How to Distribute the Assets of a Living Trust After Death

By Christine Funk, J.D.

How to Distribute the Assets of a Living Trust After Death

By Christine Funk, J.D.

Distributing a person's assets after they pass away depends on the instructions left behind in a will or trust. In situations where instructions weren't left, the state laws govern the distribution of property regardless of the desires a person may have expressed before passing away.

Hand holding a black pen signing documents

Usually, when someone has established a revocable living trust, they designate themselves as the trustee, or manager, of the trust during their own lifetime and a successor trustee to take over upon their incapacitation or passing. One of the main tasks of the successor trustee is to distribute the assets of the trust to the designated beneficiaries. This can be easy in some cases, but in others, the situation presents complicating factors. In every case, however, the designated successor trustee of a properly executed living trust has the authority to transfer assets to beneficiaries as dictated by the living trust.

Easy Asset Distribution

Sometimes, distributing the trust's assets is simple. If a single person is listed as the beneficiary of the contents of the trust, for example, the successor trustee simply transfers ownership of all assets to the sole beneficiary. Where the trust identifies all assets and designates direct transfer to specific beneficiaries, this also makes for easy distribution.

In any of these straightforward distribution situations, the successor trustee should still check with an estate planning attorney when determining the proper way to transfer titles to land and vehicles because this process may differ by state.

Asset Distribution by Percentage

Many people choose to leave some identified heirlooms to specific people, but most leave their heirs percentages of the estate. For example, one may leave their assets to their two children, divided 50/50. In this case, the successor trustee must evaluate the estate and determine the division of assets. Here are the important steps involved.

1. Determine the value of the estate.

To determine how to distribute by percentage, you must understand how much the estate is worth. You may need to obtain the assistance of art brokers, jewelers, real estate agents, forensic accountants, and other experts to determine how much the assets of the estate are worth. While the cleanest way to approach estate distribution might be to sell everything and then simply divide the profits, this may not be the best approach or what the trust agreement designates.

2. Meet with the heirs.

Meet with the heirs after the appraisals of the assets are complete, and then provide each heir with documented appraisals and discuss their preferences. This way, you can determine whether one heir might accept the $50,000 art collection while the other inherits the $50,000 cottage to divide the estate equally. You can also determine whether there are assets to which neither party assigns sentimental value that can be sold or that one or both heirs consider priceless. As the trustee, you must decide what you believe is best, as long as it complies with the terms of the trust. However, there is no need to upset beneficiaries unnecessarily.

3. Transfer ownership.

As the trustee, you have the power to transfer accounts, such as bank accounts and brokerage accounts, into the names of the beneficiaries. Similarly, if there is real property that will not be sold, you must transfer the title of the property to the proper heirs. Consult with an attorney or relevant state agency to ensure compliance with state and local transfer laws and rules.

4. Distribute remaining assets.

The estate will undoubtedly contain remaining assets, such as household goods, tools, and the like. You must also distribute this property to the heirs.

When distributing assets held in a living trust, you must follow the instruction given in the trust document. Some may be simple to execute while others require a longer process of appraising assets and discussing with the beneficiaries which assets they would like to include in their percentage of the estate. In any situation, you must also follow state laws for transferring accounts and titles.

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