How to Settle a Revocable Trust

by Daria Kelly Uhlig, studioD

For many people, the most important consideration in estate planning is deciding how their assets should be distributed after they die. You've probably considered making a will to state your preferences, or perhaps you already have one. Another option, which you can use in place of a will, is a revocable trust. A revocable trust is often faster, less expensive and less complicated than a will.

Benefits of a Revocable Trust

The primary reason people choose a revocable trust over a will is that a trust avoids the need for probate. When a decedent leaves a will, a court must determine through the process of probate that the will is, in fact, the decedent's last will and testament. A revocable trust, on the other hand, remains private, as no judicial process oversees its settlement. As a result, settlement is often faster than it is with a will. Additionally, the trustee may settle the trust without an attorney, so the trust is often less expensive and less complicated to settle than is an estate governed by a will.

First Steps After Grantor's Death

After the grantor passes, the trustee contacts the beneficiaries in writing to inform them of the trust’s existence and of their status as beneficiaries. The notification may disclose such information as the beneficiaries' rights and the location where the trust is registered. In addition, the state where the trust is located may require that public notice be given of the trust's existence. In Florida, for example, the trustee files a notice of trust administration. The trustee must also order multiple certified copies of the death certificate — at least one for each insurance policy and each asset that will be sold or liquidated.

Asset Location and Valuation

The trustee is responsible for inventorying the grantor's assets and determining who owns them or possesses title. The grantor should have transferred ownership of each asset in the trust. If any was not transferred, it must be probated. Assets not owned by the trust and located in other states must be probated in those states. Once the trustee has identified all of the assets, she must establish their market values. The valuations should be in writing.

Benefits and Debts

Life insurance, Social Security, pensions and other benefits must be collected by the trustee. The trustee notifies each company or agency of the grantor's death and follows the entity's instructions for collecting the benefits. Each entity will need one of the certified death certificate copies. The trustee must also settle the grantor's debts and pay his taxes. The trustee obtains the grantor's mail, bills, receipts and other documents that identify the grantor's creditors, notifies them of the grantor's death and pays the amounts the trust owes. The trustee also files the trust's tax returns. If the trust doesn't have the cash to pay the debts, the trustee relies on the asset valuations to decide how best to raise the money. Often, the grantor will have funded the trust with insurance policies, bank accounts and investments transferred into the trust for this purpose. If any of these policies or accounts is not included in the trust, it must be probated before the proceeds can pay the trust’s bills.

Distribution of Assets

After the liquidation of any assets in order to pay the trust's debts, the trustee distributes the remaining assets to the beneficiaries in the manner the trust specifies. Beneficiaries are also entitled to information about the trust's finances, including the asset valuations, debts, administration expenses and taxes.

About the Author

Daria Kelly Uhlig began writing professionally for websites in 2008. She is a licensed real-estate agent who specializes in resort real estate rentals in Ocean City, Md. Her real estate, business and finance articles have appeared on a number of sites, including Motley Fool, The Nest and more. Uhlig holds an associate degree in communications from Centenary College.

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