Distributing trust assets

[MomsTrust]

What is the name of your state (only U.S. law)? NV
My mom passed away this January(in CA) and as the successor trustee of her trust I am on a rather steep learning curve to properly distribute the assets. My questions are mainly financial. The vast majority of her assets are in stock and mutual funds. I am planning to reregister them all in my name as trustee. What is the best way to liquidate? Should I cash them all out and place in a checking account and then write checks to the beneficiaries? Does the trust file income tax returns for accrued interest and gains before the assets are distributed? Any other help in this area is appreciated.

Rick

 

[TrustUser]

how does the trust say to distribute the assets that it owns ?

things arent always sold right away, if the time is not right.

generally, either the trustee or beneficiary has the final say of what is done.

once there is a clear decision on what is to be done - the how can then be looked at.

 

[curb1]

You said, "The vast majority of her assets are in stock and mutual funds".

How are the stocks and mutual funds titled now? Are the accounts now in the name of the trust, or in mom's name? If the accounts are in the trust, you will be able to turn them into cash within the account. It will be easier once all assets are into cash. Stocks and mutual funds have recovered pretty well.

How much is involved? Did she have debts? How liquid are the "other assets"?

Go to the IRS website and look at Publication 559, tax Form 1041 and Schedule K-1.

 

[curb1]

Also, you might check this out:

http://www.ehow.com/how_5179396_report-living-trust-income-taxes.html]How to Report Living Trust Income on Your Taxes | eHow.com

 

[MomsTrust]

Thanks for the info. I should have given more information. All the financial assets are in the trust with my mother as sole trustee. The trust is to be distributed upon her death to three siblings, including me. I have read that you can distribute the actual mutual fund (or stock) shares, thereby passing any tax liability onto the heirs; or you could sell all and put the proceeds into a checking account (with the trust registration), but then I believe the trust would be liable for any gains from the "stepped up" value up to the date of distribution. Is the latter strategy the best (or easiest)? Any other suggestions or potholes awaiting me would be greatly appreciated.

Rick

 

[TrustUser]

i am not sure that there is any absolute correct way of doing things.

with regards to taxation, i think you would do best to get an opinion from a tax accountant.

 

[curb1]

You are now sole trustee. I would suggest turning everything to cash immediately and then distribute. You could retain $10,000 in the trust (or decide an appropriate figure, I don't know the value of the assets) for any contingencies. The sooner you do this, the less hassle for earnings within the trust. There should be very few taxes at this time. The longer you wait the more complicated it gets with dividends and mutual fund distributions.

If the three beneficiaries are very compatible, you could distribute everything with the understanding that the three of you will split the cost of any unforeseen costs.

 

[TrustUser]

why not ask your sibs how they would prefer to get their share ?

then all 3 of you receive your shares as desired.

 

[FlyingRon]

Turning every thing to cash is one option.
The other is to employ a financial advisor to split the assets up and rename them to the beneficiaries.
As pointed out, unless you are on unfriendly terms with the other beneficiaries, you might solicit their opinions as to how they would like to have it.

As far as tax issues for the trust, depending on the value of the trust and what other assets the grantor (mom) had, there may or may not be estate tax. The basis of the assets steps up to their value at the time of her death. If you get the actual securities it would behoove you to get a financial advisor to fix the basis now. If the trust turns them into cash, you need to make sure they didn't appreciate in the interim. Again some sort of tax/financial/estate professional would be helpful.

 

[curb1]

1) It is easiest to turn the assets into cash within the trust.

2) Distribute the cash.

3) After the cash is distributed to each beneficiary, each beneficiary can do what they want with the cash. They can buy back their portion of the stocks and mutual funds if that is their choice. Or, they can buy anything they would like. Keep it simple, this does not have to be difficult.

 

[MomsTrust]

This is my last question (at least for this thread!)

My mom (outside the trust) and sister are joint owners of a checking account. Due to the "pour over" in the will, is the account now owned by the trust and my sister? Or is my sister the sole owner? Thanks to all for your comments.

curb1 - I believe turning all into cash and then distributing is the best. Each heir can then do as they want. Thankfully, there is no estate tax liability.

Again, I thank all of you for your help.

Rick

 

[TrustUser]

sister is sole owner