Successor Trustee in Louisiana

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

What To Do When Person Who Set Up Trust Dies

Here's what needs to be done after someone who had set up a Louisiana Avoid Probate Living Trust passes away.

Obviously, there are a number of non-legal tasks that must be addressed, from making funeral arrangements to notifying family and friends. But once we start talking to a family about legal matters, the initial things we often review are the trust instrument and the assets.

Regarding the trust instrument, we will always initially review who was designated as the Successor Trustee or Co-Trustees. We'll also take a close look at what action is required after the death of a Settlor. The actions required may be very different depending upon whether the Settlor was married or single at the time of his or her death.

If the Settlor was married, the trust might require that assets be divided into two trusts after the first death. This was pretty much "standard practice" back when the estate tax exemption was lower and we wanted to make sure that the assets of the first spouse were not lumped into the estate of the surviving spouse for federal estate tax purposes. Now, with couples being able to exempt more than $20 million, it's not as critical that there be a division of assets upon the death of the first spouse.

If the Settlor, at the time of his or her death, was married, then the trust is likely to require distributions to the principal beneficiaries of the trust, although some trusts may require that assets remain in trust for some period of time.

Another thing we look at is the assets of the Settlor and in the trust. The trust may own real estate, investments, or other assets. The trust might be named as the beneficiary of the Settlor's IRAs, life insurance, or annuities.

And the Settlor may have owned assets in his or her own name when the Settlor died. Assets may have either intentionally or inadvertently been left out of the trust. If there are probate assets left out of the trust, then we want to determine the existence and contents of, perhaps, a pour-over Will. If there are probate assets in the Settlor's individual name (not in the trust), a Succession may be required to pour-over those assets into the trust for distribution.

Finally, as part of this first step, we want to review the trust instrument to determine the rights and obligations of the Trustee and the beneficiaries. Some trusts have customized duties and powers that must be followed.

Bottom line - don't assume that you know what the trust instrument provides and requires. Work with an estate planning attorney who can spot and solve issues that you do not know exist.

Paul Rabalais
email: paul@RabalaisEstatePlanning.com
Offices: All over South Louisiana
website: www.RabalaisEstatePlanning.com