topic | executing a living trust

Step 5: pay debts and expenses

Activity 1
Pay Debts Using Trust Funds

When all assets of an estate are placed in a Living Trust, obligations of the estate become that of the Trust. It is best not to distribute assets until all debts are retired. Obligations may include:

  • taxes
  • unpaid credit card balances
  • funeral expenses
  • doctor, hospital, and nursing bills
  • charitable pledges
  • other valid debts

When additional assets (not in the Trust) are subject to probate, debts of the estate are usually handled in the probate process. More information on handling these debts of the estate will be discussed in later Topics.

Activity 2
Keep Accurate Records

Use a spreadsheet or ledger to maintain records for debts that are paid.  Be sure to include:

  • Trust fund of origin
  • bill paid
  • date paid

Best Practices

Document financial actions even if the Trust indicates that “no accounting” is necessary. Fiduciaries may be required to account for income and distributions at any time.

(if this Step is complete)
to Step 6

Return to Step 4