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Definition | Advantages | Funding | Administration

Administration of a Living Revocable Trust

  1. Settlement of a Trust

    Upon the death of a single Trustor or upon the death of a last surviving joint Trustor, the Trust assets must be settled or disposed of according to the provisions of the Trust instrument. The successor or backup Trustee will review the Trust document and determine how the creator(s) of the Trust wanted his or her assets to be distributed. With a married couple, when both the original Trustors are deceased, the entire Living Trust becomes irrevocable. That means upon the death of the second Trustor, the disposition of assets is now carved in stone and cannot be changed -- it is irrevocable. This is just like a Will; once a person is dead the Will cannot be changed.

    Once the Trust becomes irrevocable, it no longer uses an individual's social security number. It now must have a federal tax ID number. If all of the Trust assets are paid out before any income is generated by the Trust assets, then it is not necessary to file an estate income tax return. However, beneficiaries who receive assets that produce income must report that income and will be responsible for it on their own individual tax returns.

  2. Duties of the Successor Trustee

    The successor Trustee should perform the following duties to properly administer the Trust estate after the original creators of the Trust are deceased:

    • Inventory all assets to determine title or ownership. All assets should be owned by the Trust. Any asset not owned in the name of the Trust must be probated with the local probate court. Assets located outside Florida and not titled in the name of the Trust must be probated in that state.
    • Obtain 10 death certificates for the recently deceased grantor.
    • Collect social security benefits.
    • Check on veteran benefits.
    • Notify all life insurance companies with whom the grantor had policies for any death benefits that may be due. Each company will require a certified copy of the death certificate.
    • Collect pension and profit-sharing benefits, if any.
    • Notify all heirs of their interest in the estate.
    • Determine existing debts of the estate and notify all ascertainable creditors. Pay all valid claims. This duty includes the responsibility to review all bills, receipts and mail in the decedent's home to learn if there are any creditors to the decedent's estate.
    • File a "Notice of Trust Administration" with probate clerk. This notice is required Florida Statute 737.308 which states that the Trustee shall cause a notice to creditors to be published and served. This notice shall contain the name of the deceased settler of the Trust, the name of the designation of the Trust, if any, and the date the Trust was established. It will also include the name and address of each person serving as Trustee as a result of the settler's death and the name and address of the attorney for the Trustee, if any. Finally, it shall state the date of first publication. This notice shall be published once a week for two consecutive weeks in a newspaper in the county where the Trust is administered. This notice allows any potential creditors to file a claim within three months after the first publication of the notice. If a creditor does not serve notice of a claim within three months, then that claim will be forever barred. Additionally, the statute stipulates a two-year statute of limitations barring any claims, for any reason, after two years from the date of the Trust creator's death.6-1
    • Collect rent on income-producing properties, make repairs, pay real estate taxes and maintain insurance on these properties. Also, arrange for utilities and other necessary services.
    • Set up bookkeeping records for the estate. Keep receipts and records of all disbursements, including expenses for travel, lodging, meals, etc., incurred in the administration of the estate, before final disbursement.
    • Ascertain the estate's cash requirements for debts, taxes and expenses, and review all estate assets to figure out how necessary funds can best be raised.
    • Obtain written valuations of the Trust's assets. This is absolutely necessary to determine the new cost basis for these assets in order to take advantage of stepped-up valuation. This will reduce any taxable gain when the assets are sold by the heirs.
    • Establish market value of real estate by having two real estate agents provide written valuations as well as comparable assessments to back up their valuations. If the valuations are close, average the two. If they are far apart, call a third real estate agent.
    • Check market value of securities by looking in the newspaper or by calling a broker. Most brokers will provide these figures in writing. Market value at the date of death becomes the new cost basis.
    • Review the credit cards. Decide if any or all should be destroyed.
    • Compute any state or federal income tax due. Prepare any preliminary tax notices required by law.
    • File federal estate tax form 706, if needed. This is required only if estate taxes are due (that is, if a married couple's estate is held in an A/B Trust and is valued at greater than $5 million or if a single person's estate is valued at more then $600,000.) If it is necessary to file form 706, see your CPA or financial advisor.
    • Prepare the final city, state and federal income tax returns of the deceased.
    • Distribute the estate assets to the beneficiaries according to the directives of the original Trustor(s).

  3. Summary

    The settlement of a Trust estate is similar to the settlement of a probate estate. In both cases, the assets must be identified. The debts and creditors must be paid, including the IRS. The heirs must be notified and the remaining assets should be divided and distributed according to the terms of the document (Will or Trust). The major difference is that with a Will the attorney and probate court system control the process. With a Trust, the Successor Trustee controls the process. With a Successor Trustee an estate is almost always settled more quickly and with less expense than by involving an attorney and the probate court system.

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