There are a lot of reasons for someone to put together a living trust. Setup will help protect that person’s assets and provide benefits to both the person who sets up the trust and the beneficiaries of the trust, who stand to inherit assets at some point.
Unfortunately, situations arise when someone with a living trust passes away, leaving that trust without a trustee. It often falls on a loved one to step in and settle a trust after death. While this is not an easy task, it can be managed and completed properly.
Dissolving a trust is a process, and that process must play out according to the law. Below you’ll find an overview outlining how to settle a living trust after death:
1. Take Full Inventory of the Trust
The first step towards dissolving a trust is obtaining an understanding of what’s in the trust to begin with. You’ll need to gather all the documents that pertain to that trust. That includes the trust document itself along with any pour-over will that’s related to it. It could also include documents such as:
- Real estate titles
- Automobile titles
- Any other ownership titles or documents
- Bank statements
- Investment statements
- Insurance policies
- A list of beneficiaries
- Any business documents
- Tax returns
- Death certificate
Hopefully, all of these documents, or information on where to find them, will be kept in one place. If not, you’ll need to gather and organize them if you’re going to be settling a trust after death.
2. Seek Legal Advice
Unless you have experience dissolving a trust or you otherwise know how to execute a living trust after death in California, you should seek the help of a trust attorney. That’s because this is a technical process that requires adherence to relevant laws and regulations, and any mistakes you make could prove costly in terms of delays, tax liabilities and other unforeseen challenges.
Your trust attorney will help you go over all documents, figure out what may be missing or incomplete and then compile an organized file that will be used throughout the rest of the process. The sooner you get a trust lawyer involved, the better, as it’s only going to make the process of settling a trust after death that much smoother.
3. Determine the Value of the Assets
As is the case in any accounting procedure, you’ll need to determine the value of the assets in the trust. This value must be determined and listed as the value at the time of death. This date-of-death value is critically important when figuring out how to execute a living trust after death, as values can change over time. You may need to obtain the help of several people in order to do this properly.
For instance, if there are non-cash assets in the trust such as real estate, collectible artwork or other items, an appraiser should set those values so that they are accurately reported. The same will need to be done if the person who passed away owned a business or was a member of a partnership.
Once again, you should seek the help of a trust attorney to complete this step. That’s because there could be assets that were not part of the trust that may need to be included in the overall valuation. Not to mention, part of dissolving a trust involves paying relevant taxes, and this will depend on these values.
4. Pay Off the Bills and Obligations
The next step in how to execute a living trust after death is paying the bills, expenses, obligations and, naturally, any taxes owed. As was the case with taking inventory of the trust, the successor trustee will need to gather all relevant bills and pay any ongoing expenses associated with administering the trust until it’s dissolved and those obligations are released. You may need legal help in determining which bills need to be paid, when they need to be paid and how they need to be paid.
After the bills for the living trust are paid, dissolving a trust means that you’ll need to handle the taxation aspect of the administration. Specifically, you’ll need to prepare necessary tax returns and pay any and all taxes that may be due. A living trust can incur income tax liability in some cases, and it can also be subject to inheritance taxes in certain situations. Any taxes due will need to be paid to both the federal and state governments if necessary, and they must be paid promptly in order to avoid delays, penalties and other problems.
5. Distribute the Assets
The final step in settling a trust after death is distributing the assets in accordance with the wishes of the person who has passed away and then legally dissolving the trust. Your trust attorney can help you determine when it’s appropriate to take this step, as you’ll need to be certain that the trust is not going to incur any more bills, expenses or tax liability before distributing these assets. If this is not done properly, you could be faced with expenses without having any assets to exhaust them, making you as Trustee personally liable. When the assets are distributed and all of the other steps are handled, you can dissolve the trust, thereby ending the process and releasing yourself from any further obligations.
Kam Law Firm Can Help
One of the aspects of executing a living trust after death that can go overlooked is the fact that someone close to you has passed away. This is a difficult time for you, your family and anyone else who was close to this person. Fortunately, you won’t necessarily need to dive into this process the day after death, as you deserve some time to grieve and come to grips with the entire situation.
Rather than take all of this on by yourself, your best option is to obtain the legal advice of a San Diego trust attorney who has helped families deal with these situations for years. That way you’ll know that everything is carried out legally, relieving you of this burden. If you’re ready to take this step, contact Kam Law Firm today to schedule a complimentary initial consultation so you can find out what needs to be done and how to handle the process properly.