What happens to a trust when the owner dies?
What happens to a trust when the owner dies?
When someone dies, there are a lot of things that need to be taken care of—funeral arrangements, notifying people, conservatorship for the deceased's minor children if necessary, and so on. However, one thing you may not have considered is what happens to a trust once the person who set it up has passed away. A trust is created by the owner when he or she decides that he or she wants to take advantage of some tax benefits, pass on assets to his or her heirs differently than they would be distributed by inheritance, or provide other types of protection for his or her assets and family. The owner is called a "grantor" and the assets in the trust are called "trust assets."
So what happens to a trust when its creator has died? It depends. First off, you'll want to know whether there's a successor trustee named in the trust document. If so, he or she will step in the place of the original grantor and take over management of the trust until such time as it can be handed off completely to someone else (e.g., when all beneficiaries have reached age 21).
In some states, a trust legally becomes irrevocable when the owner dies. In other states, the trust must have provisions written into it before the owner dies, which say that it will survive their death in order to be treated like one. The legal term for this is "testamentary capacity." If a trust has testamentary capacity in the state where it was created, it will continue after the owner's death just as if they were still alive. If not, then it must be administered through a probate court.
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Disclaimer: This is not legal advice and is simply an answer to a question and that if legal advice is sought to contact a licensed attorney in the appropriate jurisdiction.
