A Revocable Living Trust allows you to avoid probate at death. You don’t have to hire an attorney to go to court. However, you still need a trust and estate attorney to help you settle the trust estate. Sometimes an attorney writes in the trust or will that if the trust owner dies, that attorney must be hired to handle the estate settlement. Such a requirement is probably not enforceable in court, and, depending on the facts, may even be unethical. You should be free to go to any attorney of your choice for estate planning or estate settlement advice.
Here is a list of some of the important things that need to be done when someone dies with a trust.
1. If the trust owns real estate, a new deed should be prepared to transfer the property from the trust to the person inheriting the property. Usually, an attorney prepares such a deed for you.
2. If the trust will be earning any income (such as interest, dividends or rental income) after the death of the owner, the trust should probably apply for a federal tax I.D. Number. If the income is small and for only a short period of time before distribution of the assets, some accountants feel that it is not necessary to get a federal tax I.D. Number for the trust. It is best to let the estate planning attorney and accountant who are helping you discuss this to decide what to do.
3. If the person died with more than $1,000,000 of assets (including life insurance death benefits), then it is very important to have federal and State of Hawaii estate tax returns prepared and filed. The federal estate return is a very complicated document. You will probably need the help of an estate planning attorney and/or accountant to prepare it.
4. You should find out the value of every asset owned by the person on the date of death. For example, if your husband died on October 15, 2003, you should have your home and any other real estate your husband owned appraised to find out what the value was on October 15, 2003. The IRS allows you to value assets on the “alternate valuation date,” which is generally 6 months after the date of death, instead of using the date of death. Since stock values or real estate values are usually higher or lower 6 months after death compared to what they were on the date of death, you should seek expert advice as to which date would be better for you for tax purposes.
5. Debts should be paid. Or maybe they shouldn’t be paid! Our law office has handled cases recently in which a Medicaid Lien was improperly place on the home property of a person who was in a nursing home, received Medicaid help, and then died. We have been able to get the Hawaii State Government to remove Medicaid liens which were improperly placed, so that our clients have not had to pay the huge nursing home expenses. If there is a Medicaid lien on the property of the person who died, you should get expert advice to decide what you should do.
6. Most married couples have “A-B Trusts.” It is important for someone knowledgeable to decide which assets should be transferred to the “A” Trust and which assets should be transferred to the “B” Trust after someone dies. This can have an important effect on the amount of estate taxes which will be owed when the second spouse dies.
7. A decision should be made whether to publish a notice to creditors in the newspaper. If you don’t, creditors (people who are owed money by the person who died) have 18 months to make a claim for the money they are owed. If you do publish a notice, it will cost some money, but creditors will have only 4 months to present their claims.
As you can see, a trust still requires legal advice and work after a person dies. If the assets are simple, the estate can often be settled very quickly and inexpensively. You should at least consult an estate planning attorney before taking or using any assets owned by your deceased spouse, to determine how much legal help you need.
This column is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.