The decedent may have left written funeral, cremation, burial, or memorial instructions, in addition to a personal property memorandum. All original documents should be stored in a safe place until they can be given to the trust attorney. The decedent’s other important papers will include information about the decedent’s assets, including bank and brokerage statements, stock and bond certificates, life insurance policies, corporate records, car and boat titles, and deeds for real estate. There will also be ample information about the decedent’s debts, including utility bills, credit card bills, mortgages, personal loans, medical bills, and the funeral expenses. Refer to a detailed list of the specific documents that you will need to locate. Once you have located all of the decedent’s important documents, read the revocable living trust to determine its specific provisions. When reviewing the trust, make note of the following:
Special instructions regarding the decedent’s funeral, cremation, or burialBeneficiaries of the decedent’s personal effectsBeneficiaries of any specific bequestsBeneficiaries of the decedent’s residuary trustThe person named as the successor trustee(s) to settle the trust, as well as anyone named trustee(s) of any trusts that need to be created, now that the trustmaker has diedThe date and location where the trust agreement was signedThe witnesses and notary public who signed the trust
In addition to reading and summarizing the information in the revocable living trust, review the decedent’s financial documents, and make a list of what the decedent owned and owed, how each asset is titled (in the name of the trust, in the trustmaker’s individual name, as tenants in common, or in joint names with someone else), and, for assets and debts that have a statement, the value of the asset or debt as listed on the statement and the date of the statement. In addition, the decedent’s prior three years of income tax returns should be located and set aside. If probate will be required, take the time to understand the steps needed to open a probate estate. All financial institutions where the decedent’s assets are located must be contacted to obtain the date-of-death values. Some assets, including real estate; personal effects such as jewelry, artwork, and collectibles; and closely held businesses, will need to be appraised by a professional appraiser. Note that the value of all of the decedent’s assets will need to be established, including those passing outside of the trust, in order to determine whether any estate taxes and/or inheritance taxes will be owed. Assets that can pass outside of the trust may include those that were owned as tenants by the entirety or joint tenants with right of survivorship; payable-on-death or transfer-on-death accounts; and life insurance, IRAs, 401(k)s, and annuities with named beneficiaries. Take the time to understand what the non-probate assets are, too. It is the successor trustee’s job to determine which bills the decedent owed at the time of death, decide whether they are legitimate, and then pay them accordingly. The successor trustee will also be responsible for paying the ongoing expenses of administering the trust, such as legal fees, accounting fees, utilities, insurance premiums, mortgage payments, and homeowner or condominium association fees. The successor trustee will have to prepare and file the decedent’s final federal and, if any, state income tax returns and timely pay any taxes that may be due. The final federal income tax return will be due on April 15 of the year after the decedent’s year of death. For tax year 2020, that deadline has been extended to May 17, 2021. Aside from filing the decedent’s final income tax return, if the estate earns income during the course of administration, then the successor trustee must prepare and file all required federal estate income tax returns (IRS Form 1041) as well as any required state estate income tax returns. If the decedent’s estate is taxable for federal and/or state estate tax purposes, the successor trustee will be responsible for preparing and filing the federal estate tax return (IRS Form 706) and/or a state estate tax and/or a state inheritance tax return, and then paying the tax bill(s). Note that some trusts may be required to file a federal estate tax return even though no estate tax will be due. Prior to making any distributions to the trust beneficiaries, the successor trustee must be certain that every single expense of administering the trust (and the probate estate if there is one) and all taxes have been paid or that enough assets have been set aside to pay the final bills and taxes. Otherwise, if the successor trustee chooses to make distributions to the beneficiaries, but expenses come up later, he or she will have to pay these expenses out of his or her own pocket. In addition, if probate of some of the decedent’s assets were necessary, then the beneficiaries would need to wait until the probate estate is closed and the probate assets have been transferred over to the successor trustee before the trust can be terminated and the beneficiaries can receive their inheritance. If administration of the trust is expected to take more than a year, the successor trustee should work closely with the trust attorney and accountant to plan for setting aside enough assets to pay the ongoing trust expenses and then making distributions to the trust beneficiaries in multiple stages instead of in one lump sum.
