Trust Assets Distribution
When the Surviving Spouse Dies
The New Trustee
Federal Estate Tax
Trust Asset Distribution
When the Surviving Spouse Dies
When the surviving spouse dies, the trust normally terminates
and its assets are distributed to their children or other named
beneficiaries designated by the couple. A new trustee must take
over and operate the trust if the surviving spouse had been
the sole trustee. This new trustee is responsible for carrying
out the distribution of the trust's assets and the winding up
of the trust's business affairs.
The New Trustee
Since the trust now has a successor
trustee who has been named in the trust agreement, all assets
held by the trust need to be transferred and placed in this
person's name. For example, with the death of Ann B. Smith,
the trust names their daughter, Barbara M. Smith, as the successor
trustee. She needs to register all the assets in her name as
successor trustee, but neither Trust A nor Trust B is subject
to probate.
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Federal Estate Tax
The assets in Trust B, which were subject to estate tax
when the first spouse died, are exempt from estate tax,
but those in Trust A are now taxable. The fair market
value of the assets in Trust A and any assets held outside
of the trust are determined as of the date of the surviving
spouse's death, and if the total exceeds the maximum exemption,
they will be subject to the federal estate tax. The maximum
exemption is determined by the year of death.
Within nine months of the survivor's death, the successor
trustee must determine and file an estate tax return and
pay any amounts owed.
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Trust Asset Distribution
The trust will designate who receives the assets in Trust
B, and the successor trustee will carry out the distribution.
If the couple's three children are designated by the trust
to receive the assets, the successor trustee must re-register
those assets in their names and deliver them to them.
The disposition of the assets in revocable Trust A will be made
according to the terms of Trust A. Unless the surviving spouse
has specified who receives Trust A's assets, they will follow
the distribution of the assets in Trust B, which in this example
is the couple's three children. For additional information, please contact THE MAMOLA LAW FIRM at (800) 440-5294.
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