Sell or Distribute Assets When Someone Dies?

When someone dies with assets, whether those assets are in trust or not, the people in charge must make a decision to either sell (liquidate) the assets, or distribute them in their same form to those left behind.

When someone with a living trust dies, the Successor Trustee is typically heavily involved in that decision. If it is appropriate to sell assets, then the Successor Trustee will sell those assets, the proceeds of the sale will be payable to the Trust, and the Successor Trustee will deposit those funds into a trust account for subsequent disbursement to the beneficiaries of the trust. Trustees will sometimes sell real estate (a home, for example) that the survivors have no use for. Successor Trustees may also sell mutual funds or other investments and disburse those to beneficiaries.

On the other hand, sometimes it makes sense for the Successor Trustee to simply distribute the assets to the beneficiaries in the same form. Occasionally, a family has an emotional attachment to stock that a parent owned, and the beneficiaries will receive the stock in their own name.

Sometimes the family will want to continue owning real estate owned by the deceased (or the deceased's living trust). The Successor Trustee, immediately after the death of the Settlor, can transfer the real estate to the beneficiaries, outside of probate, so that each beneficiary owns an undivided interest in the real estate. It's also not uncommon, if the real estate was not owned in a limited liability company, for the beneficiaries to form an LLC and put their undivided interest in the property into the LLC. This could limit their liability exposure. Each beneficiary would then own a membership interest in the LLC.

So there are lots of decisions, each with tax consequences, that must be made when someone with a trust dies. Note that if there was not living trust, then the executor of the Last Will has similar decisions to make, but the actions of the executor are under the scrutiny of the judge that is assigned to oversee the Succession judicial proceeding. It's generally easier to administer a trust after a Settlor dies than it is to administer a Louisiana Succession which requires extra judicial processes and supervision. 

Paul Rabalais
Louisiana Estate Planning Attorney
paul@rabalaisestateplanning.com
Office phone: 866-491-3884