Tag Archives: revocable trust

  • 06
    Jul 16
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Widow sitting alone worried about not having Trust Protector

Every Trust Needs a Trust Protector

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I have come to the conclusion that every trust needs a Trust Protector. The reason is that you have no idea what will happen in the future. And once you are gone, there is at least a possibility that your family will fight over who gets what and how everything gets divided. It is also possible that other changes may need to be made. I discussed Trust Protectors previously here. But this is such an important topic that I wanted to share a story about why this is so important.

I recently got a phone call from a lady whose husband died a little over a year ago. They had created a joint revocable trust naming themselves as the trustees.  The value of their trust was around $3 million. They named their adult child (now disabled) as the successor trustee to take over if neither of them was able to be trustee any longer. So … when the husband died, the wife had a nervous break down. She could no longer manage her affairs. The next-in-line trustee was their child (who was also incapacitated). That meant that there was no one able to manage her finances.

Here’s what happens in a situation like this (and what happened to her). The County Attorney brought a Petition to appoint a private fiduciary company as her guardian (to make health care decisions for her). This company also became her trustee. There was litigation over whether she needed a trustee and guardian. Over the course of one and a half years, the lawyers ate up approximately $500,000!!!

Even if she is able to prove that she can now serve as trustee again, this is still set to be a problem in the future. Years from now when she is much older and perhaps develops dementia or is otherwise unable to manage her affairs, the government will again have to step in and name a new trustee. And the new trustee is almost certainly going to be a stranger!

This could have easily been avoided by naming a Trust Protector. And the future problem (which is almost certainly going to happen) could be avoided by asking the Court to amend the trust by adding Trust Protector language. Because this is so powerful, I encourage my clients to include very broad trust protector powers. (I am happy to send you my preferred trust language if you email me at [email protected].)

You can read more about Trust Protectors in an article on Forbes.com from 2012. In the meanwhile, if you have any questions about trusts or Trust Protectors, give me a call. I’m passionate about helping families avoid (or solve) court battles and family feuds.

  • 01
    Dec 15
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Should You Transfer Your Cemetery Plot to Your Trust?

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Should you transfer your cemetery plot to your trust? Yes, if you want to make sure that your wishes are carried out. In Arizona, the applicable law defines “cemetery property” that you would transfer to your trust as “a cemetery plot, including interment rights, mausoleum crypts, niches and burial spaces.”

If you have purchased such a cemetery plot or mausoleum niche (such as with a prepaid burial plan), the cemetery will give you a “Certificate of Ownership” for use of the plot. You don’t actually own the plot. There is no deed that gets recorded anywhere. Upon your death, the cemetery will contact the “next of kin” to determine what happens with your body. “Next of kin” generally means your spouse, then your kids (if you have any), or if you aren’t married and have no kids, then your parents or siblings.

But … what if your “next of kin” is someone who is irresponsible or who is estranged from you? Then what?

That would be a good reason to have a revocable living trust and to have the cemetery re-issue the Certificate of Ownership in the name of the trust. The cemetery will charge a small fee (perhaps $200) to re-issue the Certificate of Ownership. To get the ball rolling, I usually have my client sign an Assignment of the lot (or niche). I then fax or email that Assignment to the cemetery, along with the contact information for my client. The cemetery will contact the client to arrange for payment, and will then re-issue the Certificate of Ownership.

Here is the language for a sample Assignment:

Assignment of Personal Property

For value received I, [name of person] of [city and state], assign, transfer, and convey to:

[name of trustee], Trustee of the [name of trust] dated [date of trust], and any amendments thereto

The following described Interment, Entombment, Inurnment or Niche Right of Use:

[Description of the lot or niche, such as Section 6, Block 2, Lot 5, Space 3 Single] situated in [name of cemetery, and County and state of location], according to a map of said plot, Mausoleum or Columbarium filed in the office of the County Recorder of said County, and also in the office of said [name of cemetery], which map is hereby referred to and made a part hereof.

 

Dated:  ___________________                                                                                 [signature]

STATE OF ARIZONA                                              )

COUNTY OF MARICOPA                                      )  ss.

This instrument was acknowledged before me on [date], by [name].

[Seal]

                                                                                   

Notary Public

My commission expires:                                             

Once transferred to the trust, the trustee will be able to ensure that your body is properly disposed of according to your wishes. I suggest making sure that this does not conflict with any Health Care Power of Attorney or other document that gives a person the ability to decide what happens to your remains when you die. Avoid conflicts by having the same person in charge of this decision. (You don’t want your health care power of attorney and trustee fighting over what happens.)

  • 29
    Nov 15
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Your Husband Died and His Children are Asking Questions

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If your husband died and his children are asking questions, what do you do? Your husband’s kids may be asking if they can get your husband’s belongings, such as family photos or furniture. Perhaps you and the step children don’t agree on whether your husband should be buried or cremated.

First, you need to see a probate attorney right away. Find out your rights and responsibilities. Once you know where you stand legally, then you will be better able to deal with the other family members. Treat your husband’s kids with respect. But you also don’t need to be a door mat. Maintaining communication is important. It is usually best to invite them to the funeral or memorial service. It also helps diffuse some of the emotions by allowing your husband’s kids to get mementos, such as family photos. These are easy enough to copy and distribute. (You can either take the photos to an art store than can duplicate them. Or there are places that can scan them and save them digitally.) The same thing applies to military medals; you can purchase duplicates for family members who want them.

As to the bigger issues (like your husband’s house and bank accounts), you need to understand that the devil is in the details. Estate planning and probate can be complicated. To help explain what happens, let’s see what will happen to your husband’s house:

  1. If your husband added you to the house deed as “joint tenants with right of survivorship,” then you get the house now that your husband died. Even if your husband had a will or trust, the designation of a beneficiary on a house or account trumps whatever it says in the will or trust.
  2. If the house was in your husband’s name, and he didn’t have a will or trust, then the house is transferred according to state law. The applicable statute in Arizona is somewhat complicated, but generally you (as the surviving spouse) get 50% of your husband’s “stuff” and his kids get 50%.
  3. If your husband had a will, then the will determines who gets what.
  4. If your husband had a trust, you need to see a probate attorney.  While the trust probably determines who gets what, this is not always black and white. For example, you are probably the sole trustee now that your husband has died. However, there are other issues. What rights do you have to income and principal? Are you supposed to divide the trust into different subtrusts?  Do you have a power of appointment?

It always amazes me how blended family seem to get along fine over the years until one of the parents dies. Then all of a sudden the biological children of the deceased parent becomes scared that they’re not going to be treated fairly. Sometimes this is justified, and sometimes it is not. So often, the surviving spouse excludes the other side of the family from even basic civilities. Suddenly, the surviving kids never find out about the funeral. Their request for copies of photographs and family mementos go unanswered. Sometimes they can’t even get a copy of the will! This friction can lead to arguments and even court battles.

If your husband died, you need the help of a probate and trust attorney who will take charge right away. Give us a call at our Scottsdale office and ask if we can help you.

  • 11
    Mar 15
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Estate Planning: What Are the Duties of a Trustee?

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Estate Planning What Are the Duties of a TrusteeMost people feel honored when asked to be a trustee over a friend or loved one’s estate. But being a trustee is more than a title. It comes with a lot of responsibility and obligation.

The general duties of a trustee vary depending on the laws of the state where the trust is situated. But to provide you with an overview, here are the duties of a trustee based on Arizona statutes, where I practice:

1. Duty to administer. The first duty of a trustee is to administer the trust in good faith and, according to its terms and purposes, in the interest of the beneficiaries, according to Arizona statutes,. This involves reviewing the trust document or trust instrument to determine how the trust is to be administered, how debts are to be paid, etc.

2. Duty of loyalty. The trustee has the duty to administer the trust solely in the interest of beneficiaries. This means the trustee should not use the trust as a source of funds for personal activities or investments (thus, no gambling or buying speculative businesses). All expenditures should be solely in the interest of the beneficiaries.

3. Duty of impartiality. If the trust has two or more beneficiaries, the trustee must act impartially when investing, managing and distributing trust property, giving due regard to the beneficiaries’ respective interests

4. Duty of prudent administration. The trustee should administer the trust in a reasonable and prudent manner. This means not making haphazard or random choices when choosing investments, managing business or managing assets.

5. Cost of administration. The trustee may only incur costs that are
reasonable in relation to the trust property. For example, it may be
reasonable to hire an attorney and spend $50,000 to fight a lawsuit if it’s for a multimillion-dollar trust. Obviously, that would not be prudent for a
$60,000 trust.

6. Duty to use special skills. If a trustee has special skills or expertise, it’s the trustee’s duty to use them to benefit of the trust. If you’re a CPA or an attorney, you’re expected to use your skills and training for the trust.

7. Delegation. As a trustee, you must delegate duties, and exercise reasonable care, skill and caution when it comes to selecting an agent. You must also establish the scope and terms of that delegation and periodically review the agent’s actions and performance.

8. Duty to control and protect trust property. It’s important to make sure assets aren’t stolen and to guard against the waste of assets.

9. Duty to keep records and identification of trust property. This is both a protection for a trust and for the trustee. Keeping good records will make it simpler when preparing taxes.

10. Duty to collect trust property. The trustee must identify the trust property so things don’t get lost and stolen.

11. Duty to inform and report. The trustee is responsible for keeping the qualified beneficiaries of the trust reasonably informed and responding to requests from beneficiaries regarding the trust.

12. Discretionary powers and tax savings. These powers provide the trustee with options in order to accommodate varying situations.

As you can see, this is a big job. But that doesn’t mean you have to do it alone. You have the right (and duty) to seek expert help to make sure things are handled properly. If you have any questions about your duties as a trustee, I’d love to help. Leave your question below or contact our office.

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  • 25
    Feb 15
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Estate Planning: What Is a Trust?

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Estate Planning What Is a TrustA trust is similar to a will. It’s an elegant way of specifying how your property gets distributed upon your death. Property placed in a trust can pass to your designated beneficiaries without the delays and expense of going to probate court.

But – a big but – a living trust is not a complete substitute for a will. You won’t be able to name a guardian for a minor child, for example. For many people a trust is a more efficient way to transfer property at death, especially large-ticket items such as a house. Here are a few benefits of placing your property in a trust:

  1. You can avoid probate. This allows you to bypass probate and to pass the property directly to your designated beneficiaries. This is especially important if you own real property in multiple states.
  2. A trust can help with property management for those who can’t or do not want to manage for themselves. (This is particularly beneficial for older individuals who want to make sure they will be cared for without the need for guardianship or conservatorship.)
  3. Trusts can reduce estate and gift taxes.
  4. A trust protects assets from creditors and lawsuits better than does a will.
  5. If you want to protect family wealth for future generations, you can set up a trust to protect these assets (whether a business or other accumulated assets). You can also save estate taxes (if this is relevant). A trust can also protect these assets from irresponsible heirs over several generations.

There are a variety of types of trusts. They are both flexible and complex. One of the most common types of trusts is called an AB trust, also called a bypass trust. An AB trust helps provide significant estate-tax savings as well as preserve assets to survive the blending of families when and if spouses get remarried. You need three things to create a trust for your estate:

  1. The creator, also called settlor or grantor
  2. Trust property
  3. Beneficiaries

You don’t need to name someone to manage your trust (though this is certainly a good idea). The court can always choose someone to administer the trust. You can have a trust as long as you have someone who created the trust, you have property in the trust and some identifiable beneficiaries.

Think of a trust as a special place where ordinary property from your estate goes, as the result of some type of transformation that occurs, that takes on a new identity with immunity from estate taxes and resistance to probate. In this article, I primarily discussed “living trusts” or revocable trusts. You can read more about this type of legal instrument here.

I’d love to hear from you. If you have any questions please give us a call or leave a comment below.

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