topic | executing a living trust
Step 6: transfer property
A major benefit of a Trust is that property is transferred without going through probate. The Trust document should be explicit as to how, when, and to whom the property is to be distributed. The trustee (executor) has an obligation to follow the Trust instructions. If the Trust does not specify otherwise, assets may be distributed directly to a beneficiary or in the form of cash.
Cash may be needed to satisfy debts of the Trust. Sell Trust property as appropriate. Proceeds stay within the Trust and are used only for paying debts etc.
Maintain detailed records including what was sold. Include the reason it was sold and the total money received.
Handle taxes as appropriate. Sales of stocks and bonds held for the Trust may produce a capital gain or loss for the Trust.
Opening a trust bank account allows the trustee (executor) to store liquidated funds, when necessary. Setting up a bank account specifically for this situation requires an identification number called the Federal Tax ID or Employer Identification Number (EIN). If an attorney is handling probate, request that they initiate this process. Requests for an EIN may also be submitted online at www.irs.gov or manually using the IRS form SS-4.
Gather necessary information prior to starting the application. This information may be found in Personal Information. If not, use it as a guide. Required is the deceased’s:
- exact name, according to IRS records
- Social Security Number
- phone number
Also needed is the trustee’s Affidavit of Appointment, assuming that the trustee and executor are one and the same.
Online applications can be submitted Monday – Friday between 6:00 am and 12:30 am Eastern Time and Saturdays between 6:00 am and 9:00 pm Eastern Time.
The Trust checking account will hold liquidated financial assets (cash). Assets may be liquidated for the purpose of paying debts or providing fair distribution of cash to beneficiaries. The chosen bank should be easily accessible to the executor.
Close this account after liquidated assets have been distributed and the Trust is complete. If the deceased did not have assets or accounts held solely in their name, it may not be necessary to open a Trust checking account.
The following activities assume the direct transfer of assets - assets that have not been liquidated.
Banks, Credit Unions, Savings and Loans or other financial institutions familiar with simple living Trusts generally hold financial instruments including:
- saving accounts, money market funds, certificates of deposit
- 401K accounts, IRAs, annuities, and Mutual Funds
- stock and bond certificates
- savings bonds
- government securities
In the case of government securities such as Treasury bills, contact the issuing government agency or access their website at www.publicdebt.treas.gov.
Trust income is normally passed to the beneficiaries in situations where individual tax rates are less than those of a Trust.
If a tax return is required, obtain an Employer Identification Number (described in Step 6). File the return by April 15th in the following calendar year after the Trust was terminated. A Certified Public Accountant (CPA) may be of assistance.
Record of new title must be filed in the county where property is located. State specific deed forms and language may be required. Complexity usually dictates involvement of an estate attorney.
Note: The state of Ohio has special treatment for real estate held in Trust. Seek advice of an estate attorney.
Contact the local Department of Motor Vehicles department for instructions to transfer the titles to the Trust beneficiaries.
For property without title (e.g. furniture, jewelry, art, etc.):
- Distribute items as specified in the schedules.
- For items not specified, divide equally among beneficiaries.
- Keep a record of distributed property.
- Consider monetary and sentimental value as personal property is distributed.
- As property is transferred, have beneficiaries sign and date a receipt.
- For non-specified assets where value cannot be distributed equally, consider selling assets and distributing cash proceeds.
Whenever possible, transfer the assets directly. However, if any of the following conditions exist:
- there are conflicting preferences among co-beneficiaries
- asset value is unclear
- the distribution of assets diminishes the value of the asset or it cannot be distributed evenly (e.g. an antique dining room set)
It may be necessary to sell the property and distribute the proceeds evenly. Consult with all beneficiaries prior to taking action.
These transactions can be complex, involving third parties and significant amounts of money. An estate attorney is usually required and may be specific to organizational structure (sole proprietorship, corporation, limited liability company etc.)
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