Post Death/Trust Administration





    








Following the death of a parent or spouse, there are certain administrative matters that must be addressed before the decedent’s property may be distributed to his or her heirs. The following outline is a guide for understanding the activities and legal necessities inherent in the process of transferring the decedent’s property to the rightful heirs.
Probate: If $100,000 or more of the value of the decedent’s assets are not in a joint account, a Trust, and/or the heir(s) is named as a beneficiary on the account, then the property of the decedent must be administered through the Probate process, which is a court proceeding that occurs before the assets may be distributed to the heir(s). This process is expensive and time consuming.

Revocable Living Trust (RLT): While it is clear that assets properly placed or titled in the RLT avoid probate, we have found that many of our clients have inadvertently left a portion of their estates outside of their RLT, which has either resulted in an unnecessary Probate (or mini-Probate) and/or an under-funding of the Bypass Trust (Credit Shelter Trust).

Surviving spouses who have children from a prior marriage or are fearful of trusts in general, sometimes elect to not fund or “create” the Bypass Trust on the death of their spouse. In most cases, this is a direct breach of their agreement with the deceased spouse and is cause for action by the heirs of the deceased spouse.

In other cases, we have found that trusts administered by a surviving spouse alone and without the counsel of qualified tax professionals and/or who have delegated their fiduciary duties to non-qualified attorneys or accountants, have failed to:
Properly administer the trust estate of the decedent spouse by a failure to fund and/or inappropriate funding of the decedent’s sub trusts
Execute qualified disclaimers
Effectuate post death planning for deferring income taxation on the decedent’s retirement and IRA Plans
Consider making or not making the following elections:
QTIP and/or Reverse QTIP
Alternate Valuation
Special Use Valuation
IRC Section 6166
Equitable Adjustments
QFOBE
IRC 754 Basis Adjustment
Community Property Basis Adjustment
Section 303 Redemption
Allocation of GST Exemption
QSST or ESBT
Extension for Filing 706 (15 mos.)

Without expert tax and trust counseling in the post death administration of a decedent’s estates, the individual successor Trustee of the RLT will not only place him or herself at risk legally and financially, but could very well defeat the estate planning, creditor protection, and tax objectives of the decedent.

Beneficiary Designations: Life Insurance, Annuities, Pension Plans, IRA’s, etc., have beneficiary designations and avoid probate to the extent that the estate of the decedent is not named as the designated beneficiary.
With proper planning, Successor Trustees/Executors may minimize the income tax liability on such accounts by dividing the account(s) into separate shares for the residuary beneficiaries of the estate, or into separate trusts for such beneficiaries.
If necessary, funding of the Bypass or Qtip Trust, with such accounts or portions thereof, may be available at a lower or deferred income tax cost employing the newly proposed regulations.