Living Trusts Probates and Letters of Testamentary

[nwsteve]

Hoping the ER Forum members can provide some enlightenment and education for us.
DFIL passed away 3/16 after 3 months in hospice with a pour-over will and Living Trust (LT)in place. What wasn't in the LT was in POD accounts (cds and checking) the pour over will took care of the odds and ends. We were led to believe in WA, unless there is over 100K in assets subject to probate, there is no probate. It is the probate court (Superior) that issues the Letter of Testamentary (LoT) which formally certifies the executors/personal representative.
Bank is refusing to establish an estate checking account without a LoT. We point out there are no assets to be probated as they are either in the LT or POD and the Successor Trustees are appointed to distribute assets from the LT and there are provisions in the LT for gifts to Grands and others and distribution of real estate per the deceased.
Has anyone else run into this and what is the easiest solution? I am suspecting we may have to have the expenses and hassle of going to Probate Ct even though there is no need.
Sure hope some Forum members knows the answer. If we do HAVE to have the LoT than so much for the much totted avoidiing probate with a LT

 

[Montecfo]

you might check of there is a small estate process in WA that you can do without an attorney. Issuing the Letters Testamentary should be perfunctory in that case.

And another thought: any joint owners on these accounts?

It's interesting how bank procedures can in essence override state law. But it is understandable. How is the bank to adjudicate who is authorized to access the funds?

Another idea: most estate attorneys will consult with you for free. You could interview one and ask that question. It's legit, you may need to hire one. OTOH it may be simple to petition the court to issue Letters Testamentary on a more streamlined process under these limited facts. In any event, the attorneys will know.

 

[Winemaker]

Is there an executor named in the pour over to make sure things go as the pour over states?

 

[socca]

I've spent the past 2 months patiently explaining to various clerks that all of my dad's assets passed outside probate and thus any checks should be made out either to him or me as successor trustee of his revocable trust. The estate lawyer we met with immediately after his death said that it's sometimes difficult to deposit checks made out to "the estate of ..." when there is no estate checking account. This has turned out not to be a problem in practice. I've mixed checks made out "to the estate of ..." with checks made out to him and they've all been deposited without complaint. Maybe I'm just lucky. The estate lawyer said that they could run such checks through their own account if necessary, but this would be a pain.

I can't comment on practices in WA state, and your estate lawyer should have (or should be) providing guidance on this matter.

 

[disneysteve]

It really depends on the laws of your state, the rules of the bank, and the content of the will. I'm in the final stages of settling an estate for a relative who died in Florida (I'm in NJ) and it's definitely been a learning process. My attorney has been worth every penny I've paid him for all of the help he has provided. I'd definitely recommend hiring one. From what you've said, it should be a very simple case that shouldn't cost much in legal fees.

 

[disneysteve]

It's interesting how bank procedures can in essence override state law.

Tell me about it.


I've had to transfer ownership of a few stocks held by my late cousin. The transfer paperwork required medallion signature guarantees, which my bank provides. One of their rules, however, is that the letters of administration can't be more than 60 days old. It's a ridiculous rule since the letters are valid from the date of issue until such time that the estate is closed. They don't expire. But twice now I've had to have my lawyer go back to the court and have them reissued with a current date. Total waste of everyone's time but it was the only way to get the stamps done.

 

[ncbill]

I don't see a need for an estate bank account here if there are no assets going through probate...or even a need to open probate if the assets not transferring under POD were already in the trust...were there any that did need to be "poured over" into the trust?

If the above holds, OP should just need a bank account for the trust.

From what sources does the OP think they might receive checks payable "to the estate of...?"

I don't see any if, again, assets were already in the trust or transferring via POD.

 

[socca]

From what sources does the OP think they might receive checks payable "to the estate of...?"

Some organizations (magazines, country clubs, etc.) will only issue refund checks "to the estate of ..." Sometimes as executor / successor trustee you just gotta deal with it.

 

[nwsteve]

OP here. I have done some research and found on NOLO a resource for Trustees of Living Trusts (LT). Learnings for me is that the LT morphs from revocable to unrevocable at death of Grantor. Makes sense just never thought about it. IRS site provides an option for getting EIN for unrevocable trusts. It would have been nice had our LT attorney been more forthcoming about the gymnastics we had to go through at death.
Now need to figure out how to put proceeds from various POD funds into the Unrevocable trust account--not clear you can do with decease owner. Under DFIL's LT and pour over will all his assets not listed were to be combined in the Trust and successor trustees (DW &DBIL) were distribute to beneficiaries--starting to wonder if that will be possible. Guess we will have to wait another two weeks for attorney to get around to our stuff.
One of the big surprises of estate admin has been just how hard it is to get on an estate attorney's calendar. Originally, we were going to have to wait two months for first meeting but was able to get in sooner because we already had previously booked time for another matter.

 

[cathy63]

Now need to figure out how to put proceeds from various POD funds into the Unrevocable trust account

I'm not an expert in this, but why would you need to put POD funds into a trust account? I thought the point of POD designations was that the funds immediately belong to the person named as the beneficiary, not the trust. These assets should not be subject to the terms of the will, they pass outside it and can be claimed by the beneficiary presenting a death certificate and appropriate ID to the institution that holds the asset. Unless the trust was named as the beneficiary?

 

[Happyras]

It sounds like your DFIL had a very simple LT with no provisions to set up trusts for the surviving trustees. A/B and QTIP trusts are common. Technically, successor trustees are enabled will full powers to manage and distribute the trust. There should have been at least one "bank" type account in the trust which makes this simple. Fidelity is one source to create such a trust account. I would ask why you could not do so now. Our trust accounts can accept any payments to trustees or the trust itself. However per the laws of Washington State, there is precedence on distributions from the trust to assure Gov Inslee gets his cut first, followed by any debtors. I am curious if the trust had any provisions to avoid such estate taxes, as WA has a very low asset threshold for excluded assets for tax.

 

[nwsteve]

It sounds like your DFIL had a very simple LT with no provisions to set up trusts for the surviving trustees. A/B and QTIP trusts are common. Technically, successor trustees are enabled will full powers to manage and distribute the trust. There should have been at least one "bank" type account in the trust which makes this simple. Fidelity is one source to create such a trust account. I would ask why you could not do so now. Our trust accounts can accept any payments to trustees or the trust itself. However per the laws of Washington State, there is precedence on distributions from the trust to assure Gov Inslee gets his cut first, followed by any debtors. I am curious if the trust had any provisions to avoid such estate taxes, as WA has a very low asset threshold for excluded assets for tax.

You are correct regarding the DFIL trust--it was the most we could get a a95 yo to sign and we could only get him to put in the real estate because of longevity questions in the midst of real estate transaction. Interesting comment re: Fidelity. Our personal stuff is all with Fido so will check it out. The little community bank where FIL had his finances seemed quite overwhelmed in dealing with the entire topic.

 

[pdxgal]

OP, you have my sympathies. Not easy to be executor or successor trustee. Truly a labor of love. I had a similar situation with DM's bank closing her account as soon as they got notification (from SSA?) that she'd died. Meanwhile there were still incoming bills to be paid. Thankfully they amounted to only a couple thousand dollars, so I just paid them myself out of my personal checking account and kept all the paperwork and receipts. Then when the final, now irrevocable trust was liquidated I got reimbursed before proceeds were split, along with my compensation for being executor/successor trustee.

 

[disneysteve]

OP, you have my sympathies. Not easy to be executor or successor trustee. Truly a labor of love. I had a similar situation with DM's bank closing her account as soon as they got notification (from SSA?) that she'd died. Meanwhile there were still incoming bills to be paid. Thankfully they amounted to only a couple thousand dollars, so I just paid them myself out of my personal checking account and kept all the paperwork and receipts. Then when the final, now irrevocable trust was liquidated I got reimbursed before proceeds were split, along with my compensation for being executor/successor trustee.

Same here when my cousin died last year. I said several times I don't know how people do it if they don't have the money to pay the bills. Even just the funeral expenses are significant. You can't legally access the deceased's bank accounts. You have to pay bills out of your own pocket and get reimbursed when the estate is settled.

 

[nwsteve]

OP here. We are fortunate that in his later days (in fact only a couple weeks before going into the hospital for last time), DW convinced him of the importance of having her/DBIL on a checking account was going to really critical to keep the bills paid. DFIL surprised us by not fighting the suggestion and put DW on the household checking and DBIL on one of his business accounts. DFIL was in hospital and later hospice for a combination of 5 months so there were plenty of routine household bills that had to be paid, not to mention the sizeable family home hospice monthly care bill

 

[Morgan22]

I'm not an expert in this, but why would you need to put POD funds into a trust account? I thought the point of POD designations was that the funds immediately belong to the person named as the beneficiary, not the trust. These assets should not be subject to the terms of the will, they pass outside it and can be claimed by the beneficiary presenting a death certificate and appropriate ID to the institution that holds the asset. Unless the trust was named as the beneficiary?

OP, did you see Cathy63's comment? I thought the same thing myself. Why move POD funds to a trust account?

 

[RobbieB]

POD should take care of itself.

Trust is defined by the trust document. Probate not needed.

Trust = No probate.

 

[pb4uski]

POD should take care of itself.

Trust is defined by the trust document. Probate not needed.

Trust = No probate.

That is exactly why we are setting up trusts... so when the second of us dies that our executrix, DD, does not have to go through probate.

Almost all of our financial assets will pass via beneficiary designations or TOD. Our two homes and vehicles that can't be TOD will be owned by the trust. And the there will be a will for anything that spills over, but it should be negligible (furniture, personal items, etc) and within the amount where probate isn't required.

While all of this could be done after the first of us dies, DW and I travel together a lot so this covers off if we die simultaneously or one of us survives and the survivor isn't competent or have enough time to set all of this up.

 

[Happyras]

I think folks are forgetting that the estate, including all trust assets, is still subject to WA State death tax, which take into account all assets held at death. Otherwise, we could put all of our cash into a POD, and if done quickly, the taxes due would be paid by what is left in the trust. That could make heirs to the trust pretty upset. What would really happen is the beneficiary of the POD would be required to pay a fair share of the estates tax. Here in WA, our home alone max's out the state exemption of 2.2M, so any thing worth more than that is taxed up to 20+%.

* Taxable amount

Rate

Tax owed
$0 to $1,000,000 10.0% $10% of taxable amount
$1,000,000 to $2,000,000 14.0% $100,000 plus 14% of the amount over $1,000,000
$2,000,000 to $3,000,000 15.0% $240,000 plus 15% of the amount over $2,000,000
$3,000,000 to $4,000,000 16.0% $390,000 plus 16% of the amount over $3,000,000
$4,000,000 to $6,000,000 18.0% $550,000 plus 18% of the amount over $4,000,000
$6,000,000 to $7,000,000 19.0% $910,000 plus 19% of the amount over $6,000,000
$7,000,000 to $9,000,000 19.5% $1,100,000 plus 19.5% of the amount over $7,000,000
$9,000,000 and up 20.0% $1,490,000 plus 20% of the amount over $9,000,000
* Taxable amount - Line 7 under Part 2 of the Estate Tax Return.

So in this case, if all property in the trust is real estate and businesses and all cash is in POD, it would be a long wait until everything is liquidated for the trust, and the POD beneficiarys could take the cash and spend it before they knew how much tax was due.

Trust=no Probate, but you still pay the tax

 

[Montecfo]

To be clear, a trust does not equal no probate. Lots of estates with trusts are probated. It depends what assets are placed in the trust.

And a pour-over will does not change this.

 

[Happyras]

To be clear, a trust does not equal no probate. Lots of estates with trusts are probated. It depends what assets are placed in the trust.

And a pour-over will does not change this.

I agree this is often not understood, you have to be careful that any and all assets subject to probate are titled to the trust prior to death. Pour over wills are only meant to capture the odd items not subject to this.

A list of trust assets can include items not yet directly titled and it can get messy.

 

[RobbieB]

Yes, unless the property is titled in the name of the trust, it is "outside" the trust and not covered by the trust document. A trust also does not avoid the law, so the trustees are bound to deliver what taxes are due before disbursement.

You don't escape taxes, only probate.

 

[cathy63]

I think folks are forgetting that the estate, including all trust assets, is still subject to WA State death tax, which take into account all assets held at death. Otherwise, we could put all of our cash into a POD, and if done quickly, the taxes due would be paid by what is left in the trust. That could make heirs to the trust pretty upset. What would really happen is the beneficiary of the POD would be required to pay a fair share of the estates tax...

Yes, I see that's all spelled out in WA law here: https://app.leg.wa.gov/RCW/default.aspx?cite=11.18.200

(c) A beneficiary of payable-on-death or trust bank accounts, bonds, securities, or similar obligations, including without limitation United States bonds or similar obligations, takes the property subject to the decedent's liabilities, claims, estate taxes, and administration expenses as described in subsection (1) of this section, to the extent of the decedent's beneficial ownership interest in the property immediately before death.

But this does not explain why OP needs to transfer the payable-on-death accounts into the trust. The financial institution holding the account should refuse to make that transfer unless the trust is the named beneficiary of the accounts. If it is, then OP shouldn't need letters testamentary to retitle the existing account, a death certificate should be sufficient.

 

[nwsteve]

I'm not an expert in this, but why would you need to put POD funds into a trust account? I thought the point of POD designations was that the funds immediately belong to the person named as the beneficiary, not the trust. These assets should not be subject to the terms of the will, they pass outside it and can be claimed by the beneficiary presenting a death certificate and appropriate ID to the institution that holds the asset. Unless the trust was named as the beneficiary?

OP here--we still have not had our meeting with the lawyer but as I read the pour over will, it includes a clause saying ALL assets of deceased should be combined in the trust and used to make payment for all expenses and beneficiaries. The LT holds essentially real estate but not the financial and personal property. It was hard enough getting the DFIL to put real estate in it. The two sibs are cooperative and will use the POD funds to be sure the trust intent is met regardless. The thought was to establish sufficient funds in the trust checking account to meet WA St estate tax (est 70K) as well making all other payments from the trust account. We ARE unclear ourselves how the PODs and LT play together at this point.

 

[MarkiePippo]

My Dear Departed Wife got a Safe Deposit Box years ago. Normally she would have had me sign and be authorized to get into it. At the time she did this I was ill and I guess she thought I was going to die (AFIB). So anyway I was not on the sign list. When she passed I found the key and went to see what was in the box. They would not let me in. I talked to my lawyer. He said don't worry about it. There is normally noting in there worth the trouble. I decided to get a Letter of Testimony and in order to get that I had to probate her estate. It cost me a bit. But it was not bad. That gave me access to the box. Inside there was a few pieces of jewelry and a stack of U.S. Saving Bonds totaling over $100k. Most of these were already signed and ready to cash. My wife and I were planning to cash them out but I guess she never did. Even though the interest rate on them was very good I cashed them out. I had trouble finding a place to cash them. My credit union would not take them and most banks told me to send them to the treasury which I was not going to do. I finally found that two of my local banks would cash them. But both of them had to research how to do it as the rules have changed in the last few years. I can remember as a child seeing people cash them at a grocery store.

So my point is a simple estate is not a big deal to probate. If there are bills owed it can get a little more complicated.