Revocable Living Trust issue

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radiowave
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Revocable Living Trust issue

Post by radiowave »

My wife is having a difficult time after the death of her mother in disbursing funds from her revocable living trust at Ally Bank to her siblings. Her mom died in December. DW sent a copy of the death certificate to Ally several weeks ago. At issue is the funds are in several CDs. Ally said to disburse the funds, the CDs will have be liquidated then the funds sent to a new account with a new EID number. She got the EID number from IRS and has tried to set up the new trust account but Ally is now saying that the original trust account is now irrevocable as her mom is deceased and a new trust cannot be created. Yes, she is at the point of hiring an estate attorney. Just posting here to see if anyone has gone through this issue before and if there is any elegant solutions to this problem before expending possibly hundreds if not thousands of dollars to resolve a seemingly simple issu. So summary, CDs in a revocable trust need to be liquidated and disbursed to daughters who are membesr of the trust my wife is trustee and there is a valid trust document in place how to do this. Ally has the death certificate on file.

Any help is appreciated. Thanks
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Freeadvice
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Re: Revocable Living Trust issue

Post by Freeadvice »

Can’t the bank just send a check or checks to your wife?
miket29
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Re: Revocable Living Trust issue

Post by miket29 »

I'm not an attorney. However our mother passed away last year so we went thru liquidating and disbursing the money from her trust. I think you may have misunderstood a few things here. I'll give an answer based on what we found out.

When her mom was alive her mom owned the revocable trust, and her mom could use her own Social Security number for the trust as can anyone with a revocable trust. When she passed away the trust became irrevocable (that's the whole point of a living trust, changeable anytime while the creator is alive but it becomes fixed when they die). You write " CDs in a revocable trust need to be liquidated" but they are no longer in a revocable trust, they are now owned by an irrevocable trust. You write about a "new trust" but this is not a new trust, it is the old revocable trust that has turned irrevocable. It sounds like your wife is the successor trustee, so she has control of the irrevocable trust. The irrevocable trust needs its own EIN (you call it a EID, but I'm pretty sure it is a EIN).

" Ally said to disburse the funds, the CDs will have be liquidated then the funds sent to a new account with a new EID number. " I think this is a misunderstanding. A living trust can use the SSN of the creator, but an irrevocable trust needs its own EIN. The funds aren't sent anywhere, but since the trust your mother-in-law created has changed from revocable to irrevocable it just needs to have its own EIN. Your wife needs to give Ally bank the EIN she obtained for the irrevocable trust which now owns the CDs. They will change the trust to use the EIN and then let her control it. The trustee (eg. your wife) has a choice. She can wait for the CDs to mature. Or she can liquidate them now at whatever early termination fee/penalty may apply. Then she can send out the cash in accordance with the terms of the trust. This irrevocable trust, BTW, will be filing annual tax returns until the trust is liquidated and filling out a K-1 when it disburses funds. Many people hire a CPA to handle the tax return of the trust, the final tax return of the deceased, and to create the K-1. Or you could do it yourself, I'm not sure how hard it is (we used a CPA).
Gill
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Re: Revocable Living Trust issue

Post by Gill »

These assets are now held in the same trust although it has now become irrevocable with a new tax ID number. With a copy of the trust agreement, the death certificate and the new ID number the bank should send a check payable to your wife as trustee of the trust.
Gill
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increment
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Re: Revocable Living Trust issue

Post by increment »

miket29 wrote: Wed Apr 07, 2021 12:02 am Your wife needs to give Ally bank the EIN she obtained for the irrevocable trust which now owns the CDs. They will change the trust to use the EIN and then let her control it.
It is possible that (for internal bookkeeping reasons) the bank cannot change the EIN for a particular account (number). In this case, they may expect the trust to open a new account (with the new number), and then all the contents can be transferred into it. Afterwards the (new) trustee can do whatever needs to be done.
Nowizard
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Re: Revocable Living Trust issue

Post by Nowizard »

I cannot imagine a case where the Successor Trustee cannot simply have funds, accounts and CD's liquidated with cash sent to the Trustee. That was not an issue in a case where I served as Successor Trustee. No on-line bank was involved.

Tim
crre
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Re: Revocable Living Trust issue

Post by crre »

but Ally is now saying that the original trust account is now irrevocable as her mom is deceased and a new trust cannot be created

others have said this, but just to get the focus right for you: the above is correct, and indeed a new trust cannot be created. but what she needs to create is a new trust account, not a new trust. so possibly just a misunderstanding.

not a lawyer, but i went through this process myself many years ago.
Topic Author
radiowave
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Re: Revocable Living Trust issue

Post by radiowave »

Thanks all, this is helpful and yes EIN not EID. My wife was talking to Ally late last night as it is difficult to talk about this at work during the day and very frustrating not getting the help she needs from evening CSRs. I've never hear her curse and slam her fist as she did last night after almost an hour the CSR disconnected her :twisted:
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fourwheelcycle
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Re: Revocable Living Trust issue

Post by fourwheelcycle »

miket29 wrote: Wed Apr 07, 2021 12:02 am I am not quoting miket29's full post, but it is perfect advice!
+1 My wife and I have a joint revocable trust for our taxable savings at Vanguard. The trust uses my SS number and all earnings are reported to the IRS under my name. If I die first my wife can simply change the trust's SS number to hers. Vanguard has a copy of the trust, which indicates our son is the successor trustee. Vanguard has advised us when the second of us dies our son needs to contact the IRS and get a new EIN for the now-irrevocable trust. Then he needs to submit Vanguard's change in trustee form along with the new EIN and copies of our death certificates. Vanguard will turn the necessary dials, and with two weeks or so our son will be the new trustee of the trust, with his own log-in for the trust account and full transaction authority to distribute the trust to himself and the other heirs.

Our son will have to submit a final tax return for the year the second of us dies. If the trust earns more than $600 during the following tax year our son will also have to submit a Form 1041 tax return for the trust. TurboTax's Deluxe or Premier versions can do our final tax return, and our son's regular return, for the tax year the second of us dies. TurboTax's Business version can do a Form 1041 tax return, and our son's regular return, for the following tax year.
bsteiner
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Re: Revocable Living Trust issue

Post by bsteiner »

fourwheelcycle wrote: Wed Apr 07, 2021 9:08 am ... My wife and I have a joint revocable trust ...

Our son will have to submit a final tax return for the year the second of us dies. If the trust earns more than $600 during the following tax year our son will also have to submit a Form 1041 tax return for the trust. ...
$100 of gross income or any taxable income unless the trustees of the trust and the executors of the estate (or just the trustees of the trust if there's no executor) elect to treat the trust as part of the estate. That election is sometimes beneficial and sometimes not.
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