6 Tips on How to Handle the Responsibility and Potential Liability of Being a Trustee (Part 1) by Rob Cohen

Trusts are popular estate planning tools to ensure that families and assets are taken care of when someone passes away. Whether it’s providing for children, endowing charities, or managing real estate, those who create trusts have specific wishes that they expect to be followed, and they expect the trustee to carry out their plans.

But, being a trustee can be a thankless job, not to mention one that can thrust a person with good intentions into the cross hairs of litigation. Courts are filling to over-capacity with cases against trustees, and the matters can get quite complex.

If you are asked to be a trustee, first understand that someone held you in very high esteem and had confidence that you could oversee his or her legacy and assets. Second, be sure you know what being a trustee entails. It can get very complex, very fast.

With this in mind, here are a few tips that might help make your trustee-ship progress more smoothly.

1) Read the trust. Seems pretty basic, but you might be surprised at the level of detail and complexity contained within a trust. The trustee is obligated to administer the trust strictly by its terms. Not all trusts are the same; if possible, read the document with an attorney familiar with trust administration.

2) Keep track of your time. Some trusts are specific as to how much the trustee is to be paid (e.g., a fixed fee or percentage of the value of the assets). But some trusts, especially those drafted several years ago, may permit the trustee to receive “reasonable” compensation. What is reasonable? Ask 10 people and you’ll get 10 different answers. To avoid possible confusion or challenges, track your hours spent acting as trustee. If there is a dispute as to the trustee’s compensation, at least you’ll be able to demonstrate the actual time spent on trust matters.

3) Provide annual accountings. Every year, be sure to provide the beneficiaries with clear written accountings, which explain the income and expenses of the trust. Why is this important? First, it is required by statute. Second, once the accounting is served on the beneficiaries, the statute of limitations begins to run on claims challenging the accounting. If you don’t serve the accounting, the statute of limitations to file a challenge doesn’t start and you can be on the hook for a long time.

To continue reading: BEING A TRUSTEE IS A THANKLESS JOB: Six Tips on How to Handle the Responsibility and Potential Liability (Part 2)

For more information speak with our Trust Attorney in Los Angeles today.

Published in: on June 10, 2011 at 6:40 pm  Leave a Comment  
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Understanding Estate Taxes: Net Value, Reduction/Elimination and Exemptions

Signing of tax exemptions for 2014 FIFA World ...

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How is the net value of my estate determined?

To determine the current net value, add your assets, then subtract your debts. Include your home, business interests, bank accounts, investments, personal property, IRAs, retirement plans and death benefits from your life insurance.

How can I reduce or eliminate my estate taxes?

In the simplest terms, there are three ways:

1. If you are married, use both estate tax exemptions

2. Remove assets from your estate before you die

3. Buy life insurance to replace assets given to charity and/or pay any remaining estate taxes

Using Both Exemptions

If your spouse is a U.S. citizen, you can leave him or her an unlimited amount when you die with no estate tax. But this can be a tax trap, because it wastes an exemption.

Let’s say, for example, that Bob and Sue together have a net estate of $4 million and they both die in 2006. Bob dies first. He leaves everything to Sue, so no estate taxes are due then. When Sue dies, her estate of $4 million uses her $2 million exemption. The tax bill on the remaining $2 million is $920,000! ($900,000 in 2007 and 2008.)

But if, instead, Bob and Sue plan ahead, they can use both their exemptions and pay no estate taxes. A tax planning provision in their living trust splits their $4 million estate into two trusts of $2 million each. When Bob dies, his trust uses his $2 million exemption. When Sue dies, her trust uses her $2 million exemption. This reduces their taxable estate to $0, so the full $4 million can go to their loved ones.

This planning can also be done in a will, but you would not avoid probate or enjoy the other benefits of a living trust.  Speak with an experienced Estate Planning Attorney in Los Angeles today to plan for your estate taxes.

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Published in: on April 25, 2011 at 8:33 pm  Comments (1)  
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Understanding Living Trusts: How You Can Avoid Probate, Save Taxes and More FAQ

In this blog series, we will be going through frequently asked questions regarding various aspects of estate planning including living trusts, probate, taxes and more.

I have a will. Why would I want a living trust?

Contrary to what you’ve probably heard, a will may not be the best plan for you and your family – primarily because a will does not avoid probate when you die. A will must be verified by the probate court before it can be enforced.  Also, because a will can only go into effect after you die, it provides no protection if you become physically or mentally incapacitated. So the court could easily take control of your assets before you die – a concern of millions of older Americans and their families.

Fortunately, there is a simple and proven alternative to a will–the revocable living trust. It avoids probate, and lets you keep control of your assets while you are living – even if you become incapacitated – and after you die.

What is probate?

Probate is the legal process through which the court sees that, when you die, your debts are paid and your assets are distributed according to your will. If you don’t have a valid will, your assets are distributed according to state law.

What’s so bad about probate?

It can be expensive. Legal/executor fees and other costs must be paid before your assets can be fully distributed to your heirs. If you own property in other states, your family could face multiple probates, each one according to the laws in that state. Because these costs can vary widely, be sure to get an estimate.

It takes time, usually nine months to two years, but often longer. During part of this time, assets are usually frozen so an accurate inventory can be taken. Nothing can be distributed or sold without court and/or executor approval. If your family needs money to live on, they must request a living allowance, which may be denied.

Your family has no privacy. Probate is a public process, so any “interested party” can see what you owned and who you owed. The process “invites” disgruntled heirs to contest your will and can expose your family to unscrupulous solicitors.

Your family has no control. The probate process determines how much it will cost, how long it will take, and what information is made public.

For additional questions about trust law, speak with our experienced Estate Planning Attorney in Los Angeles today.

Continue to: Understanding Living Trusts: How You Can Avoid Probate, Save Taxes and More FAQ (Part 2)


Published in: on March 21, 2011 at 10:50 pm  Leave a Comment  
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