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CALIFORNIA ESTATE ADMINISTRATION

WHAT IS REQUIRED AFTER THE FIRST SPOUSE DIES?

When any close friend dies, it is a difficult time. This is especially true for a spouse. This is not the time you want to have a lot of financial stress. A living trust helps to simplify the process.

If you have a trust, and all the assets are properly titled in the trust, there is no need to go through probate after the first spouse dies. There are however, some actions that need to be taken. First you will need to determine if it is necessary to split the trust into two parts; the decedent’s sub trust which becomes irrevocable and the survivor’s sub trust which is still revocable and can be changed or modified by the survivor. (For larger estates there may be a third part, i.e. the QTIP or Qualified Terminal Interest Property sub trust.) This split requires a valuation of all assets on the date of death of the decedent and a decision as to which assets go into which sub trust. This split is important for tax purposes. You can use a simple ledger to record this split. You can do this yourself but in most cases it is more efficient to retain an experienced estate planning attorney to make this ledger and the required backup valuations. Note that after the tax law changes of 2010, the primary purpose for splitting the estate into subtrusts, i.e. to preserve the deceased spouse’s estate tax exemption, has been removed. If your trust was drafted before 2011 and not amended however, you may still be required to use a bypass trust. Ask your estate planning attorney if you need a bypass trust. You will also need to do the necessary paper work so that the unused portion of your deceased spouse’s estate tax exemption can be transferred to you. Consult your CPA and Estate Planning Attorney for these items.

If you are the survivor, you still have control over all of the sub trusts since you are the trustee of the trust. There are some rules on priority of use of assets and transfer between sub trusts, but the bottom line is that if you need any of the assets for your living expenses you can use them.

In addition to the legal steps related to the trust, there are lots of other things that need to be done when a spouse dies. Every situation is different, but a list of typical things that need to be done is given on the page titled Check List for Settling Your Trust after the First Spouse Dies. Not every item is required in every case. Your estate planning attorney Terry L. Thompson, located in Contra Costa County, can work through this list with you.