Settling and estate — especially an estate with a trust — can be lengthy, emotional, and complicated. Trusts and wills serve different functions and are handled differently after a person’s death. If an estate has both a will and a trust and you are both the executor of the will and the trustee (the person in charge of the trust), you will have additional responsibilities. The trustee must be impartial and responsible, and must keep detailed records of the entire process for accountability.
Here’s a big-picture outline of how to settle an estate with a trust:
Gather initial materials
You must first locate both the trust itself and the original copy of the will (if applicable) and familiarize yourself with their contents. Request multiple original death certificates from the funeral home. Apply for a trust tax ID number from the IRS to be used on bank accounts instead of the deceased person’s Social Security Number. Look for any other important estate planning documents the decedent may have left, as well as financial account statements and tax records.
Notify the appropriate authorities and individuals
If probate is required — and it might be required even if the decedent did not leave a will — you must file the original will (if applicable) and death certificate with the probate court. Identify and notify all trust beneficiaries and heirs. You will also need to notify the Social Security Administration and the state’s Department of Health of the death.
Inventory the estate
Determine the value of all of the estate’s assets, even those not passing through the trust. Include bank accounts, cash, investments, retirement accounts, and insurance policies. Non-monetary assets, like businesses, property, or personal valuables will need to be professionally appraised. Track the cost of the appraisals and any other trust-related expenses diligently.
Make sure everyone gets paid
As trustee, you will handle the payment of any of the estate’s debts, liquidating assets to do so if necessary. This must be done before the distribution of trust assets to beneficiaries. Any expenses you incurred settling the estate — you have documented all of that meticulously, right? — will be taken from the estate at this time. Death doesn’t get you out of paying taxes, so you will need to file a final income tax return and pay any estate or death taxes. When all claims against the estate have been resolved, you can finally distribute any remaining assets and personal property among the beneficiaries as directed by the trust.
That’s a lot — and this is only a basic list of a trustee’s responsibilities. Depending on how detailed the trust is, it could be much, much longer! While straightforward situations can often be managed without an attorney, it absolutely pays to enlist legal assistance when settling an estate under more complicated circumstances. An honest mistake or misunderstanding could put you at risk of trust litigation. You definitely want to get help from a lawyer when:
Someone is contesting
Legal representation is absolutely necessary when someone is contesting a will or trust. Generally, contesting parties argue that the will is invalid because it is legally non-compliant or because the decedent was either mentally unfit or was inappropriately influenced when they signed it. All of these situations require testimony, evidence, and knowledge of the law. Bringing in a lawyer at the beginning can prevent a lot of headaches (and heartaches) as well as drawn-out conflict.
The estate includes more than just common assets
Dividing someone’s assets can get complicated fast. For example, say that someone leaves an uncommon asset like a commercial business or a property in their trust. After their death, you have to determine the value of the asset, factoring in taxes and upkeep. Depending on the provisions of the trust, you may be tasked with having to divide it, maintain it, or sell it — none of which are easy undertakings.
There are debts owed in the estate
What happens to the debts of a deceased person? Someone still has to make sure everything gets paid — and if you find yourself a trustee of an estate with outstanding debts, it is essential to enlist an attorney’s help. Why? Because if you overlook or miscalculate a debt or tax owed by the estate and it is discovered after you’ve distributed assets to all beneficiaries, you will have to pay the difference from your own pocket.