Most people think that if they created a revocable living trust, that the process of settling their affairs won't require the services of an attorney. However, in my experience, this assumption is true for only a handful of trusts. Here's a list of things to keep in mind if you find yourself the successor trustee, settling your family's trust.
Was the Trust Fully Funded?
One of the most important aspects of having a living trust work as expected is to ensure that it is fully funded with all of the Trustmaker's assets prior to death. If, at the time the Trustmaker dies, anything of even limited value is left out of the trust, a probate administration may be required.
Was the Trustmaker Married?
If the living trust contains follow on AB or ABC Trusts, the successor trustee and surviving spouse should meet with an attorney to ensure those follow on trusts are funded correctly. Also, any federal or state estate tax returns need to be prepared and filed, sometimes even if no tax is due.
Will the Beneficiaries of the Trust Receive their Inheritance in another trust?
If there are no issues that need to be addressed by a trust attorney, such as paying estate taxes, getting tax releases, dealing with debt or deciding what to do with retirement accounts, then all parties may be able to settle the trust without an attorney. If there are issues such as the above, or if any of the beneficiaries will receive their inheritance in a trust, then it's best to discuss how the new trust will be funded, the tax returns and how each trust should be handled with a reputable attorney.
Will the Estate Owe Federal, State or Inheritance Taxes?
If the Trustmaker lived in or owned real estate in one of the jurisdictions or states that collects inheritance taxes, the successor trustee should work with a trust attorney to make sure all tax returns are filed and taxes paid, else the successor trustee could be stuck paying taxes out of personal assets.
Is a Business Involved?
Even if the Trustmaker made an exit plan for a business, the successor trustee will need to work with a trust attorney to implement the exit plan. Without an exit plan, an attorney would be needed to deal with the legal aspects of the business.
Is there contention among Beneficiaries?
If beneficiaries hire their own attorney to represent their interests, the successor trustee would want to hire a trust attorney to settle the trust.
Are there Retirement Accounts Involved?
If ether the trust is the beneficiary of a retirement account such as a 401K or IRA, then an attorney would be needed to ensure distributions are handled correctly and tax consequences minimized.
In conclusion, as a successor trustee, you may wish to at least consult with a reputable estate attorney to understand your family's living trust situation.
Note - the foregoing should not be construed as legal advice. Contact Avanti for a list of local, reputable attorneys in the Grass Valley area.
When you're ready for a PRO to help you buy or sell, give me a call.