Trust Settlement

Trust Settlement in Columbia, MD:

When the maker of a living trust dies, the person designated as successor Trustee is responsible for executing the terms of the trust and filing various tax returns.

If you have been selected as a successor Trustee, your first responsibility will be to locate the original trust documents. If you cannot locate them, you should check with family members or friends who may know of their location. If only a copy of the trust documents can be found, you should check with the attorney who drafted them. The attorney’s name and contact information are often found among the trust documents. The attorney may have them or know of their location. Often, attorneys retain “conformed, signed copies” of such documents.

Once the original trust documents are located and your designation as successor Trustee is corroborated, appropriate documentation must be created to memorialize your acceptance of such appointment and your agreement to take all actions necessary to settle the trust. Once you have accepted the appointment of successor Trustee, Maryland (and many other states) has very specific laws regarding notices you must provide to the trust beneficiaries.

All of the financial institutions at which the deceased trustmaker had assets and all of the insurance companies which issued policies on his or her life must be contacted and advised of his or her death. You will need to obtain certified copies of death certificates to provide to each such financial institution. It is important to correctly complete and submit the paperwork necessary to claim the benefits of any life insurance policies. For bank accounts and financial investments, the proprietary forms to transfer ownership to the beneficiaries designated in the trust must be obtained. The trust beneficiaries may be individuals, charities, or post mortem trusts created for the benefit of the deceased trustmaker’s family. Care must always be taken to obtain the correct forms and complete them to the precise requirements of such financial institutions and insurance companies.

The value of all assets in the trust must be ascertained as of the date of the trustmaker’s death. This is critical not only to determine whether there is any estate tax exposure, but also to provide a new tax basis when such trust assets are liquidated. When an asset is purchased, the purchase price is called its “basis.” If the asset is real estate, the cost of any capital improvements is included in the basis. When a person dies, the basis of his or her assets for capital gains tax purposes is increased or “stepped up” to its date of death value. If you are settling a trust with multiple beneficiaries, you may need to liquidate the trust assets to ensure an accurate distribution of assets to the beneficiaries. By establishing the actual date of death values of the trust assets, you will be able to minimize any capital gains tax exposure when such assets are sold. The capital gains tax upon sale of trust assets will be determined by the difference between the net proceeds of the sale and their “stepped up” basis. In addition, by obtaining accurate date of death values, any capital gains tax exposure to the trust beneficiaries who sell their inherited assets long after the trust is settled will likewise be based upon their “stepped up” basis.