letters, gather information and do follow-up calls. But for certain matters like investment decisions, real estate ownership transfers, filing tax returns and dealing with subtrusts, it will ultimately be wise to contact a lawyer who fully understands how to execute a living trust after death.
If your plan is to distribute the trust properties to the respective beneficiaries fairly quickly, you may be able to get much of this work done in as little as six months. The situation is a little different if there is an ongoing trust – such as one that involves children. But at the very least, you can tackle the larger and more difficult tasks in the initial months of the trust administration.
What Happens to a Living Trust after Death
Unless you are serving as both the trustee of the trust and estate executor, you will need to stay in contact with the executor in the early stages of this process. You will want to understand what the executor is doing and why he or she is doing it. Often, the executor will be transferring the assets of the estate to the trust you are administering. Once there they are the responsibility of the trustee. Below is a rough outline of what happens to a living trust after death and of the tasks that have to be performed, even for relatively simple trusts:
Obtain copies of the death certificate
Locate the will and file it with the probate court
Notify Social Security about the death
Notify State Department of Health
Identify and notify trust beneficiaries
Create an inventory of trust assets
Protect all trust properties
Obtain a TIN – taxpayer identification number – from the IRS
Transfer estate properties to your name as trustee
Examine the trust investments
Create a reliable record-keeping system
Have assets professionally appraised and pay all debts
Most of these tasks are relatively simple and straightforward. For instance, the funeral home can usually help you obtain death certificates and may also notify Social Security about the death. You will need to obtain 8-12 individual copies of this death certificate. You will need this many for everything you will be doing as a trustee. If it is necessary for you to inform Social Security – instead of the funeral home – all you have to do is phone them at 800-722-1213.
Keep in mind that regardless of when the death took place during the month, you are legally obligated to return a Social Security payment that took place during that month. This is the case even if payments came in on the very last day of the month. However, if these payments were made via direct deposit, you will want to make sure you leave the deceased persons bank account open, since it may be several months before the Social Security Administration deducts this payment from the account.
Distribution of Trust Assets to Beneficiaries
You will need to read the trust instrument and identify the beneficiaries so the distribution of trust assets to beneficiaries can begin as soon as possible. If the trust document does not specifically name individuals – instead of using a term like “children” – you may want to contact a lawyer to ensure that you are adhering to state law when it comes to the term used. Just what does the state consider a “child” to be? An experienced trust administration attorney can help you understand this.
Keeping Things Organized
Of the remaining tasks that the trustee has to carry out, most rely on your organizational skills. You will need to be aware of what debts the trust has and what its assets are. The valuation of the assets is also very important, and you will likely need the help of experts with this for things like art or similar items. This means hiring appraisers. Having the TIN number will allow you to accurately report any losses or gains that result prior to the distribution of the property to the beneficiaries.
Finally, it will be necessary to keep an eye on the incoming bills of the deceased so the debts can be paid as they become due. This could include the administration costs (including tax preparers, lawyers and housecleaners) and personal debts like medical costs and credit card balances, as well as the funeral expenses for the deceased.
If all you have to do is identify the trust assets, pay debts and distribute what remains to any beneficiaries, you will not have to keep track of income and expenses for a very long time. In fact, it will probably be no more than six months or so. Also, keep in mind that it will not be necessary to file a tax return for the trust unless the assets of the trust generate over $600 that year. When doing a simple trust, it may be possible to do a very effective job by simply using a notebook and the trust checkbook and chronologically organizing the bank statements and the brokerage statements.
Your goal as a trustee is to ensure that the estate of the deceased is handled in a legal and efficient way. When you look at the checklist above, it might sound like a lot to do – and if the estate is large and complex this might be the case. Certainly, serving as an effective trustee is sometimes difficult which is why reaching out to a qualified and experienced lawyer for getting some help is often a good idea.
