How to Execute a Living Trust

By David Carnes

A living trust allows a person known as a trust grantor to place his assets under the administration of a trustee, who then distributes these assets to trust beneficiaries as instructed by the grantor in the trust deed. The main advantage of a living trust is that since it is prepared while the grantor is still alive, it allows the grantor's property to pass to his beneficiaries, both before and after his death, without the expense and delays of probate. The administration of a living trust involves challenges, responsibilities and potential legal liability.

Step 1

Prepare an affidavit of authority that includes the name of the trust, the date the trust deed is signed, and a statement identifying you as the trustee. Sign the affidavit in the presence of a notary public.

Step 2

Assemble the necessary documentation to establish your authority to third parties. This includes the affidavit of authority, the trust deed and the grantor's death certificate -- if the grantor was the original trustee and you have been named the successor trustee due to his death.

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Step 3

Identify trust assets. A list of trust assets should be included in an appendix to the trust deed.

Step 4

Locate and take custody of the title documents for all titled property listed as trust property. Titled property may include real estate, automobiles, stock certificates and bank accounts.

Step 5

Notify trust beneficiaries in writing of your trusteeship. Include a copy of the trust deed with your notification, and provide them with a general timetable for the distribution of trust assets.

Step 6

Obtain appraisals of all valuable trust property from licensed appraisers. Such property includes real estate, automobiles, securities such as company shares, and insurance policies. You may pay the appraisers out of trust assets. You need to know the true value of these assets in case you have to sell them to pay trust debts or distribute cash to beneficiaries.

Step 7

Pay all trust debts, even if you have to liquidate trust assets to do so. If you must sell property, you must rely on your affidavit of authority, the trust deed and the grantor's death certificate -- if applicable -- to complete the transaction. Trust debts may include taxes on income generated by trust assets, unpaid credit card balances and expenses for trust administration including your own compensation. You must file an annual federal income tax return for the trust if it is irrevocable and if trust assets earned more than $600 during the tax year. Keep accurate records of all transactions.

Step 8

Prepare periodic trust asset accounting reports detailing your disposition of trust assets, and distribute copies to each beneficiary. The frequency with which you must submit these reports depends on state law.

Step 9

Transfer trust property to beneficiaries as instructed in the trust deed, liquidating trust assets if necessary. Unless the trust deed provides otherwise, however, you may distribute either cash or assets directly to trust beneficiaries. You must use your affidavit of authority and associated documentation to transfer title to titled trust assets to beneficiaries.

Step 10

Close the trust after you have distributed all of its property. To close the trust, close all accounts listed in the name of the trust and issue a final trust asset accounting report to beneficiaries.

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Living Trusts & Bank Accounts

References

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