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What happens to a grantor trust when the grantor dies Form: What You Should Know

What Happens to A Revocable Trust when the Granter Dies? If the trustee doesn't name a successor trustee, any income from trust property of the deceased person is considered taxable income, and the deceased person may be required to pay tax on that income.

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FAQ - What happens to a grantor trust when the grantor dies

Does a trustee have to reconcile outstanding family debts owed to the grantor of a living trust?

A trustee can try to reconcile outstanding debts, but he/she cannot force people to pay. My husband loaned 3 parties money a few years before he died, one party eventually paid in full because I told her she could pay the principle and that would square it. The second party was always spotty in his payments and eventually filed bankruptcy and listed the trust as one of his many creditors, so that was the end of that. The third party at least tried and called me in 2024 that he was losing his business due to the downturn in the economy, I told him to contact me when he felt like he was getting back on his feet and weu2019d work out something. A family with children approaching college ageu2026.what can you do?I was also the beneficiary, so in my mind I have written it off, none of these people were family members and the aggregate amount totaled almost $100,000.It was a good lesson for me and my child who will someday inherit a sum from meu2026u2026..never loan people money and never, never loan friends money.

If all paperwork is done on a living trust including signing the deed over to the trust, but the grantor dies before it is filed with the county, can it be filed after death, or does it void the trust?

Unfortunately, you answer does depend upon in what state the decedent lived. In what I believe to be most states a deed is effective upon delivery and if you are both the Settlor of a trust and itsu2024 Trustee delivery is ordinarily automatic. In most states delivery is also considered to have occured when a person signs a deed, has it notarized and gives it to a third party (like their attorney) with instructions to record it.In California, where I practice law, while only revocable transfer on death deeds need to be recorded to be effective, recording gives you enforceable rights against third parties. California also allows properly executed deeds to be recorded after someone has died. Title companies donu2019t like it and may request verification of delivery or instructions to record, but they are recordable and subject to challenge, convey title ownership.Whether a trust holds a property is also something that varies state by state. In California a clear showing that someone intended something they own to be owned by their trust is enough to have the property retitled to a trust through what we call a Heggstad petition. In California, this process is much less painful than full probate and keeps a trustu2019s terms intact. Some other states have similar procedures.All that being said, under most stateu2019s laws a trust can exist without a trustee but cannot exist without any assets. It isnu2019t that it is void, it just doesnu2019t exist. But, in the case like what you described, the trust could be brought to life through a will that indicates that the decedentu2019s property held outside of any trust at the time of their death be held and administered under the terms of the trust.I hope this is helpful for you and yours. Please remember, if you ask legal questions on Quora, you will get much higher quality answers if identify the state or states involved in your question within the text of your question. Best wishes - Joel

What US tax requirement would necessitate having to withdraw money from a Residual or QTIP trust while the grantor/trustee is still living?

If the terms u201cQTIPu201d and u201cresidualu201d are being used in the usual way, to refer to (1) a trust qualified for the estate tax marital deduction as terminable interest property and (2) a trust not qualifying for the marital deduction and containing the residue of assets held by the trustee after the marital deduction property has been placed in the QTIP trust, the questioner is confused. These are trusts funded after the death of the grantor, so there will not be a living grantor when they are funded. If the grantor was also the trustee of an inter vivos trust created before his death under the same document as is used to create the marital and residual trusts after his death (as is common), he stopped being trustee when he stopped breathing. (It is possible to establish a marital deduction trust in connection with a lifetime gift, but this is quite uncommon and I assume is not the subject of the question.)A trustee, on the other hand, is necessarily living (or, in the case of a trust company, legally in existence). When a grantor dies, he is still the grantor, when a trustee dies, he is no longer the trustee and a successor trustee takes over. There is no such thing as a dead trustee, only a dead former trustee.Since these trusts will not be in existence during the lifetime of the grantor, I cannot answer the question as asked.

Does the trustee of a (now) irrevocable living trust have a conflict of interest if he/she owes money to the trust due to earlier borrowing from the deceased grantor?

A conflict of interest exists. However, thereu2019s nothing wrong with a conflict of interest if itu2019s disclosed and properly handled.Really, the question turns on whether the loan was properly made.Was it documented?Is the interest rate at an appropriate rate for the time the loan was made? Was the IRSu2019s AFR schedule consulted?Is there a repayment plan in place and have payments been made? Have they continued to be made?Are proper tax records filed? (1099-misc with the interest declaration for income and interest payments)Was it secured or unsecured? If secured, was it perfected or recorded?Were loan documents notarized?The degree to which standard loan procedures are followed will help to mitigate conflict of interest issues. The conflict exists no matter what. Whether that conflict creates a problem may be seen in the extent to which the Trusteeu2019s behavior may be measured by other parties. On time payments, tax filings, and clear documentation all show the Trustee has acted on behalf of the trust and not in favor of the Trusteeu2019s own interests.

Who do you name trustee in a land (grantor) trust that youu2019re using to protect from liability while avoiding the due on sale clause of your rental propertyu2019s mortgage?

Typically, youu2019d name a third party, such as a lawyer. However, you should retain the u201cpower of direction.u201dHowever, I hope youu2019re not setting up a land trust just to avoid the due on sale clause. There are far more efficient ways to do that (although, admittedly, a land trust is one way to do that).

What happens to the trust fund when a beneficiary dies?

Itu2019s impossible for me to give a definitive answer without actually reading the trust, knowing what state law applies, and knowing more about your specific situation. However, Iu2019ll try to give a general answer.The trust document normally says what happens if a beneficiary dies. Normally, it would name another beneficiary or beneficiaries. However, if a trust named only one beneficiary, and that person died before the trust was distributed, then the trust probably fails. In other words, it would be as if there was no trust. My guess is that the trust property would become part of the estate of the person who created the trust. The trust property would have to be probated. However, this is only a tentative answer. You need to talk to a lawyer in the state where the trust is being administered.

What happens when you sell a covered call at the same strike price and stock as a call that you have purchased? Is it possible to hold both a call contract where you are the grantor and another where you are the grantee for the same thing?

If you sell a contract in an account where you are long the contract then it is a closing transaction and the position is gone. And even if you did it in separate accounts, what would be the point? Everything that you made on one contract would be lost by the other one - PLUS needless frictional costs (B/A spread and commissions).

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