Upon your death, your revocable living trust becomes irrevocable. The terms of your trust are set and unchangeable and your successor trustee must follow the terms of the trust and distribute your assets according to your wishes.
An irrevocable trust is a new tax entity that will need a new tax identification number for tax reporting purposes. Assets in the trust are transferred from the decedent’s social security number to the Trust’s tax identification number. The successor trustee takes control of all the decedent’s assets, pays all the debts, taxes, and liabilities. Then, distributes the assets to the named beneficiaries. The successor trustee must make sure that income tax returns are filed. The decedent’s estate must file a final income tax return (Form 1040) and the irrevocable trust must file a fiduciary income tax return (Form 1041) for income earned after the decedent’s death until the trust is terminated and distributed.
One of the responsibilities of the successor trustee is to pay all unpaid bills, debts owed to creditors, income and estate taxes, attorney fees, and tax preparation fees.
A successor trustee can also take a reasonable fee for his or her time in administering the trust. The money the successor trustee receives is taxable income.
A successor trustee must send an accounting to all the beneficiaries on an annual basis and upon final distribution. The accounting must include the beginning balance of all the accounts at the date of the decedent’s death. It must include all the withdrawals and deposits with an explanation for each transaction. The accounting must reconcile with the distributions to each beneficiary. We recommend having the beneficiaries sign a receipt of his or her final distribution if you are a trustee making a final distribution.
Beneficiaries have the right to receive a copy of the Last Will and Testament and Trust documents for the decedent. Beneficiaries may also hire attorneys to represent them as a beneficiary of the trust. Beneficiaries may object to the accounting, payment of successor trustee compensation, or any other expenses that were deducted from the trust.
Hurley Re estate planning attorneys have many years of experience administering a variety of trusts. With over 40 years of combined experience, Hurley Re estate planning attorneys have a well-established base of knowledge and work with the details to properly administer trusts. Contact a Hurley Re estate planning attorney for a 15-minute complimentary phone consultation at (541)317-5505.
Trust Administration Attorneys