Settling a Revocable Living Trust at the Death of the Grantor

April 5, 2022 | Jennifer Harrington

Introduction

Many people wishing to streamline the administration of their estates at death choose to create revocable living trusts. While the goal of creating a revocable living trust is often to keep assets from going through the probate process, the trustee must still administer or settle the trust at the death of the grantor. This checklist provides an overview of the trust administration process.  It is for educational purposes only. Those tasked with settling a revocable living trust at the death of the grantor should seek legal counsel.

This checklist assumes that the trustee or other representative has already followed the steps in What to Do Immediately After the Death of a Loved One, that the trustee has secured the death certificate, and that the trustee is emotionally ready to begin administering the trust. While this checklist refers to Iowa law, the laws of other states are generally similar. As such, this checklist may be a useful resource for trustees or beneficiaries from other states as well.

Inventory

  • Estate Planning Documents
    • Find the trust and the pour-over will; ideally the one signed by the decedent.[i] Hopefully, the decedent left directions about where to locate the important documents.
    • If you cannot find the trust document, locate the law firm associated with the deed that transferred the decedent’s home or other property into the trust. You can obtain a copy of the deed, either online[ii] or by calling the county recorder’s office and asking for assistance in obtaining a copy.[iii]
    • To access the safe deposit box, you must have a document giving you authorization to access the box (such as a certification of trust).[iv] If no documents are available, then the bank may open the box 30 days after the date of death.[v]
  • Locating Assets & Debts
    • Obtain a certification of trust. This notarized document has the information necessary for third parties to interact with a trustee. This prevents the trustee from having to give a full copy of the trust to non-beneficiaries.[vi]
    • Locate the documentation for assets to determine how each asset was owned.[vii]
      • Many trusts have a “Schedule A” or attachment at the end that lists the assets in the trust.[viii]  A transfer of real property to the trust, however, must have been made through a deed filed with the county recorder’s office.
      • Find the management documents (bylaws, operating agreement, buy-sell, etc.) for any closely held business interests.[ix]
    • Copies of the following documents will be helpful, and the certification of trust can be used to obtain:
      • Last 12 months of bank statements.
      • Tax Returns. If copies of federal tax returns are needed, use Form 4506-T and 56.[x]
    • Obtain a copy of decedent’s credit report from Equifax, Experian, and TransUnion to review for open accounts.[xi]  Can use certification of trust to show authorization.[xii]  
    • Online locator services may assist in finding life insurance policies[xiii], pensions[xiv], and retirement accounts.[xv] Contact life insurance companies and retirement account custodians and follow their procedures for transferring assets to the designated beneficiaries.
  • Locate Mailing Addresses for heirs and beneficiaries
    • Heirs are those that would receive the estate if no estate plan was made.[xvi]
    • Beneficiaries are those named in the trust instrument.[xvii]

Notify Financial Institutions, State Departments. [xviii]

  • Send the Department of Transportation a request for the decedent’s identity card to be flagged as “deceased,” along with a copy of the death certificate.[xix] For more information on vehicles, read Vehicles: A Quick Guide After the Death of a Loved One.
  • Send the original passport and certified copy of the death certificate to the U.S. Department of State, along with a request to “cancel and return” or destroy.[xx]
  • Alert Equifax, Experian, and TransUnion by sending the death certificate and other required information.[xxi]  Review the decedent’s credit reports from Equifax, Experian, and TransUnion to review for fraudulent activities.
  • Place the decedent on the Deceased Do-Not-Contact List to remove from marketing campaigns.[xxii]
  • Notify the local FSA county office or service center of the death.[xxiii]

Tax Forms

  • Obtain an EIN for the trust.[xxiv] This can be acquired online[xxv] or with form SS-4.[xxvi]
  • File Form 56. This notifies the IRS that the trustee is responsible for of the trust’s tax filings and the decedent’s final tax return(s).[xxvii]
  • Estate Tax. If estate tax is owed, Forms 706 and 8971 are necessary.[xxviii]
    • The estate tax return is generally due 9 months after the date of death.
  • Decedent’s Final Tax Return. A federal Form 1040 tax return must be filed for the partial year in which the decedent lived, using the decedent’s social security number.  
    • This final return is typically, due on April 15th of the year following death. For example, if Winston died March 20, 2022, the final tax return for Winston would cover Jan 1 – March 20, 2022, and would be due April 15, 2023. [xxix]
    • If copies of prior years’ tax returns cannot be found, copies can be obtained from the IRS using Form 4506.[xxx]
  • Trust Tax Return. [xxxi] A tax return (Form 1041) will be filed for the trust during its existence. The trust return will be filed using the EIN obtained after death.[xxxii]  
  • State Tax Forms.
    • Tax returns will usually need to be filed in the state of final residence.[xxxiii]
    • If trust assets were located in multiple states, multiple state returns may be needed.

Pour-Over Will Administration

  • If the decedent had a will, it must be given to the clerk of court in the county of the decedent’s residence.[xxxiv]
    • If there were assets without a beneficiary designation that were titled outside of the trust, then the will may need to be administered.[xxxv]
      • If the value of individually owned assets is less than $200,000, then a simplified estate administration may be available.[xxxvi]
      • If the value of assets outside of the trust is less than $50,000 and no real estate is owned outside of the trust or in joint tenancy with right of survivorship, then no court administration may be necessary, and transfer can occur via affidavit.[xxxvii]
    • If all assets were in the trust, then notice to the court must be given that there will be no administration of the will.[xxxviii]

Beneficiary Notice

  • Notify all beneficiaries of their right to receive an annual accounting and copy of the trust instrument.[xxxix]
    • Beneficiaries include any individuals who could receive an interest, now or in the future.[xl]

Creditor & Estate Recovery Notice

  • If the decedent received any Medicaid benefits at the age 55 or older or resided in a nursing home at any time, notify the state’s Medicaid Estate Recovery department of the decedent’s death. How notice is given will depend on whether probate of the estate was required.[xli]
  • Publish a Notice of Trust in a newspaper distributed in the decedent’s county of residence.[xlii] This notice must be published for two weeks.
    • All claims against the trust must be made within 4 months after the second publication.[xliii]
    • If general publication is issued, then notices must be sent to the surviving spouse, heirs, and known creditors.[xliv]
  • If proper notice is not provided, creditors can file claims with the trustee for up to one year after the death of the grantor.[xlv]

Spouse & Minor Children Notices

  • Notify the surviving spouse, if any, of their right to the elective share of the trust.[xlvi]
  • If no probate is opened, then notice must be sent to a surviving spouse about their right to the spousal allowance (temporary support following the death).[xlvii]
  • If the decedent had children who did not reside with the surviving spouse, notice must be sent to the child’s guardian.[xlviii]

Digital Accounts and Assets

  • Google[xlix] and Apple[l] have account features where the company will contact a designated individual who is authorized to act on behalf of inactive accounts.
  • Facebook will follow the directives of the decedent or “memorialize” the account. They will not give the login and password to the account.[li] 
  • If access is needed to an email, the trustee may be able to obtain access if the trustee was given express permission in the trust. The provider has the right to ask for a Court order finding that the access is “reasonably necessary for administration.”[lii] 

Documenting Date of Death Value

  • Secure an account statement documenting the date of death value for each financial account.
  • Obtain an appraisal from a third party for the following:
    • Vehicles
    • Equipment
    • Real Estate
    • Business Interests
  • Each asset owned by the trust must have a documented date of death value.[liii]

Final Settlement and Distribution

  • Pay the debts of the decedent.[liv]
  • Determine the administrative costs and apportion appropriately.[lv]
  • Distribute assets according to the trust terms.
    • Trustee may send out a Notice of Proposed Distribution prior to releasing any funds to allow for objections prior to distribution.[lvi]
  • Provide an accounting of the trust to each beneficiary.[lvii]
    • Often accompanied by a waiver of any claims against the Trustee and acceptance of the property.[lviii]
  • Distribution may not occur until after all assets have been located, proper notice has been given, and a determination is made that there are sufficient assets to make the distribution.
  • All documents associated with the trust administration should be physically copied and that copy placed in a safe location – such as an attorney office.[lix]
  • Create a digital record of all documents.[lx] Save in two or three secure electronic locations.
The Center for Agricultural Law and Taxation is a partner of the National Agricultural Law Center (NALC) at the University of Arkansas System Division of Agriculture, which serves as the nation’s leading source of agricultural and food law research and information. This material is provided as part of that partnership and is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture.

[i] Iowa Code § 633A.2103; Iowa R. Evid. 5.901 and 5.902.

[iii] For example, see Lee County, Iowa. Land Records. https://www.leecounty.org/pview.aspx?id=20878&catid=0 (last accessed 02/25/2022).

[iv] Iowa Code § 524.810A(1).

[v] Iowa Code § 524.810A(3).

[vi] Iowa Code § 633A.4604.

[vii] For example, locate the title papers for a vehicle or equipment.

[viii] Drafting the trust instrument—Schedule of property, 2 Ia. Prac., Methods of Practice § 19:8 (08/2021 update).

[ix] Felt v. Felt Farms, LLC, No. 18-0710 (Iowa Ct. App. June 5, 2019). https://www.iowacourts.gov/courtcases/6331/embed/CourtAppealsOpinion (last accessed 03/09/2022).

[x] About form 4506-T, Request for Transcript of Tax Return. IRS. https://www.irs.gov/forms-pubs/about-form-4506-t (last accessed 02/24/2022); Instructions for Form 56 (12/2019) IRS. https://www.irs.gov/instructions/i56 (last accessed 02/24/2022).

[xi] Reporting Death of Relative. Experian. https://www.experian.com/blogs/ask-experian/reporting-death-of-relative/(last accessed 02/25/2022). 

[xii] Iowa Code § 633A.4604.

[xiii] Life Insurance Policy Locator Service. Nat’l Assoc. Insur. Comm’n. https://eapps.naic.org/life-policy-locator/#/welcome (last accessed 02/28/2022).

[xiv] Contacting PBGC About Unclaimed Pensions, Pension Benefit Guarnty Corporation, https://www.pbgc.gov/about/pg/contact/contact-unclaimed (last accessed 02/28/2022).

[xv] National Registry of Unclaimed Retirement Benefits. https://unclaimedretirementbenefits.com/search (last accessed 02/28/222).

[xvi] Iowa Code § 633A.3110(1); Iowa Code § 633.219.

[xvii] Iowa Code § 633A.1102(2).

[xviii] Protecting the Deceased from Identity Theft!, IA Dep. Of Justice, https://www.iowaattorneygeneral.gov/media/cms/Protecting_The_Deceased_716FA84103728.pdf (last accessed 02/24/2022).

[xix] Id.

[xx] FAQ- General Question #27, U.S. Dept. of State, https://travel.state.gov/content/travel/en/passports/passport-help/faqs.html (last accessed 02/24/2022).

[xxi] Reporting Death of a Relative, Experian, https://www.experian.com/blogs/ask-experian/reporting-death-of-relative/ (last accessed 02/24/2022).

[xxii] Deceased Do No Contact Registration, Data & Marketing Assoc., https://www.ims-dm.com/cgi/ddnc.php (last accessed 02/24/2022).

[xxiii] Deceased Person. Farm Service Agency. https://www.fsa.usda.gov/programs-and-services/payment-eligibility/deceased_person/index (last accessed 03/04/2022).

[xxiv] IRS Reg. 301.6109-1(a)(3)(i)(A).

[xxv]  EIN Assistant. IRS. https://sa.www4.irs.gov/modiein/individual/index.jsp (last accessed 03/08/2022).

[xxvii] IRC § 6036; Instructions Form 56, https://www.irs.gov/instructions/i56 (last accessed 03/03/2022).

[xxviii] Form 8971 Instructions. IRS. https://www.irs.gov/instructions/i8971 (last accessed 03/08/2022);

[xxix] IRS Publication 559, pg. 4-9. 

[xxx] Form 4506. IRS. https://www.irs.gov/forms-pubs/about-form-4506 (last accessed 03/08/2022); authority for trustee or executor to obtain information comes from IRC § 6103(e)(1)(E-F).

[xxxi] IRC § 644(a). Note: a §645 election could be made, which could possibly delay when the first filing for the trust is due.

[xxxii] About Form 1041. IRS. https://www.irs.gov/forms-pubs/about-form-1041 (last accessed 03/09/2022). 

[xxxiii] Iowa – IA 1041 Instructions 63-002, pg. 1 https://tax.iowa.gov/sites/default/files/2021-12/IA1041Inst%2863002%29.pdf (last accessed 03/09/2022).

[xxxiv] Iowa Code § 633.285.

[xxxv] Iowa Code § 633.304.

[xxxvi] Iowa Code Chapter 635.

[xxxvii] Iowa Code § 633.356.

[xxxviii] Iowa Code §633.305.

[xxxix] Iowa Code § 633A.4213(1-2). Could be altered by trust instrument – Iowa Code § 633A.4201.

[xl] Iowa Code § 633A.1102(2).

[xli] Iowa Estate Recovery Law. Iowa Dept. of Human Serv. https://dhs.iowa.gov/ime/members/members-rights-and-responsibilities/estate-recovery (last accessed 02/24/2022); see also, Iowa Code § 633A.403.

[xlii] Iowa Code § 633A.3110 (2022).

[xliii] Iowa Code § 633A.3110(2)(d) (2022).

[xliv] Iowa Code § 633A.3110(2)(b-c) (2022).

[xlv] Iowa Code § 633A.3108; Iowa Code § 633A.3109; Iowa Code § 633A.3110(4).

[xlvi] Iowa Code § 633.237(2); Iowa Code § 633.238(d).

[xlvii] Iowa Code § 633A.3114(1).

[xlviii] Iowa Code § 633A.3115(1).

[xlix] About Inactive Account Manager. Google Account Help. https://support.google.com/accounts/answer/3036546?hl=en (last accessed 02/242022).

[l] About Legacy Contacts. Apple Support. https://support.apple.com/en-us/HT212360 (last accessed 02/24/2022).

[li] How do I report a deceased person or an account on Facebook that needs to be memorialized? Facebook Help Center. https://www.facebook.com/help/150486848354038 (last accessed 02/24/2022).

[lii] Iowa code § 638.7.

[liii] There are many good reasons to do this. One important reason is to establish basis for the new owner. IRC § 1014(b)(2); IRC § 1014(b)(3); IRS Reg § 1.1014-2(a)(2).

[liv] Iowa Code § 633A.3104.

[lv] Iowa Code § 633A.3109; Iowa Code § 637.501-502.

[lvi] 72-34-425, MCA; Nev. Rev. Stat. § 164.725.

[lvii] Iowa Code § 633A.4213; Iowa Code § 633A.4504; Iowa Code § 633A.4506.

[lviii] Iowa Code § 633A.4506.

[lx] How to Digitize Your Most Important Documents. The New York Times. Pub. 4/1/2020. https://www.nytimes.com/2020/04/01/technology/personaltech/digitizing-important-documents.html (last accessed 03/10/2022).