My good friend passed away and named me Trustee of her Trust. I went to the bank to access the funds and I was told that I needed a special tax ID number from the IRS. Later, I was then told that I needed to see an attorney to settle things out. What gives? I thought this was all taken care of when she created the Trust.
– Galled on Gladstone
Dear Galled on Gladstone:
Unfortunately, there is a misimpression by MANY people that trusts “run themselves” after somebody dies. People think that having a trust means that money automatically flows to the beneficiaries with little to no effort.
In reality, Trusts require for certain things to be done after the Trustmaker dies. Failure to know about and follow these rules could cause significant and irreversible problems.
For (just one) example, it is a requirement that the Trustee notify the state taxing authority (FTB) after the Trustmaker dies (even if they had a trust). This notice allows the tax man to make a claim on assets if back taxes had gone unpaid.
A case came across my desk where the Trustee was a “do it yourselfer” and distributed the trust assets without first consulting an attorney. After the money had been distributed (and spent by the heirs), the FTB found out about the death and sent a bill for $37,000.00 to the Trustee for back tax. The Trustee was ultimately on the hook for the bill.
Many mistakes are avoidable with help of legal counsel on the front end!