Irrevocable Trusts

Home / Archive by category "Irrevocable Trusts"
Trust Administration in Missouri…

Trust Administration in Missouri…


TRUST ADMINISTRATION IN MISSOURI:  9 STEPS

Avoiding probate is one of the best aspects of having a living trust.  Administering a trust after a person dies is much easier and cost effective than the probate process.  That does not mean there are not steps to complete for administering a trust, however.

Here are the 9 steps for administering a trust in Missouri:

  1.  Making an inventory of assets.   All assets held by the trust should be identified, including determining title and ownership of the trust assets.  If some assets are not owned by the trust, a separate probate estate might need to be opened.
  2. Valuing of assets.  The valuation of assets has important income tax, capital gains tax, property tax and estate tax implications.  Depending on the asset, a formal appraisal might be required.  Accounts are easy since statements will provide valuations.
  3. Allocating of assets.  The trust terms will dictate what assets are to be allocated to sub-trusts or to a surviving spouse or both.  Technical considerations must be made to determine where certain assets should be allocated.
  4. Asset retitling.  Each asset must be titled to the proper trust in order to maintain protection from estate taxes, creditor claims and Medicaid.  Our firm can assist in preparing titles and transferring assets quickly.
  5. Obtaining a taxpayer identification number.  Once a trust becomes irrevocable, a taxpayer identification number (a TIN) must be obtained from the IRS.  To do so, a Form SS-4 must be filed.  Caution must be taken to ensure that the trustee will be recognized by the IRS and will recognize and respond to inquiries from the trustee.
  6. Determination of need to file Form 706.  A married couple has generally no estate tax payable upon the first death because of the unlimited marital deduction.  A Form 706 is a federal estate tax return.  Filing this form will establish the value of assets.
  7. Filing of Form 706.  A federal estate tax return must be filed within 9 months of the date of death.  Since Missouri does not have an inheritance tax, there is no need to file a state estate tax return (and there is no such thing).  Our firm has experience in preparing these returns.
  8. Filing of Form 1041.  A Form 1041 is often required to report income taxes.  There are other filings as well, including Notice of Fiduciary Relationship and Request for Discharge of Personal Liability.
  9. Distribution of assets.  Eventually assets will need to be distributed from the trust and will be able to be distributed.  Specific distributions and residual distributions must be carried out.

Keep in mind that in addition to the above, a trustee must also, collect assets of the estate, pay bills of the decedent before their death, during the administration of the trust and bills directly attributable to the passing of the decedent (i.e. funeral bills, medical bills).  Any other directions in the trust must also be carried out.

Trustees ultimately must carry out the terms of the trust as provided in the document.  This can lead to a trustee exposed to liability, potential legal penalties and subjected to litigation.  Trust documents always allow a trustee to obtain legal counsel and a trustee should never attempt to administer a trust without the assistance of an attorney.

Irrevocable trusts…

irrevocable trust

 What is an irrevocable trust?

An irrevocable trust is simply a trust with terms and provisions that cannot be changed by the grantor (the person creating the trust). This is distinguished from a revocable trust (AKA a living trust), which is commonly used in estate planning and allows the grantor to change the terms of the trust and/or take property back at any time.

Why would I want to use an irrevocable trust?

Using an irrevocable trust allows you to achieve a number of significant benefits, including minimizing estate tax, protecting assets from creditors, and providing for family members who are minors, financially irresponsible, or who have special needs.  They are sometimes also used for Medicaid and VA Aid and Attendance benefits planning.

How do I create an irrevocable trust?

To create a trust, the grantor enters into a written trust agreement. He or she names a trustee to hold the property according to the terms of this trust agreement. The trust agreement identifies the beneficiaries and tells the trustee when distributions of trust property (including the original assets placed in trust, as well as the income on such assets) should be made to the beneficiaries. A well drafted trust agreement should plan for certain contingencies, such as what to do if the initial beneficiaries are no longer living.

What are the trustee’s duties?

The trustee has two primary duties: (1) to prudently invest and protect the assets of the trust, and (2) to make distributions to the trust beneficiaries according to the terms of the trust agreement. The trustee is required to act at all times in the best interest of the trust beneficiaries. This duty of loyalty is known as a fiduciary duty, and it places a very high (and legally enforceable) standard of care and expectations upon the trustee.

Who should I name as trustee?

Any individual, other than the grantor, may serve as trustee of a trust, including the grantor’s spouse, children, family members, or friends. Of course, given the fiduciary duties required of a trustee, you’ll want to choose someone who is honest, diligent, and trustworthy (no pun intended!). If you would rather have an independent party act as trustee, there are a number of very well qualified professional trust companies in the community. If desirable, more than one individual may be named to serve as co-trustee.

Who can be a beneficiary of a trust?

Anyone other than the grantor may be named as a beneficiary of the Trust. Different family circumstances may dictate the need to structure the trust for different beneficiaries.

Can I amend the trust agreement?

As the name implies, once the trust agreement is signed, it cannot be amended or revoked. However, the trust agreement should be drafted in a flexible manner to allow the trustee to address unforeseen changes in circumstances.