We all want to ensure the well-being and security of our loved ones, both during our lifetime and after our passing. That’s why it’s crucial to have a comprehensive Estate Plan in place, such as a Trust-Based Estate Plan with Trust & Will. This type of plan provides the necessary tools to protect your assets and loved ones. However, when the Trustee of a Revocable Trust passes away, it is up to their Successor to administer their affairs and close the Trust.
Understanding a Revocable Living Trust
A Revocable Trust is the foundation of an Estate Plan. It grants the Trustee the authority to manage, control, and distribute their assets during their lifetime and after their death.
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One significant advantage of a Revocable Trust is the level of privacy it offers. By using a Revocable Trust, you can transfer assets to your Beneficiaries outside of Probate Court. This avoids the lengthy and costly probate process. Assets that can be included in a Trust range from real estate, valuable possessions, family heirlooms, bank accounts, stocks, and bonds. The private nature of a Trust ensures that the details of your assets and their distribution remain confidential, keeping them out of the public record.
Furthermore, a Revocable Trust provides flexibility as your life circumstances change. You can easily modify it by adding new assets, updating Beneficiaries, or appointing a new Legal Guardian for your child. In contrast, an Irrevocable Trust is permanent and cannot be amended or revoked.
Settling a Trust After the Trustee’s Death
Not everyone is well-versed in handling the closure of a loved one’s Revocable Living Trust. If you find yourself in the position of a Successor Trustee without knowing where to begin, here are the steps to settle the Trust:
Step 1: Take inventory
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Before anything else, you need to have a clear understanding of the Trust’s contents. Start by taking inventory of the Estate and familiarize yourself with any instructions for distribution. Additionally, your loved one may have left special instructions regarding funeral arrangements, cremation, burial, or memorial services.
To gain a comprehensive view of the Trust, gather the following documents – copies are usually sufficient unless stated otherwise:
- Account statements: Bank accounts, brokerage accounts, retirement accounts (e.g., 401(k)s, annuities, IRAs) for at least a few months before the Trustee’s death.
- Bills: Utility bills, credit card bills, phone service costs, mortgages, personal loans, taxes, medical bills, and funeral bills.
- Stocks and bonds: Original titles required for stocks or bonds held in certificate form.
- Life insurance policy: In some cases, the insurance company may request the return of the original policy for older policies.
- Contracts: Prenuptial, postnuptial agreements, real estate, and automobile leases, personal loan contracts, lines of credit, mortgages, and original promissory notes.
- Deeds: A copy of a property deed is usually sufficient, contrary to the common misconception that an original deed is needed.
- Vehicle titles: Original titles required for transferring legal titles of automobiles and boats.
- Business documents: Original stock or LLC certificates for transferring legal business titles. Also, gather local and state business licenses, and federal and state income tax returns for the past three years.
- Tax returns: Copies of federal and state personal income tax returns for the last three years, as well as federal and state gift tax returns.
- Estate Planning documents: Copies of the Revocable Living Trust and any amendments, and the original Last Will and Testament.
- Beneficiary designations: For all assets listed in the Trust.
- Death certificate: Multiple original death certificates (at least ten) are recommended for settling the Decedent’s final affairs as advised by Trust attorneys and Estate Planning experts.
Step 2: Pay bills and expenses
As the Successor Trustee, your responsibility includes determining the outstanding bills and expenses owed by the Decedent at the time of their passing. Additionally, ongoing expenses related to Trust administration, such as legal and accounting fees, utilities, insurance premiums, mortgage payments, and homeowner association fees, must be paid.
If the Decedent had significant debts, you may need to sell off real estate or other valuable assets from the Trust to settle the debts and cover any expenses and taxes associated with the Trust.
Step 3: Pay taxes
After settling the final bills and expenses, the next step is to address any income and death taxes that may be due.
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The Successor Trustee is responsible for preparing and filing the Decedent’s final federal and state income tax returns. They must also pay any taxes owed. The Decedent’s Estate may be subject to federal and state Estate Taxes. In such cases, the Successor Trustee prepares and files the Federal Estate Tax Return, State Estate Tax, and/or State Inheritance Tax Return, and then pays the respective tax bill(s).
Step 4: Distribute assets
Once all Trust administration expenses, including taxes, are settled, the Successor Trustee can proceed to distribute the remaining assets to the named Beneficiaries according to the instructions outlined in the Decedent’s Revocable Living Trust.
It’s important to note that the Trust is considered complete and closed once the Beneficiaries receive their inheritances.
Create Your Revocable Trust with Trust & Will
A Revocable Living Trust offers peace of mind, knowing that your assets and loved ones are protected not only now but also in the future. Trust & Will can guide you through the process of creating a Trust, making it easier for your Successors to handle your Estate.
Start planning your Estate today with Trust & Will’s online Trust creation service.
Source: https://t-tees.com
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