The payment of taxes and other expenses allocated between the sub-trusts is a great question. When there is an allocation of assets between sub-trusts and the Surviving Trustor amends their sub-trust, providing for different distributions or beneficiaries, this means that each sub-trust will need to be administered separately. This makes the administration a bit more complicated upon the Survivor’s passing.

Prior to the Survivor amending their sub-trust, they had to allocate the assets pursuant to the Trust into each sub-trust. Now that you are the Successor Trustee, your job is to pay all administration expenses and divide the assets pursuant to each sub-trust according to the Trust terms, and in this case, each sub-trustees terms. Often, assets are insufficient in one sub-trust to pay for the fees, such as taxes for the real property in both sub-trusts, as is the case here.

What we advise you do is pay the fees with the assets currently on hand, which in this case means depleting the liquid assets of the Survivor’s Trust and paying the remainder, including the portion the Survivor’s Trust owes, with the assets from the Exemption Trust. However, when the real property sells, you will first reimburse the Exemption Trust from the assets used by the Survivor’s Trust for taxes. Once the Exemption Trust has been reimbursed, then you will divide the proceeds from the sale between each sub-trust in proportion to how the title was held.

Depending on the amount and the repayment situation, we may need to provide this as a loan from the Exemption Trust to the Survivor’s Trust.