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What Happens When a Grantor Dies: An Overview

Individual Trust
Shared Trust

The process works differently depending on whether you made an individual living trust or a shared trust with your spouse or partner.

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Individual Trust

When the grantor, who is also the trustee, dies, the successor trustee named in the Declaration of Trust takes over as trustee. The new trustee is responsible for distributing the trust property to the beneficiaries named in the trust document.

The trust continues to exist only as long as it takes the successor trustee to distribute trust property to the beneficiaries.

The successor trustee is also in charge of managing any property left to a young beneficiary in a child's subtrust. A subtrust will exist until the beneficiary is old enough to get the property outright (at the age specified in the trust document), so if there's a subtrust, the successor trustee may have years of work ahead. (See Administering a Child's Subtrust.)

If trust property inherited by a young beneficiary is to be managed by a custodian under the Uniform Transfers to Minors Act, the person named as custodian will be responsible for that property. That person may or may not be the successor trustee. (See Administering a Custodianship.)

The Successor Trustee's Duties: Individual Trust
  • Notify beneficiaries that the trust exists, if necessary.
  • Get an appraisal of valuable trust property.
  • Prepare an Affidavit of Assumption of Duties.
  • Distribute trust property to beneficiaries named in the trust document.
  • Manage trust property left in a child's subtrust, if any.
  • File the deceased grantor's final income tax returns. (This is the responsibility of the executor of the estate.)

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Shared Trust

When a couple creates a basic probate-avoidance living trust, both grantors are trustees. When the first one dies, the survivor becomes sole trustee.

The trust itself is automatically split into two trusts:

The survivor is sole trustee of Trust #1, Trust #2 and any children's subtrusts set up for the deceased grantor's young beneficiaries. (See Administering a Child's Subtrust.)

It's the survivor's job to distribute the property in Trust #1 to the beneficiaries the deceased grantor named in the trust document. If, as is common, much of the trust property is left to the survivor, that person will have little to do -- the trust property he or she inherits is already in the living trust and does not need to be transferred. (More about this later.)

Trust #2 goes on as before, as a revocable living trust. It contains only the survivor's property, and the survivor is free to change any terms of the trust. For example, the survivor may want to amend the trust document to name beneficiaries for the property inherited from the deceased grantor.

EXAMPLE: Edith and Jacques create a shared living trust. They transfer their house, which they own together, into the trust and name each other as beneficiaries. Edith names her son as alternate beneficiary.

When Jacques dies, Edith inherits his half interest in the house. Because of the way the trust document is worded, she doesn't have to change the trust document to name a beneficiary for this half interest in the house. Both halves will go to her son at her death. She may, however, want to amend the trust to make her son the primary beneficiary and name someone else to be alternate beneficiary.

 

When the second grantor dies, the successor trustee named in the trust document takes over as trustee. The process of winding up the living trust is the same as that for an individual trust. (See Individual Trust.)

EXAMPLE: Harry and Maude, a married couple, set up a basic revocable living trust. They appoint Maude's cousin Emily as successor trustee, to take over as trustee after they have both died. They transfer ownership of much of their co-owned property to the trust. Maude also puts some family heirlooms, which are her separate property, in the living trust.

In the trust document, Maude leaves her heirlooms to her younger sister. She leaves her half of the trust property she and Harry own together to Harry.

When Maude dies, Harry becomes the sole trustee. Following the terms of the trust document, he distributes Maude's heirlooms (Trust #1) to her sister, without probate. Maude's half of the property they had owned together stays in the trust (Trust #2); no transfer is necessary.

After Maude's death, Harry decides to amend the trust document to name his nephew, Burt, as successor trustee instead of Maude's cousin Emily. When Harry dies, Burt becomes trustee and distributes the trust property following Harry's instructions in the trust document. When he has given all the property to Harry's beneficiaries, the trust ends.

The Surviving Grantor's Duties: Shared Trust
  • Get an appraisal of valuable trust property.
  • Prepare an Affidavit of Assumption of Duties.
  • Distribute the deceased grantor's share of the trust property to beneficiaries named in the trust document.
  • Manage property left in a child's subtrust, if any.
  • File tax returns, if necessary. (This is the executor's responsibility, if a will named someone else as executor of the estate.)

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