How to Distribute the Assets of a Living Trust After Death

By Ronna L. DeLoe, Esq.

How to Distribute the Assets of a Living Trust After Death

By Ronna L. DeLoe, Esq.

After the trustee or grantor of a living trust has passed away, the successor trustee distributes the trust assets to the beneficiaries listed in the trust agreement. Distributing assets from a living trust ranges from being simple to extremely complicated, depending upon how many successor trustees and beneficiaries the trust has and what assets are in the trust.

Hand holding a black pen signing documents

How to Administer a Living Trust

As successor trustee, once the trustee passes, your job to administer the trust begins. Although you don't have to start right away, keep in mind that some of the tasks you must undertake to administer the trust may take a while—for instance, consulting with experts, such as attorneys, appraisers, and accountants, all of whom you may need to hire.

While administering the trust, you'll follow the trust agreement that the trustee, or grantor, created as part of their estate plan. The trust agreement will guide you in distributing assets from the living trust.

How to Distribute Assets to Beneficiaries

How to distribute trust assets to beneficiaries depends upon whether you're distributing the assets outright, over time, or pursuant to your discretion as the new trustee.

1. Distributing Assets Outright

If the trust agreement permits it, certain beneficiaries can get their assets immediately after you've had the assets appraised. This type of distribution allows you to give personal property, money, or other assets to the beneficiaries, or change titled property into the beneficiaries' names.

2. Distributing Assets Over Time

Sometimes the trust agreement states that some beneficiaries get their assets only after an event occurs, such as when a beneficiary's turns 30 years old—or whatever age the grantor listed—or upon a beneficiary's graduation from college. If the trust agreement states this, then the trust remains open until the triggering event occurs.

3. Distributing Assets Pursuant to Your Discretion

If the trust agreement gives you permission to use your discretion in distributing assets to beneficiaries, you can do that so long as you act in good faith and use your best judgment to honor the terms of the trust.

Steps to Distribute Trust Assets

Whether you distribute the assets outright, over time, or by discretion, you must take certain steps before you can distribute anything. Hopefully, the grantor has made you the sole successor trustee, because more than one successor trustee can cause problems if you don't all agree how to administer the trust. If any conflicts arise, consult an attorney.

Follow these steps to distribute the assets after the grantor's death:

1. Locate the trust agreement: Find the trust agreement, review it, and take notes about what it contains. Protect the assets in the trust, and create an inventory of them. Consult a trusts and estates attorney if you need help ascertaining what the trustee meant in the trust agreement.

2. Get organized: This involves obtaining multiple certified copies of the death certificate, closing the trust's bank account, and opening a new account with you as the trustee. You'll also have to find titles, deeds, and insurance policies; hire professionals to help you administer the trust; and talk to the executor of the will to see who's contacting Social Security and paying debts. Keep a detailed list of the beneficiaries and what they inherit from the trust.

3. Contact the beneficiaries: Advise them that you're the new trustee and that they're a beneficiary of the trust. Give each a copy of the trust agreement. Keep them informed about the progress of administering the trust. If the trust agreement mentions the beneficiaries as a class, such as “all my children and grandchildren," ascertain who each beneficiary is. If you're not sure how to locate them or have any other questions about administering the trust, contact an attorney.

4. Get a tax number from the IRS: The trust needs an Employer Identification Number from the Internal Revenue Service so you can pay taxes on the interest the assets have generated. The beneficiaries are also responsible for paying taxes on the interest. Make sure to get an updated IRS Form 1041 and Schedule K-1. If you're uncomfortable dealing with taxes, consult an accountant.

5. Pay any outstanding taxes and debt: Consult with the executor of the will to find out who is paying which debts so no payments are duplicated or missed. Check with an attorney if you have any questions concerning payment of taxes and debt.

6. Distribute the assets to the beneficiaries: You can distribute many assets right away if the trust agreement allows it. As for other assets, you'll have to pay them out over time if the trust agreement requires it. Anything paid out over time keeps the trust open, which could be indefinitely, although many trustees can distribute the trust's assets within a year or so. Make sure to transfer titles or deeds to beneficiaries who inherit property that require such documents. Distribute whatever else is left in the trust, and make sure you're following the laws of your state in administering the trust.

7. Close the trust if you're able: If you've distributed all the assets, you can close the trust and notify the beneficiaries that you're closing it. Have an attorney help you with a closing statement. If some assets can't get distributed until a certain event happens, you'll need to keep the trust open until then.

Administering a trust after the grantor has passed away can be complicated unless it has few assets and only one or two beneficiaries. Otherwise, you'll have a more complicated job administering the trust. Still, the grantor trusted you to guard their assets and distribute them according to the agreement. Make sure you follow the laws in your state for administering trusts, and consult experts to help you make the process easier.

 

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.