When a loved one dies, the surviving spouse may be at a loss when it comes to knowing what to do next. When there is a living trust between spouses, there are some initial tasks that need to be taken care of. The process is not necessarily complicated, and knowing what to expect will make the process easier.
Find the trust document and then read it.
The first step is to locate the trust document. Once you find it, read the terms to get a general understanding of what will be needed. Even if you read it when it was first created, it has likely been many years since it was first drafted. You may have forgotten important details. Most trusts are drafted to leave all of the assets to the surviving spouse. However, there are some trusts that provide for distributions to other heirs, as well. All provisions of the living trust should be understood before any action is taken to implement the trust. If you have any trouble understanding the provisions, you should consult with an estate planning attorney before you go any further.
Determine the type of living trust involved.
You need to first determine what type of living trust was created. The nature of the trust will determine what steps you need to take. If you are not sure what type of trust you have, your estate planning attorney can help you make that determination.
What are A/B Trusts?
A common type of trust is an A/B trust, which divides the assets into two shares when the first spouse dies. However, this division does not occur automatically. Instead, the assets must be physically transferred to two separate trusts. This type of trust must be handled a certain way after the death of the first spouse, and if these requirements are not met, it could unnecessarily cost the surviving family members thousands of dollars in estate taxes. This result would defeat the true purpose of the trust.
An inventory of the assets must be made and then it is determined how to allocate the assets between the two trusts. Procedures must be established to keep track of the assets in each trust. An income tax return must also 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.
Transferring title to the surviving spouse.
It is common for living trusts to name both spouses as co-trustees. This means that, after the first spouse dies, the assets will be transferred to the surviving spouse as the sole trustee. Institutions like banks will continue to request two signatures for transactions until the assets are transferred solely to the surviving spouse. In order to transfer title, a certified death certificate and an abstract of the trust are required. The surviving spouse will need to submit these documents to any institution where joint accounts are held. On the other hand, when dealing with real estate, an estate planning attorney can draft an affidavit to be recorded with the county recorder.