Recently in Trusts Category

June 8, 2011

We've Moved!

Ask Liza's new URL is http://blog.nolo.com/estateplanning/.

See you there!

June 3, 2011

Surgery and Procrastination

surgery.jpgSo, I have a weird job in that I, literally, talk to people about getting their estate plans up to date many times a week. And I've done this for TEN YEARS. Over and over, people tell me that they've been procrastinating and feel badly that they haven't gotten things taken care of. And I listen. In fact, my first question is almost always what prompted my clients to finally make the appointment and get the job done. It's almost always one of these four things:

  • An upcoming trip.
  • A scary diagnosis or test.
  • A death in the family or a death of a friend.
  • The birth of a child.

Let's face it, these are the things that get our attention in a deep way. They make mortality real and make us want to do what we can to get things in order. Until something like this grabs us, there are always 200 other 'important' things to capture our time and energy.

And here's my confession: despite my professional focus on estate planning, my family's estate plan has been out of date for at least four years! Really. Our guardian got divorced; her kids grew up to not get along with mine; our financial situation changed drastically. Every single thing about the plan wouldn't work.

And guess what? Do you know what made me fix it? It certainly wasn't because I knew we should. It was reasons one and two on the above list. Not only had we planned our first family trip that required airplane travel to a distant and slightly tropical local, but the week we got back my husband faced major spine surgery. Nothing like filling out hospital admittance papers to get those mortality juices flowing.

So, we redid our plan. We changed our guardians. We simplified our trust for tax planning. We updated our Durable Powers of Attorney and our Advance Health Care Directives. And it felt GREAT to finally fix it. Next up: the earthquake kit, also woefully out of date.

Believe me, I get it if you can't focus on estate planning right this second. But, please, next time life reaches out and grabs your attention, jump on it. You'll feel better, I can almost promise.

May 24, 2011

Did My Mom Have a Valid Trust?

trustee certfication.jpgDear Liza, My mother passed away last year. She had a living trust prepared in January of that year by an online provider of legal forms. Before she died, she had the abstract of trust and bill of transfer listing all properties to be transferred into her trust signed and notarized which I have a copy of. She did not have the declaration of trust signed or if she did I cannot find a copy. Is the living trust still valid? I am hoping that you can find that trust. It would make your job a lot easier. Have you checked with the online provider to see if they have a copy of what she prepared with them? Because if all that you can find is the trust abstract, which is usually an excerpt listing the trustees and their powers, you'd have to try and make an argument that the summary itself is a valid trust under state law, and I'm not too sure that would work. The requirements vary by state, but in general, a trust must state the Grantor's intention to create a trust; identify the property held by the trust; state the trust's purpose, and identify a beneficiary (these last two are probably not in that summary). (The Grantor must also have the legal capacity to make such a document, but that's not the issue here.)

I would check with a trust and estate lawyer in your state to see if there's any state law to support your argument that the excerpt itself, plus the document listing the properties to be transferred, could somehow be construed to create a constructive trust or somehow avoid probate via a court petition to that effect.

While I love providing people with information and tools to get legal work done on their own (obviously, since I write for Nolo) -- this kind of story just kills me. I've seen it too many times -- without guidance, people forget to sign the right thing, or do the required follow-up. Estate planning doesn't have to be complicated, but it does have to be done right. If you can't make the trust valid, and your mother didn't prepare a Will, then you'll have to get her estate probated and her property will pass via your state's intestacy laws (which state who gets what if there is no Will).

April 21, 2011

Does a Living Trust protect against creditors?

safe.jpgDear Liza: My wife is in the middle of her medical residency.  With the risk of future lawsuits, do Living Trusts or other vehicles help protect family assets from Malpractice or other law suits? Nope. Sorry. A revocable living trust does not protect assets from creditors. A revocable trust's purpose is to provide tax planning at the death of the first spouse, and probate avoidance at the death of the second. Both are worthy goals and I do not in any way feel that I spend my working life selling snake oil. But during your lifetimes, those assets are fully reachable by creditors. Asset protection trusts are different beasts entirely. There's a large industry of lawyers out there, figuring out clever ways to protect doctors from law suits, but they are not estate planners, as a rule.
April 8, 2011

Worries About My Husband's Inheritance

historic house.jpgDear Liza: My father in-law passed away 3 years ago. Since then, the other siblings have been given their share of their inheritance. My husband will get the family home when Mom goes.  Mom came to us to say that she has made another adjustment to the will to state that... "if son (my husband) predeceases her then the home will go to our daughter and I will have life rights." Couldn't his Mom simply leave the home to her son (my husband) with no strings attached and if he were to predeceases her, would his inheritance still go to him or his estate so that our will will dictate our wishes for the home to go to our daughter when I die? Or would the remaining three siblings get the house and my daughter and I get nothing? Keep in mind the motive is that this is a historic home that everyone wants to stay in the family, yet there is no family money. This is one of those questions that I can't begin to answer specifically because there are so many things that I don't know. Most of the answer lies in the specifics of your husband's mother's estate plan. But here are two pieces of general advice:

1. Your mother-in-law's estate plan is HER estate plan and, until she dies, you really have no control over what she decides to do and how she decides to do it, unless her husband's share of the historic house is in some kind of trust that would prevent her from making an amendment and changing what would happen upon her death. Even if this were the case, that's a limitation that her estate planning attorney would be advising her about. In my state, beneficiary's are required to get notice if they are beneficiaries of an irrevocable trust like this, and have the right to see the trust, but this is not true in all states.

2. As a general matter, if your mother-in-law did leave the house to your husband without any limitations,  and if he were to die before your mother-in-law, what happens next would depend on what the estate plan said. It may pass directly to his surviving children, to you in a life estate of some sort, or to his surviving siblings, again, that's up to your mother-in-law. Honestly, she could leave it to charity if that's what she felt like doing.

It sounds like she's been willing to share her plan with you. Perhaps you need to have a frank family discussion and discuss your concerns with her. Good luck. These are not easy discussions to have, which is one reason that so many people keep their plans confidential until they've died (when they don't have to deal with the howls of outrage, disappointment, or glee that their plan may evoke). But if the family really wants to keep the house, and there's truly no money to maintain it, that's not a problem easily solved by avoidance. Perhaps the use of life insurance or other financial products could help with the issue, or perhaps the family needs to face reality now, rather than later.

March 20, 2011

Finding a Professional Fiduciary

professional fiduciary.jpgDear Liza: We're in the process of establishing a Child's Trust as part of our estate planning; the Trust would exist until our daughter turns 35 (32 years from now; we're both about to turn 50).  We have created a list of four Successor Trustees, but each one is either our age or slightly older. Nolo's advice is to list a last choice a "private trust company." What's that?  It's great that you're thinking about how old your trustees are going to be when you daughter is 35--sadly, our trustees age right along with our kids. I am not familiar with the term 'private trust company' but I think Nolo may be suggesting that you consider naming a private fiduciary as a backup trustee. This is someone who is licensed to serve as a trustee, but is not a bank or a large corporate institution. Such people are licensed in California via the Department of Consumer Affair's Professional Fiduciaries Bureau. Alternatively, you might consider allowing your daughter to become the Trustee if none of the above can serve and she is over a certain age, say 28. (Serving as her own Trustee would give her management control over the trust, but still protect the trust's assets from her creditors or a bad marriage.) You might also, though, check with the bank where you do most of your business, you might find that their rates are competitive for trust services.

 

March 13, 2011

Special Needs Trusts

downs syndrom girl.jpgDear Liza: we had a special needs trust drawn up by a lawyer for our disabled daughter who has turned 21 and is entitled to an annuity.  Our lawyer is stating in
the trust that any benefits received by SSI or medicare throughout her life
must be reimbursed to the state (new york) upon her death or upon
termination of the trust.  We want her to be entitled to government benefits
so that she can stay active (day programs, job coaching, etc) but we were
surprised to read in the drafted trust document that any of these benefits
would have to be "paid back".  Is this true in New York State?
If the money that you are going to place in that Special Needs Trust is her money, and not a gift from a third party (and this is often the case if there's an accident settlement or the like), then, yes, your lawyer sounds as if he or she is setting it up correctly. A self-settled Special Needs Trust requires, by federal regulation, that the assets left at the end of the beneficiary's life must be paid back to the state Medicaid agencies that provided service. Here's a link to a helpful site, The Learning Disabilities Association of America, read the entry on Restrictions on Self-Settled Special Needs Trusts.

February 20, 2011

When Divorced Parents Disagree on Guardians

Will being signed.jpgDear Liza: What if divorced parents disagree on a guardian? In the case of joint legal custody, with visitation for one parent, are the wishes of the parent with physical custody granted, or does it solely depend on who dies first? Or does it also depend on which state? It is always unfortunate when divorced parents cannot agree on who should take care of minor children. I always encourage my clients to try and find common ground on that, at least. But here's what happens: the first parent to die isn't going to have a say in the matter in most cases. Unless there's some compelling reason not to let the surviving parent take custody (they are in jail; they don't want to take custody; history of abuse), the surviving parent will be in charge of raising the children. That parent's Will, subsequently, will control who is then nominated to be a guardian for minor children. If you have good reason NOT to want a divorced spouse take custody should you die first, you can put that information into your Will (which will be public after your death), or put it in a side letter to be opened only upon your death. If you are seriously concerned about this, please see a good estate planning attorney in your state, so that your estate plan can appropriately document your concern and your reasons for such concern.
February 18, 2011

Trustees Decide When Beneficiaries Don't Agree

happy family.jpgDear Liza: I am one of 5 beneficiaries of a living trust.......my grandparents are both deceased now.  Everything is to be divided equally 5 ways.  There are several properties involved that need to be sold etc. One property in particular is a "cabin" in a small town. How do you decide who "gets" it if more than one party is interested, but not all interested parties want to share? As a general rule, unless the trust instrument itself says something differently, it's up to the Trustee to decide how to make the shares equal in a situation like this. Of course, it's always better if everyone can agree. And, as a beneficiary, you are entitled to full disclosure of the values of the assets so that you can make sure that the shares are equal, or very close to equal (it's sometimes hard to match up perfectly). If you disagree with an appraisal, you could request that another appraisal be made. Though I don't recommend it, you can even retain your own counsel to advocate for you in the settlement process.  Like most family situations, though, working it out is generally a better idea than getting "lawyered up."
November 23, 2010

Appointing a Bank as Executor

  woman banker.jpgDear Liza: Is it possible to appoint a bank Executor of Estate ?  I am not comfortable appointing family members or friends for a number of reasons. You bet. Many banks have trust departments who can provide services to families, as executors or trustees. They, of course, charge for this service. So, if there is a bank or financial service firm that you already work with, ask them if they have a trust department. Ask them what their fees for this are -- many charge a percentage of the assets under management, which can range from .75% to 1.5%, depending on the size of the estate. Also ask them if they require special language to be in your Will or trust, some do, and some don't. If they do, get the language and ask your attorney to incorporate that into your documents, or, if you're doing them yourself, make sure you're doing what the bank requires. Two things to think about, though. The first is that the banking industry has been through some, ahem, turmoil, lately--so you need to consider how you'd feel if your friendly local bank gets sold to some megalopolis bank and some banker in a far away city takes over as your family's executor.  If that's not OK with you, you might want to name a second choice and say that if your local bank is sold, you don't want the bank's successor to be your executor, but want your second choice to serve instead. The second thing is, if there's a particular banker you really like, you can add language to your documents that says you want that banker to do the job, even if they move to another institution with trust powers.