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September 11, 2020

Administrative trust after death

Administrative trust after death

Distributing a person’s assets after they die depends on the instructions left behind in a will or trust. In situations where instructions were not left, the state laws govern the distribution of property regardless of the desires a person may have expressed before passing away. A trust may be created during life, either as a revocable trust or an irrevocable trust.

Or a trust may be created under a Will. Regardless of the attributes of the instrument creating the trust, different sub-trusts may be created under the trust. If the assets start in the Will, the Will could name the revocable trust as the beneficiary, this is a “pour-over” Will. Or, the Will could set up trusts directly. If the assets start off in a trust, it may be called a Revocable Living Trust or some other name. There is no magic to the name of the trust. It just cannot be confusing or violate a copyright. Upon death, a temporary Administrative Trust may be created to pay expenses prior to splitting as directed by the instrument.

What Is Trust Litigation?

Trust litigation is where a Beneficiary or Trustee or even an heir of a Trust feel their legal rights are trampled upon and need legal counsel to represent them in court. Typically, the trust litigation is between the Trustee vs. the Beneficiary/ heir. Many issues can arise, and mostly due to transparency, the beneficiary feels the Trustee may be self-dealing. Self-dealing is where the Trustee puts their needs and wants before the Beneficiaries. Now, the Trustee knows they have the fiduciary duty to put everyone above their self-interest first and to comply with the wishes of the Trustor.

What is the First Step the Trustee Should Take?

So, what happens to a living trust at death? Upon the death of the owner of a living trust, the successor trustee will take over. The first step is to contact the investment firm that is holding the living trust or the attorney representing the trust owner. They will have the necessary documents (the trust agreement) to begin executing the provisions of the trust.

A change of ownership

If the trust holds real property, the next step is to bestow title in the successor trustee to ensure that the property will be handled according to the settlor’s wishes. An affidavit ought to be recorded with a certified copy of the death certificate against each real property held in a living trust.

This process transfers the property’s title from the deceased settlor to the new trustees. A change of ownership form is typically recorded simultaneously with the affidavit. If the trust transfers real property from parents or children by any means exempt from property tax reassessment, the trustee must complete the proper exemption form. An attorney is recommended to help prepare these documents.

Pot-Trust

A Pot Trust is a trust set up for several beneficiaries, typically children. The purpose of a Pot Trust is to keep the funds in one “pot” until a later event. For example, at the death of the parents, the assets may be kept in one pot until all the children have graduated from college or reached age 25. By doing this, parents can ensure that each child has enough to go get a good start in life.

Let us say that there are 2 children ages 18 and 22 at the death of the parents and there are $400,000 in assets. Assume that the 22-year old went to a school costing $50,000 per year and has now graduated. If the 18-year old went to the same school, without a pot trust, their entire inheritance would go toward their education. With a pot trust, once they are both out of college, the trust would split, and each would get $100,000. Once the pot trust terminates, the remaining balance could be distributed outright or in further trust.

What to do after a passing

Get the death certificate. You will need to get as many original death certificates when settling a trust after death based on how many bank accounts, properties, etc., you must receive the original death certificates. Contact Social Security if necessary. Many times, a check might need to be returned based on when the SSI check was received, after the death of the grantor.

Inventory Trust Assets

Inventory Trust Assets. It takes time to collect all assets, documents, and control them, so no loss of assets occurs. Review Trust Investments: Depending on the number of investments can complicate matters. Many times, a financial advisor may be necessary to understand the ramifications of selling, reinvesting, etc.

Set up a Record-keeping system: Setting up bookkeeping is the foundation of the trust administration process. Identify all beneficiaries and heirs: To add to the time, the Trustee will need to contact the heirs and beneficiaries as to the status of the Trust process. There is a reasonable time frame; the Trustee must get back with the Beneficiary with answers. The above list is just a preview of the full breadth of steps of an accurately complete trust administration process.

How long does it take to get an inheritance?

What if the Beneficiary has been waiting for more than 18 months? If you are the Beneficiary, hopefully, you have been in the loop of the current standings. If not, then, you will need to start by gathering information like the following:

1. Copy of the Trust
2. Banking information
3. Asset updates
How Does the Trust End?

Depending on the terms of the trust, it may be dissolved after all the trust property has been distributed. But, if the terms call for something other than direct distribution to heirs, it may be necessary to maintain the trust for a period. For instance, the trust owner may have left money to a minor child which would require that the trust retain the funds until the child reaches the age of majority in the state of the child’s residence. If that is the case, the trustee will remain responsible for the trust until it is time to make the final distributions.