Administering a Trust

As my mother in law got older, we went to an attorney and set up a living trust. i.e. A trust that is set up using her social security number, for which, I am the trustee.

For the last 3 years, she's been in a memory care facility, and I've transferred funds out to cover the cost.

It was written with the intent of keeping her irresponsible daughter (my sister-in-law) from having access to a windfall. I'll distribute 5%/yr, and at my discretion, handle 'emergencies'. Even though my wife is entitled to money, she won't request anything. Fortunately, the sister-in-law knows she is awful with money, and always thought my handling it was the best course. No resentment, the exact opposite.

The question - my Mother-in-law is in her last days now, sleeping 20+ hrs a day, and not eating. When she passes, what changes do I need to make via the Trust? As mentioned, it's currently using her SS#. Do I need to change this? I imagine I do, but am not sure of the process.

We have an irrevocable trust for my daughter, which was set up with its own tax ID, and I file a return for it, basically info-only, as all income is distributed each year. This situation is new to me.

Reply to
JoeTaxpayer
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The first thing to do is to make sure the trust owns all her property, real and personal. Then you have to pay her debts. You probably also know that the death triggers

Upon her death the trust becomes irrevocable, and a separate tax- paying entity. So it needs a new EIN, which you can get on the IRS website. Put "EIN" in the search box when you get to the webiste irs.gov

As long as you follow the directions in the trust, it doesn't have to be hard. Good luck.

Reply to
Stuart O. Bronstein

Thanks, Stuart. Yes, no more IRAs, the house sold, car sold, etc. A small checking acct will cover funeral and last credit card bill my wife used for incidentals. We'll notify her employer (she was a teacher) and Social Security of her passing. I get to do one last Mitzvah for my MIL, continuing to manage this for my sister in law. Again, thanks.

Reply to
JoeTaxpayer

Just curious. Will the remaining funds in this trust [revocable to irrevocable] be distributed; and the trust will then be terminated after that?

If not terminated, then are you one of the beneficiaries of this trust? If yes, I am just wondering about the consequences (if any) of you being both the trustee and a beneficiary of the trust.

Reply to
Not A Clue

It depends on just what the trust says.

Again, it depends on exactly how the trust is drafted. A truste that has a person who is both a trustee and a beneficiary has an increased chance of being considered a grantor trust, at least to an extent. But if it's drafted properly it doesn't have to be.

Reply to
Stuart O. Bronstein

Meaning limiting the trustee/beneficiary's Power of Appointment? And/Or does it require a non-beneficiary co-trustee?

Reply to
Not A Clue

A "grantor trust" is one which is ignored for tax purposes, and the "grantor" is treated as treated as the actual owner of trust property for tax purposes, meaning any trust income is taxed to him personally. Sometimes it's beneficial to do that, other times not.

Being a "grantor" in this situation does not limit powers given to a trustee in the trust.

You should talk to the lawyer who drafted the trust to get more information, because almost everything is dependent on how the trust was drafted.

Reply to
Stuart O. Bronstein

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