What to Do When Someone Dies With a Trust

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 an estate planning 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 are 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 this 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. It is best to let the estate planning attorney and the accountant help you decide whether this is necessary.
3. If the person dies with more than (or close to) $5.49 million in assets in 2023 (including life insurance death benefits and amounts given away during life), then it is very important to have a federal estate tax return prepared and filed. The federal estate tax 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 June 15, 2022, you should have your home and any other real estate your husband owned appraised to find out what the value was on June 15, 2022. The IRS allows you to value assets on the “alternate valuation date,” which is generally six months after the date of death, instead of using the date of death. 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 many cases in which a Medicaid lien was improperly placed on the home property of a person who was in a nursing home, received Medicaid benefits and then died. We have been able to get the Hawai`i state government to remove Medicaid liens which were improperly placed so that our clients have not had to pay the huge nursing home expenses out of the value of their family home. 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. (And if the person hasn’t died yet, you should seek expert advice to learn what to do now to minimize the risk of having to pay off the lien)
6. Most married couples have “A-B Trusts.” It is important for a knowledgeable estate planning attorney 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 and future capital gains taxes that will be owed when the surviving 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 publish a notice, creditors will have only four months to present their claims. Sometimes it’s better to publish, and sometimes it’s not.
8. If real estate is registered in the Land Court system, then a Land Court petition is necessary to note the death of the owner.

As you can see, a trust requires legal advice and work after a person dies. If the assets are simple, the estate can often be settled quickly and inexpensively. You should at least consult an estate planning attorney to determine how much legal help you need before taking or using any assets owned by your deceased spouse or parent. 

This column is for general information only and is not tax or legal advice. 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.