A living trust, much like a will, indicates your wishes regarding what you want to happen to your assets after you pass away. One of the benefits of executing a Living Trust is that your family can bypass the costly and time-consuming probate proceeding. The Successor Trustee (serving the same role as an executor) is able to carry out the instructions in your Trust at your death, or at any time you become incompetent. When your spouse passes away and leaves behind a Living Trust, there are some initial tasks that need to be completed.
Find the trust and read its terms.
First, you must locate the trust document and read the terms to familiarize yourself with them. Most Living Trusts executed by a spouse leave all of the assets to the surviving spouse. However, in some cases, the trust may distribute some assets to other heirs as well. If you have any trouble understanding the provisions, you should consult an estate planning attorney before going any further.
In some cases, spouses name each other as co-trustees of the Living Trust. In that situation, when the first spouse dies, the assets must be transferred to the surviving spouse as the sole trustee. Until this is done, banks and other institutions will request two signatures for transactions to be completed, as they had done in the past. You will need a Certification of Trust in order to effectively transfer title of the assets. Your estate planning attorney can draft the Certification of Trust to show who can act on behalf of the Trust.
What type of living trust is it?
You need to determine what type of trust you have, because that may have an effect on the steps you need to take. If you are unsure, contact an estate planning attorney for help. One common type of trust is known as an A/B trust, which requires special actions after the death of the first spouse. An A/B trust divides the assets into two shares when the first spouse dies. However, the division does not occur automatically. Instead, the assets must be physically transferred into two separate trusts. An inventory of the assets needs to be created first and then a determination of how to allocate the assets between the two trusts will be made. Procedures must be established to keep track of the assets in each trust. Also, an income tax return must be filed for the decedent’s trust each year after his or her death. Otherwise, the IRS will not recognize that the trust exists and the entire estate will be subject to taxation after the death of the second spouse. Failure to take care of these special requirements could result in estate taxes, which would defeat the purpose of establishing this type of trust in the first place.