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How to Handle a Living Trust after a Death by Mind Map: How to Handle a Living Trust after a Death
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How to Handle a Living Trust after a Death

Getting started

Need accurate list of all assets

Are assets over $2 million?

Is a probate needed?

Can a small estate affidavit be used?

Need the following:

"Holding" account

Trustee opens an account to hold $ during trust administration

Holding Account is titled, for example, "Ryan Sammons Trustee of Tom Sammons Living Trust dated 1/1/90" and uses the FEIN number

All assets that are liquidated, and house proceeds, are deposited here

When it's time to distribute, checks are written from the account, but a holdback is left in the account until tax returns are filed. The holdback amount is usually double whatever taxes we think may be due.

Dealing with Assets and Distribution

Most assets are liquidated and the cash put in "holding account"

Assets can be distributed "in kind"

All debts must be paid

File deceased final 1040 tax return

Distribution

Taxes

Obtain FEIN for trust

Instructions for Form 1041- Brutal reading

Can't use deceased SS # anymore

Form 1041 must be filed for trust while income is earned on FEIN

Determine tax year

"Simple" vs. "complex trust"

Beware difference in tax rates

Don't forget to file tax return-This is a common problem (due 3 mo. after end of period you choose)

Goals

Keep beneficiaries informed and don't destroy family relationships

Avoid notices from IRS by filing correct tax returns

Distribute in a timely manner