As a trustee, can I "settle" the financial portion of a trust on my own?

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piton
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As a trustee, can I "settle" the financial portion of a trust on my own?

Post by piton » Sun Aug 11, 2019 2:15 pm

As a trustee for a trust, assuming that I have gone through the legal aspects of informing heirs regarding the trust, and assuming that there are only liquid assets, and that there is nothing contentious, can I just make out checks to heirs and will I be able to do the rest with a program like turbo tax? I guess I'm looking to know if I can't do it myself?

If the answer is no, what should I look for in terms of getting help?

I'd be grateful for any links regarding this subject.

thx

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prudent
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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by prudent » Sun Aug 11, 2019 2:32 pm

The advice I got was to have a financial advisor give guidance on how the trust funds should be invested (based on purpose of the trust). Not that you need to have an advisor take over management of the trust, but to be able to say "these funds were invested based on what a professional money manager said". The reason was that even if the immediate beneficiaries are completely OK with what you want to do, their heirs may end becoming beneficiaries and who knows if they might challenge what you did.

"So, Mr. prudent... are you a certified financial planner? Any formal education in managing trust funds? No? I see you did not work with an advisor, and my client could have received far more from the trust except for your amateur mismanagement."

When I became a trustee I did the above and had an advisor do a one-time consultation on appropriate management of the trust funds. Not because it was that complicated (the trust expired in 10 years), but because I felt it was important to be able to say "don't complain to me about results, a guy with a lot of letters after his name said this was a suitable investment approach." So for a one-time fee (paid out of the trust), I don't worry about what a beneficiary or their heirs might say. I also did a consultation with a trust lawyer to walk me through my legal obligations and areas of concern (the trust paid for this as well).

In my case there have been no issues with beneficiaries, but at the same time the markets have been kind. Had markets taken an extended dive, I think one of the beneficiaries would have wanted to second-guess the investment approach had I not already told everyone I followed an advisor's guidance.

I don't try to do the taxes myself. I thought I could pay a CPA to do them the first year, then I could just use that as a guide for future years, but I found it more complicated than I was comfortable with.

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RickBoglehead
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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by RickBoglehead » Sun Aug 11, 2019 2:46 pm

OP seems to be looking to distribute the funds, not invest them, then file taxes. Yes, OP, if the trust tells you to distribute the assets, do so. And if you need to file a tax return for the estate, do so.

IANAL
Last edited by RickBoglehead on Sun Aug 11, 2019 2:54 pm, edited 1 time in total.
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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by HomeStretch » Sun Aug 11, 2019 2:53 pm

As trustee, I wouldn’t want to handle the returns myself unless I was experienced in doing them. The trust should pay for reasonable legal and accounting/tax fees. An estate attorney should be able to give you recommendations for several tax accountants/firms. I would interview a couple and request a fee estimate.

afan
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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by afan » Sun Aug 11, 2019 3:02 pm

I gather you are talking about settling the trust after the grantor has died. You certainly can do this all by yourself. Whether you should depends on the circumstances. It sounds like all the funds are to be distributed to the beneficiaries, rather than held in trust for them. If that is the case there are no concerns about how you invest the money since you will be simply paying it out.

Another consideration is paying final expenses. In many estate plans the assets of the trust would be liable for any outstanding bills, taxes, and claims of creditors. This would not have to be the case if the grantor had set up the trust as irrevocable during life and made a gift of the assets to the trust. Assuming that was all done properly, creditors of the grantor would not have a claim on the trust assets. It is much more complicated than that brief summary and if you are not sure then you may need a lawyer to tell you whether you have to pay those bills from the trust.

Same thing with final income tax returns and estate or inheritance tax returns and amonuts due.

If you are both trustee and executor then you would have to make sure the final bills are paid but not necessarily paying from the trust. It would depend on how much was owed, how much was available outside the trust and any instructions from the grantor/decedent.

Can you do the final tax returns yourself? Probably, but you would have to learn the rules, knowledge you may never use again. I don't know whether the standard consumer software will handle estates

If the trust remains in existence, then, just as for personal returns, you could do the taxes yourself if the investments do not make it too complicated for you. How complicated that is depends on how much you are into taxes. The standard software will definitely handle some trust tax returns.

There are experts in estates and truats law and in taxes who participate on this forum and could give you more detailed information if you provide more details about the situation.
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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by celia » Sun Aug 11, 2019 3:23 pm

I think there’s usually a time requirement for beneficiaries to be notified of what they will be receiving, giving them time to object, before the remaining funds are distributed. The time span is likely state dependent.

Then after the bulk of the estate is distributed, taxes need to be filed and paid and the IRS and state need to be notified (on the final tax return) that this is the final return. Until you are sure they are satisfied (possibly they mail you something?), you need to hold onto some funds in case there is a tax issue.

Once everyone is satisfied, then you can distribute the rest.

Didn’t your lawyer discuss this with you and explain all the notifications that are required?

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piton
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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by piton » Sun Aug 11, 2019 6:49 pm

I appreciate the input. As a follow-up:

I am the trustee and executor. This isn't about investments.

Yes, the heirs have been notified and I will wait 60 days for any objections. I worked with a lawyer on this, and it seems that's all there is to do in terms of the legal portion. There are no special conditions or trusts that need to be set up. This seems very straight forward. Taxes and all trust expense are going to be paid by the trust.

In terms of distributions, when the waiting period is over, can I just start writing checks but keeping a backup for taxes, etc.? (There are no bills to pay.)

I'm just wondering if there is an accepted format that should accompany the distributions, or anything else that needs to be filed while doing the distributions. Whether I will need help filing taxes I suppose I can deal with at the time.

It seems too easy and I'm trying to determine if there is something about the process that I don't know but should know.

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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by Gill » Sun Aug 11, 2019 7:26 pm

piton wrote:
Sun Aug 11, 2019 6:49 pm
I appreciate the input. As a follow-up:

I am the trustee and executor. This isn't about investments.

Yes, the heirs have been notified and I will wait 60 days for any objections. I worked with a lawyer on this, and it seems that's all there is to do in terms of the legal portion. There are no special conditions or trusts that need to be set up. This seems very straight forward. Taxes and all trust expense are going to be paid by the trust.

In terms of distributions, when the waiting period is over, can I just start writing checks but keeping a backup for taxes, etc.? (There are no bills to pay.)

I'm just wondering if there is an accepted format that should accompany the distributions, or anything else that needs to be filed while doing the distributions. Whether I will need help filing taxes I suppose I can deal with at the time.

It seems too easy and I'm trying to determine if there is something about the process that I don't know but should know.
Be very careful in making distributions when there is still the possibility of outstanding claims against the estate. Also, when partial distributions are made the beneficiary is often asked to sign a receipt and refunding agreement. Upon final distribution you will wish to have the beneficiary sign a release of you as trustee.
Gill
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Island John
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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by Island John » Sun Aug 11, 2019 8:27 pm

I recently had a similar experience as a trustee settling an estate. Similar to you, I was a little surprised at how easy it was to do the actual distributions to the heirs. However, there were some formalities that our estate/trust lawyer recommended and I followed the advice.

You have to keep in mind that you get one chance to do it right. If the attitude of one of the beneficiaries changes over time, and you did distributions in a casual way, you don't get to go back and redo the distributions. For example, I was advised that each time I did a distribution I was to get a signed receipt from each beneficiary acknowledging the amount that they received. For the last distribution, the receipt included acknowledgements from the beneficiaries that they had received the quarterly financial statements they were sent and that they agreed with them, and that the final distribution was, in fact, the final distribution.

It may sound like unnecessary formalities and complications. But as the trustee, you are responsible to all of the beneficiaries to make sure that everything is done correctly and done in a way that protects their interests now and in the future. I'm not a lawyer and I was afraid I might screw something up so I tried to follow all of the lawyer's recommendations to the letter.

One last comment I would make is that you mentioned trying to do the taxes using Turbo Tax. It may work great for you but I am guessing that your next tax return is going to be an estate tax return. When I had that final estate tax return done I found it to be very complicated and, although I've used Turbo Tax for my own returns in the past, I would never have attempted to do myself the tax return that our CPA did. It was much more complicated than a typical personal tax return and included K-1 Forms that had to be distributed to all the beneficiaries with information that had to be included on their taxes. You may be up to the task. I couldn't have done it.

Good luck!

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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by curmudgeon » Sun Aug 11, 2019 10:44 pm

Island John wrote:
Sun Aug 11, 2019 8:27 pm

One last comment I would make is that you mentioned trying to do the taxes using Turbo Tax. It may work great for you but I am guessing that your next tax return is going to be an estate tax return. When I had that final estate tax return done I found it to be very complicated and, although I've used Turbo Tax for my own returns in the past, I would never have attempted to do myself the tax return that our CPA did. It was much more complicated than a typical personal tax return and included K-1 Forms that had to be distributed to all the beneficiaries with information that had to be included on their taxes. You may be up to the task. I couldn't have done it.
I found the NOLO press book on being an executor helpful. My memory is that the standard turbotax (and the "upsells" such as "premier") won't generate K1 forms, you need the business version. Read the fine print before buying. There's less handholding in the business version, but I'm comfortable with tax filing and found it worked OK (I really just used it to confirm what I had worked out by hand and to generate the forms).

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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by celia » Sun Aug 11, 2019 11:08 pm

piton wrote:
Sun Aug 11, 2019 6:49 pm
Yes, the heirs have been notified and I will wait 60 days for any objections.
Instead of waiting for objections, the cases I was involved in had each beneficiary sign a statement (that the trustee generated) that they agreed with the accounting and the distribution. This prevents the situation where someone might not have received your notice. Just waiting "for any objections" seems like it wouldn't apply to someone who was not notified. (Things sometimes get lost in the mail or someone at the beneficiary's residence could have moved the particular piece of mail without the beneficiary seeing it.)

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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by RickBoglehead » Mon Aug 12, 2019 6:58 am

I'm confused. OP worked with an attorney. What was the attorney paid for if not to provide answers to basic questions?
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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by bertilak » Mon Aug 12, 2019 8:30 am

piton wrote:
Sun Aug 11, 2019 6:49 pm
I appreciate the input. As a follow-up:

I am the trustee and executor. This isn't about investments.

Yes, the heirs have been notified and I will wait 60 days for any objections. I worked with a lawyer on this, and it seems that's all there is to do in terms of the legal portion. There are no special conditions or trusts that need to be set up. This seems very straight forward. Taxes and all trust expense are going to be paid by the trust.

In terms of distributions, when the waiting period is over, can I just start writing checks but keeping a backup for taxes, etc.? (There are no bills to pay.)

I'm just wondering if there is an accepted format that should accompany the distributions, or anything else that needs to be filed while doing the distributions. Whether I will need help filing taxes I suppose I can deal with at the time.

It seems too easy and I'm trying to determine if there is something about the process that I don't know but should know.
I had to settle a family member's estate where there was no will involved. In addition to locating family members I had to put both a death notice and a statement in a newspaper asking for any creditors to step forward. There was a waiting period for responses. The death notice had to be from a funeral home.

I had a CPA prepare the taxes. I kept good records of my expenses (travel, etc.) and the deceased's expenses. The most complicated were the medical expenses -- hospitals, surgeons, ambulances, etc.. These came in for as much as a year afterwards. Some I did not pay because the residual estate was already emptied. I paid all the estate could afford.
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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by dbr » Mon Aug 12, 2019 9:12 am

I think that if a person is not familiar with estate tax filings, especially for an estate that is being terminated, that it makes sense to hire a CPA to do the filing. For one thing you want K-1s that go to beneficiaries to be right the first time. I also think a trustee of an estate, especially someone who is also the executor, should at least consult experienced legal advice. There will still be plenty to do. Trustee and executor is an onerous and lonely job. Costs charged to the estate for this are entirely appropriate, especially if the trustee/executor does not take a fee himself (Is that the case?).

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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by afan » Mon Aug 12, 2019 10:30 am

It can be hard to be sure that there are no final bills. Perhaps if the deceased owned little, including no real estate, was incapable of creating new creditors for long enough that the people taking care of them would know about all the costs.

Otherwise, it would be wise to wait some amount of time (lawyer should be able to advise as to how long) to give a chance for any legitimate bills to come in before distributing all the money. When I settled an estate that was similar to the situation I described, the lawyer suggesting holding on to the bulk of the assets for what seemed like a long time. This was to wait for final bills and to have the tax returns accepted. If the government comes back and says the estate owes more money you could be personally responsible if you have emptied out the trust.

In our case, it took more than 15 months for the estate tax return to be accepted. I kept most of the money in the trust while waiting.
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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by FIREchief » Mon Aug 12, 2019 1:26 pm

bertilak wrote:
Mon Aug 12, 2019 8:30 am
I had to settle a family member's estate where there was no will involved. In addition to locating family members I had to put both a death notice and a statement in a newspaper asking for any creditors to step forward. There was a waiting period for responses. The death notice had to be from a funeral home.

I had a CPA prepare the taxes. I kept good records of my expenses (travel, etc.) and the deceased's expenses. The most complicated were the medical expenses -- hospitals, surgeons, ambulances, etc.. These came in for as much as a year afterwards. Some I did not pay because the residual estate was already emptied. I paid all the estate could afford.
If you could do it all again, would you consider just skipping the whole thing? (i.e. just let the state/courts take over)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by bertilak » Mon Aug 12, 2019 2:55 pm

FIREchief wrote:
Mon Aug 12, 2019 1:26 pm
bertilak wrote:
Mon Aug 12, 2019 8:30 am
I had to settle a family member's estate where there was no will involved. In addition to locating family members I had to put both a death notice and a statement in a newspaper asking for any creditors to step forward. There was a waiting period for responses. The death notice had to be from a funeral home.

I had a CPA prepare the taxes. I kept good records of my expenses (travel, etc.) and the deceased's expenses. The most complicated were the medical expenses -- hospitals, surgeons, ambulances, etc.. These came in for as much as a year afterwards. Some I did not pay because the residual estate was already emptied. I paid all the estate could afford.
If you could do it all again, would you consider just skipping the whole thing? (i.e. just let the state/courts take over)
I don't think that option was open to me. A complication was that the death occurred in California but what little money was available was in a bank in a different state. I don't even remember all the details! I think it can be summarized as follows: The bank required a probate court to tell them what to do, but no probate court was interested because either A) out-of-state death or B) out-of-state assets and estate too small to bother with anyway. California had a simple form for small estates but the bank would not accept it (wrong state!). I eventually talked the bank into it when it got to the point where they couldn't tell me what else I should do.
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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by FIREchief » Mon Aug 12, 2019 3:51 pm

bertilak wrote:
Mon Aug 12, 2019 2:55 pm
FIREchief wrote:
Mon Aug 12, 2019 1:26 pm
bertilak wrote:
Mon Aug 12, 2019 8:30 am
I had to settle a family member's estate where there was no will involved. In addition to locating family members I had to put both a death notice and a statement in a newspaper asking for any creditors to step forward. There was a waiting period for responses. The death notice had to be from a funeral home.

I had a CPA prepare the taxes. I kept good records of my expenses (travel, etc.) and the deceased's expenses. The most complicated were the medical expenses -- hospitals, surgeons, ambulances, etc.. These came in for as much as a year afterwards. Some I did not pay because the residual estate was already emptied. I paid all the estate could afford.
If you could do it all again, would you consider just skipping the whole thing? (i.e. just let the state/courts take over)
I don't think that option was open to me. A complication was that the death occurred in California but what little money was available was in a bank in a different state. I don't even remember all the details! I think it can be summarized as follows: The bank required a probate court to tell them what to do, but no probate court was interested because either A) out-of-state death or B) out-of-state assets and estate too small to bother with anyway. California had a simple form for small estates but the bank would not accept it (wrong state!). I eventually talked the bank into it when it got to the point where they couldn't tell me what else I should do.
I believe that doing nothing is always a legal option for somebody nominated to serve as executor within a decedent's will.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by ncbill » Mon Aug 12, 2019 4:17 pm

I'm trustee for a recently-deceased relative's trust...the only significant asset being their home.

Once that's sold I'll distribute the funds to their heirs.

Filing a 1041 and the state trust tax return is no big deal.

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piton
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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by piton » Mon Aug 12, 2019 4:55 pm

I got some good ideas here - thx

I didn't realize that Nolo press had a book about this. I will look at that.

I really like the proactive approach of requesting a signed statement from heirs that they “agreed with the accounting and the distribution”. This kind of info is worth a lot to me in terms of preventing problems in the future.

I plan to hire a CPA, but I wanted to have a feel for what I should expect. I don’t think there is much to do, but it seems like it’s worth meeting with a CPA experienced with settling trusts for some hand-holding and the eventual tax return.

Regarding CPAs, what is a reasonable fee to expect to pay for a consultation and a usually uncomplicated tax return?

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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by afan » Mon Aug 12, 2019 6:07 pm

FIREchief wrote:
Mon Aug 12, 2019 3:51 pm


I believe that doing nothing is always a legal option for somebody nominated to serve as executor within a decedent's will.

I am sure it would be legal to refuse to serve.

It would hardly live up to commitments made to the deceased to do right for the survivors. If you intend to bail out completely if it is any work at all, then you should tell the person so they can make other arrangements. From an ethical point of view, yes means yes.

Many people settle the estates of close relatives. They are working on behalf of family members. Simply leaving it up to the state can impose costs and delays on the family. Costs and delays the deceased thought they had avoided when you agreed to serve.

Sure, if you found out after they died that some total stranger had named you executor it would be foolish to accept. For close friends and family, this is what it means to have those relationships. There are responsibilities.
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Re: As a trustee, can I "settle" the financial portion of a trust on my own?

Post by FIREchief » Mon Aug 12, 2019 6:34 pm

afan wrote:
Mon Aug 12, 2019 6:07 pm
FIREchief wrote:
Mon Aug 12, 2019 3:51 pm


I believe that doing nothing is always a legal option for somebody nominated to serve as executor within a decedent's will.

I am sure it would be legal to refuse to serve.
Yes, and this was my only real "point."
It would hardly live up to commitments made to the deceased to do right for the survivors.


You seem to be adding criteria that was not part of the initial discussion. The post I was responding to was from somebody who was serving in absence of a will, so we'll assume that this person was selected by the state's laws regarding estates. I have brought up this question a few times, but never in the context of somebody who had made an agreement with a decedent to serve.
If you intend to bail out completely if it is any work at all, then you should tell the person so they can make other arrangements. From an ethical point of view, yes means yes.
Hopefully you're not directing this comment to me personally. If I had agreed to serve for a family member (or anybody), certainly I personally would follow through. There are at least four scenarios that I was considering:

1) A person is named as executor without ever being told
2) A person is told that they have already been named executor, and the person so-named indicates that they do not desire to be so-named, but the will is never changed
3) A person is a contingent executor and the primary is unable or unwilling to serve
4) The decedent had no will and a person finds out that by state law they are the first "choice" to serve
Many people settle the estates of close relatives. They are working on behalf of family members. Simply leaving it up to the state can impose costs and delays on the family. Costs and delays the deceased thought they had avoided when you agreed to serve.
Again, you've added the criteria that a person had previously agreed to serve. See above.
Sure, if you found out after they died that some total stranger had named you executor it would be foolish to accept. For close friends and family, this is what it means to have those relationships. There are responsibilities.
"Total stranger" seems to be a bit extreme here. You seem to be suggesting that if a "close friend or family" names me executor without my agreement, that I am still responsible. Is this what you are saying? If so, I believe that state law (as well as "laws" of common sense), would suggest otherwise in many scenarios.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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