Checklist for Trust Administration – Part 3
Valuing the Decedent’s Assets – by Julie Garber and Steve Beede
Once you’ve met with an estate and trust attorney and determined whether their services are needed, the next step in settling a trust is to establish date of death values for all of the decedent’s assets.
All financial institutions where the decedent’s assets are located must be contacted to obtain the date of death values. For assets including real estate, personal effects including jewelry, art work and collectibles, and closely held businesses, they’ll need to be appraised by a professional appraiser.
Note that the value of all of the decedent’s assets will need to be established, including those passing outside of the trust, in order to determine if any estate taxes and/or inheritance taxes will be owed. Assets that can pass outside of the trust may include those that were owned as tenants by the entirety or joint tenants with right of survivorship, payable on death or transfer on death accounts, and life insurance, IRAs, 401(k)s and annuities with named beneficiaries.
Some non-Trust assets avoid Probate:
Determine if there are any, non probate assets the decedent owned. Non probate assets are simply assets that won’t need to be probated after you die. Here are some examples:
1. Assets you own jointly with your spouse or others with rights of survivorship (JTWROS).
2. Assets you own jointly with your spouse as tenants by the entirety (TBE).
3. Assets owned by your Revocable Living Trust.
4. Assets in which you retain a life estate and the remainder passes to a non-charitable beneficiary other than yourself.
5. Assets owned by you and payable to a designated beneficiary, including:
d. Health savings accounts (HSAs)or medical savings accounts (MSAs)
Note that if all of the designated beneficiaries of any of the assets listed in (5) above predecease the account owner, then the account will need to be probated.
Will Non Probate Assets be Included in Your Gross Estate?
Yes…Non probate assets must be included in the value of your gross estate in order to determine your estate tax liability. However, the more important question is: What value of the non probate asset will be included in your gross estate for estate tax purposes?
1. If the asset is titled in your sole name without any other owners or has a POD, TOD or ITF designation, then 100% of the value will be included in your taxable estate.
2. If you own a life estate in the asset and the remainder passes to a non-charitable beneficiary other than yourself, then 100% of the value will be included in your taxable estate.
3. If the asset is titled as JTWROS with your spouse or as TBE, then only 50% of the value will be included in your taxable estate.
4. If the asset is titled as JTWROS with someone other than your spouse, then 100% of the value will be included in your taxable estate unless it can be proven that the other owner(s) actually made contributions to the account or toward the purchase of the property.
5. If the asset is titled in the sole name of your Revocable Living Trust, then 100% of the value will be included in your taxable estate, but if the asset is titled in the name of your Revocable Living Trust as a tenant in common, then only the proportionate share owned by your trust will be included in your taxable estate.
6. The entire death benefit of life insurance policies that you own on your own life at the time of your death will be included in your taxable estate, but only the cash value of life insurance policies that you own on someone else’s life will be included.
7. Finally, 100% of the value of your retirement accounts, including IRAs, 401(k)s, and annuities will be included in your taxable estate.
Once the date of death values have been determined for the decedent’s assets, the next step is to pay the decedent’s final bills and ongoing expenses of administering the trust. That’s what we’ll cover in Step 4 of Trust Settlement – Pay the Decedent’s Final Bills and Trust Expenses
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The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.