Full question:
This is a question for a trust in the state of PA. My wife is a benificary of a irrovocable trust setup by her aunt's husband at the time of his death 1992. (Her aunt is a blood relative.) The aunt was entitled to the trust income every year until her death. Upon the aunt's death,which was 3/9/2009 principle was to be distributed to my wife and her brother. The trust language did not specify any successor beneficiaries. Since my wife's brother died 9/2005, and he was not a blood relative of the uncle who set up the trust, how would the principle remaining in the trust be distributed? Note: my wife's aunt is a blood relative(her father's sister). The aunt's spouse is the originator of the trust but is not a blood relative of the deceased nephew.
- Category: Trusts
- Date:
- State: Pennsylvania
Answer:
The trust document determines how property is to be distributed after the death of the grantor. A trust can be a separate entity that does not die when the creator dies. The successor trustee can take over management of the trust estate and pay bills and taxes, and promptly distribute the trust assets to the beneficiaries, without court supervision, if the trust agreement gives the trustee that power.
A living trust is considered terminated when all assets of the trust are removed. A person can terminate a living trust by simply removing all property from the trust and closing any accounts opened as part of the trust. A living trust is terminated when all property is distributed to the beneficiaries following the grantor(s) death.
If a living trust had a federal or state identification number, which is unusual, all property would be removed from the trust and it would be noted on that year’s tax returns that the trust the year was the final one for the trust.
If real property is involved, some of the documents that may be required, among others, include:
1. An Affidavit of Death of Trustee and Consent of Successor Trustee. This should be recorded for each real property held in a living trust. This affidavit is recorded with a certified copy of the death certificate. When it is recorded, it changes the title of the property from the trustee (usually the settlor) who has died and into the names of the new trustee(s).
2. Along with this affidavit, a Preliminary Change of Ownership Form must be completed and recorded at the same time. This form basically tells the county recorder why you are recording the Affidavit.
3. If a living trust will transfer the ownership of the real property from parents to children or any other manner exempt from property tax reassessment then the appropriate exemption form should be filled out and mailed to the county assessor's office.
If it is time to wrap up a living trust by distributing the assets and terminating the living trust entirely, a Trust Distribution and Termination Agreement may be prepared. This agreement will contain such provisions as recitals of successor trustees, distribution provisions, distribution of personal property already made, funding at date of distribution values, proposed final distribution, consent from beneficiaries for final distribution, and waivers of accounting if appropriate, among other clauses that protect the successor trustee while obtaining an agreement among the beneficiaries for the final distribution of trust assets.
Due to the complexities that may occur, I suggest consulting a local attorney who can review all the facts and documents involved.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
