Dear Mr. Premack: My uncle set up a living trust several years ago. His bank helped make sure that all of his accounts were registered as being owned by the trustee of the trust. He died a few weeks ago, and I am now the trustee. He owned a piece of land and his home, and had a few life insurance policies. How do I handle the land? What do I do to get the money from the insurance companies? – E.C.
When a living trust is properly funded, the trustee of the trust has power to manage and distribute the assets held in the trust. While the creator of the trust (called the “grantor”) is alive, it is typical that the grantor is also the trustee. But when the grantor dies, a replacement trustee who was named in the trust agreement steps in to take control.
The replacement trustee is bound by the terms of the trust agreement, and must fulfill the instructions left by the grantor. Usually those instructions include: 1) paying the grantor’s final debts and expenses, 2) paying the grantor’s final taxes, and 3) distributing the remaining trust assets to the beneficiaries named in the trust agreement.
Note that I said, “…distributing the remaining trust assets”. The trustee only has access to and control over assets that were placed under the trust’s ownership while the grantor was alive. If there are any remaining assets that are still owned individually, it is possible that the grantor’s Will is going to have to be probated.
Hopefully, the attorney who helped write the trust agreement also prepared a special type of Will for your uncle; one in which he made the trust sole heir to his estate. If so, probate of the Will allows the executor to transfer the testamentary assets to the trustee.
If the Will needs to be probated, the executor should allow the trustee to handle steps 1-3 above. The executor’s main job is to gather the assets that were outside of the trust and then to convey them to the trustee. Clearly, that is a job that could have (and in most cases, should have) been done by the grantor while he was alive. Any asset already in the trust is exempt from probate. Any asset left out must wait for the executor’s authority to begin upon probate of the Will.
You ask how to handle the land. Check your uncle’s papers to see if he already signed a deed that conveyed land title to the trustee. If you cannot find one in his papers, check with the county clerk in the county where the land is located. If the trustee already owns the land, then you already have legal authority to sell it or convey it to the beneficiary named in the trust (depending on what your uncle instructed). If he did not convey the land to the trustee, then probate of his Will is necessary in order for the executor to receive the legal authority necessary to convey the land to the trustee.
As to the insurance policies, the first thing you need to do is contact the insurance companies to obtain the identity of the designated beneficiaries. If he named specific individuals, then you should alert them of the policy’s existence, give them one of the death certificates, and let them claim the benefits for themselves. If he named his “estate” then you will have to probate his Will, become executor, and claim the benefits for the estate.
If he named the trust as beneficiary, they you already have authority to act. Fill out the claim forms from the insurance company as trustee, providing them with a copy of the trust and a copy of the death certificate. The insurance company should send a check payable to the trust, which you can deposit to an account held in the trust’s name. When his final debts and taxes are discharged, you will accumulate all the remaining assets and distribute them as he instructed in the trust agreement.
Paul Premack is a Certified Elder Law Attorney and a Five Star Wealth Manager (Texas Monthly Magazine 2009-2013) practicing estate planning and probate law in San Antonio.
Original Publication: San Antonio Express News, June 25, 2010