Trustee considers next steps for beneficiaries after sale of Mom’s home

Q: My mom’s home is in a trust. She passed away toward the end of last year. She lived in the home for over 20 years. Her trust lists her six grandchildren as the beneficiaries of the trust.

We’ve found a buyer for the home who is paying cash. As a trustee, am I required to open a separate bank account for the proceeds to be placed in that account for distribution to the beneficiaries?

A: We’re sorry for your loss. It was nice of your mom to leave the home to her grandchildren. Apparently, she left you — her child — in charge of the trust, with the funds going to support the grandkids. There are two separate concepts that we need to talk about to answer your question.

The first issue relates to your mom’s debts and bills. When your mom died, her estate would have to settle any outstanding debts. Someone should have taken care of paying her final bills, funeral expenses, state and federal income taxes for the prior or current year, credit card bills, utility charges, etc.

For simplicity’s sake, we assume that you took care of all of those bills. Or, that you have money in another account to take care of any final bills and obligations your mom had or that her estate might have. If this is the case, once you sell the home, the money from the sale can go directly to the grandkids. You, as the trustee, can direct the settlement agent or closing attorney to pay the proceeds from the sale to the six grandchildren.

It could be as simple as that. However, if you need some of the money from the sale of the home to pay for the funeral expenses or some other of your mom’s bills that might not have been paid or are coming due, you might need to set up a bank account for the trust. Once you have that account, you can pay your mom’s bills and other estate expenses from the bank account until everything is settled. At that point, you could pay the grandkids and close the bank account.

Depending on your situation and circumstances, you might need to talk to an estate attorney to make sure you’re doing everything correctly. For example, if your mom’s estate was pretty simple — that is, she lived off her Social Security and some small other sums, she didn’t have debts, and you were able to verify that everything she owed was taken care of shortly after she died — any money that you have from the estate from that point forward could be paid to the beneficiaries of her or heirs under her will.

The key is to make sure that all bills and expenses of your mom’s estate are paid in full. Once that’s done, you can then distribute cash to the beneficiaries. You wouldn’t want to distribute money to the grandchildren and then find out that the estate has a $5,000 bill to pay.

We don’t have enough space to go through all of the different issues a trustee or estate representative must go through after a loved one passes. But, keep in mind that bills must get paid, and creditors and the Social Security Administration must get notified of the death (often, the funeral home may notify the SSA).

In many instances, where the deceased had bank accounts, real estate assets, or investment accounts, and it will take time to settle their affairs, you’ll need to apply for an Employer Identification Number (EIN) for the estate. That’s a different number than your mom’s Social Security number.

Once your mom passed, her Social Security number should no longer be used. And, any income earned from her investments between the date of her death and the date any of her assets are transferred to her grandkids (or others), the new EIN number is used with the Internal Revenue Service.

So, if you open a bank account for your mom’s estate or for the trust, you might need another new EIN to do that. You can’t use your mom’s Social Security number or the EIN for your mom’s estate for that purpose.

All this can be complicated, which is why, depending on how sizable her assets and cash are, you might be better off hiring an estate attorney.

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(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, a financial wellness technology company. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.)