Question:
My mother died recently. She had a revocable trust that says that at her death it is to be distributed equally to her three children. What do now?
Response:
The process for closing out the trust may be a bit different depending on what property it holds and other circumstances related to your mother’s estate.
In all cases, the first step is to make sure that there is a trustee in place. If there was already a trustee other than your mother on the trust, this may already be set. But if your mother was the sole trustee, the successor trustee or trustees must accept their new role and get added to any bank or investment accounts held by the trust. If the trust holds real estate and there’s a change of trustees, the new trustee or trustees will have to file a certificate with the registry of deeds reflecting the change.
No doubt, your mother used her own Social Security number on any accounts held by the trust. The bank or investment firm where she held those accounts may or may not require you to obtain a new tax identification number for the trust. Often they don’t require this step if the accounts are to be liquidated quickly.
The trust may distribute most of the liquid assets — bank and investment accounts — relatively quickly. If those accounts hold shares of stock it’s usually easiest to simply sell them and distribute the proceeds. There’s usually no capital gains on such a sale because the stock receives a step-up in basis upon the death of the owner, which includes the grantor of a revocable trust.
It’s important, however, to hold back some funds for anticipated expenses, whether legal and accounting fees or house maintenance if there’s real estate involved.
If the trust holds real estate and the plan is to sell it, that could delay the ultimate distribution of the trust until after the closing. But the bulk of the other holdings can be distributed in the meantime.
