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Trust Administration: what your trustees and beneficiaries can expect.

Creating a revocable living trust is the first step to executing your estate plan. The second step is the administration of the trust. This takes place following the death of the last grantor (the person who created the trust), at which moment the appointed successor trustee steps in to ensure that all of the beneficiaries receive the portion of the estate allotted to them, according to the wishes of the grantors in the trust. The successor trustee is legally bound in this responsibility, and a beneficiary can question before the court any behavior that does not meet this requirement.

Although the trust administration process is much more simple than probate, and significantly less expensive, a successor trustee can often feel lost, or unable to do it themselves. Necessary actions such as creating a tax identification number for the trust, sending death certificates to the proper locations, changing titles, and collecting benefits from insurance, can often be confusing. Unfortunately, it is critical that these actions be completed, and completed correctly. If not, the beneficiaries may suffer delays, taxes, or other undesirable consequences. Because of this it is generally advisable to hire an attorney to either assist in the process, or complete most of the work themselves. If such were the case, an attorney could sit with your successor trustee, help them figure out how the estate should be distributed, and then complete the necessary, although often confusing tasks. That way the successor trustee can be sure that everything is done, and done correctly.

With this in mind, it is important to choose a successor trustee who will have the maturity and experience to make the right decisions under such circumstances, and ensure the proper distribution of your estate.

Contact the attorney’s at Celaya Law today to schedule an appointment for your next steps or to answer any questions you might have.

 

The primary purpose of a living trust is to help your beneficiaries avoid the grueling process of probate. There are additional benefits, however, that are important to consider. One such benefit is the ability to provide asset protection for your beneficiaries.

A properly drafted revocable living trust with asset protection provides a protective wall around the inheritance received by your beneficiaries, which can keep out creditors, ex-spouses, or others who hope to grab part of that inheritance. If your beneficiary is involved in a lawsuit for a car crash, for example, the asset protection language in the trust will protect for them the money or assets received from your estate following your death. Although this protection is not provided to you (since your trust is revocable while you are alive), it can allow you the peace of mind of knowing that your children, or any other of your beneficiaries, will not lose their inheritance to a creditor immediately after receiving it. This can also allow important assets, like a home, to remain in the family despite insolvency among children.

Since many trusts do not automatically provide asset protection, it is very important to ensure that your estate planning attorney includes it.

Contact the attorney’s at Celaya Law today to schedule an appointment for your next steps or to answer any questions you might have.

 

The Advance Health Care Directive (or Living Will) is an essential document to have alongside your Revocable Trust. While the Revocable Trust both prescribes and protects post-death decisions, the Advance Health Care Directive (Living Will) protects your decisions while in life, when you are found incapable of making them on your own.

A typical situation that would require this document might involve an accident of some sort, or otherwise a disease or condition that–in either case–leaves you unconscious and incapacitated to make personal health-care decisions. In such a situation the Advance Health Care Directive would authorize someone you trust (and had chosen previously) to make these important health-care decisions in your behalf, decisions for which doctors often need consent. This could include blood transfusions, tube-feeding, or decisions permitting or prohibiting prolongation of life in an unconscious state through permanent medical assistance and machinery.

Beyond providing this authorization, the document also allows you to make as many of these decisions as you deem necessary previous to the need to use them, and while in a conscious state. This can bring relief to family members in the moment of your health crisis, and can help them avoid disputes.

The importance of the HIPAA (Health Insurance Portability and Accountability Act) document should also be noted. This document grants your elected agent (of the Advance Health Care Directive) access to your protected health information, which would otherwise be unavailable to them. This means both the HIPAA and Advance Health Care Directive should be created and used together.

Many people seek a Living Trust for a singular purpose: to protect their assets from a potential or pending lawsuit. The hope is that transferring assets from the person’s name to that of the trust can block a creditor’s ability to access them. This way of thinking is not totally correct.

There are two forms in which a Living Trust can be written:  the first is as a Revocable Trust, and the second is as an Irrevocable Trust. Each produce distinct consequences in regards to asset protection as a result of a lawsuit.

A Revocable Trust is one that can be revoked or revised in life, and it permits the original owner– as trustee of the trust–to maintain total control over his or her assets, including the ability to sell them if desired. Since the owner continues to have this control not only over the assets, but over the dispositions of the trust holding them, the Revocable Trust provides little to no protection for these assets in the face of a lawsuit. While it can be considered a deterrent to creditors, it is a small one, and not advisable as a singular asset-protection tool.

An Irrevocable Trust is one that cannot be revoked or revised. Its dispositions are firm and obligatory, eliminating completely the original owners control over the assets it holds. While this can provide a certain amount of protection from creditors (since the owner no longer controls the assets, but rather they are controlled and protected by the dispositions of the trust), it must be noted that a court has the power to revoke such a document created for the purpose of defrauding creditors. In other words, such a document will not be looked favorably upon by a judge if clearly created for the purpose of injuring a creditor’s rightful claim to compensation. That coupled with the undesirability of losing control over one’s assets also makes the Irrevocable Trust a poor asset-protection tool.

Put succinctly, in the face of a potential or pending lawsuit it is not advisable to use a Living Trust as a primary asset-protection tool. There are other ways, however, to provide yourself with adequate protection. Here are a couple possible strategies:

For a more in depth discussion on these strategies, follow this link to a useful, WealthCounsel article: https://www.estateplanning.com/how-to-protect-yourself-from-lawsuits/

 

One of the key tax protections provided by a Revocable Living Trust is the inheritance of property with a step up in basis. This means that your beneficiaries will inherit any of your property at the market value it holds at the time of your death, rather than the market value it held at the time it was purchased. Were this not the case, your beneficiaries would be required to pay Capital Gains Tax were the property to be sold.

The Capital Gains Tax is imposed on any increase in value of an asset. For example, a house purchased by Jack and Susan for $200,000 in 1990 could in the current year be worth $500,000, even if no improvements were made. This means that if Jack and Susan’s house was not protected by a Living Trust, their beneficiaries would inherit the house at its original value of $200,000. If they were to sell it, it would be reassessed, and they would be required to pay Capital Gains Tax on the $300,000 gain. This can add up to be quite a large sum.

However, were Jack and Susan’s children to inherit the home through the Trust, they would receive it at its value of $500,000, effectively disregarding, for tax purposes, the increase in value. This can save them from paying a very expensive tax.

People often attempt to avoid the inheritance step of Estate Planning entirely by putting their children on the title of the property with them. This, however, can be quite negative in the long run, as it prompts a reassessment of the property with regard to property taxes. This put’s the child in a similar situation as the beneficiaries above, requiring them to pay an increase in property taxes if a child is added or removed from title to a property. Gifting the property can also trigger a reassessment, again putting the recipient in a similar situation. Simply put, for purposes of Estate Planning, the best way for your children or beneficiaries to receive your home following your death is for them to inherit it through a Trust.

 

In reference to a common misconception, many people worry that transferring their assets to a Living Trust–assets such as their homes and bank accounts–negatively affects, or even eliminates the control they have over those assets. This is entirely false. While transferring your house deed to the trust requires that the deed contain name of the trust rather than your own individual name, the case being similar with other assets, you also establish yourself as Trustee of the trust. This means that all assets contained in your Living Trust continue under your full control. The only difference between this situation and that in which all your assets were under you name is the protection now added to those assets, as provided by the Living Trust.

Following your death, this control over the assets will pass, at least temporarily, into the hands of your chosen successor Trustee. The difference in this case, however, is that the trust is now irrevocable. While in your life you are free to change the parameters of the trust, after you pass away the Trust can no longer be changed. The successor Trustee will be required to obey the established parameters, including those regarding the distribution of the assets to the appropriate beneficiaries. If this Trustee fails to obey the parameters, they can be held responsible before the court and removed if necessary, a power often maintained by the beneficiaries or other alternate successor trustees.

Finally, the importance of a Durable Power of Attorney, as related to this subject, should be noted. While the Living Trust allows you the capacity to control your assets while in life, and provides for a successor Trustee following your death, a Durable Power of Attorney provides for someone to manage your assets in the case of incapacity during life. It gives them the authority to make financial decisions in your behalf and control you economic interests.

Schedule an appointment with a trusted Attorney at Celaya Law today to discuss what options you have and your next steps.

 

Funding your revocable trust is a fundamental part of the trust-making process, a part that often gets overlooked.

A trust, in and of itself, is little more than a vehicle through which your assets can pass to your beneficiaries after your death (while at the same time avoiding probate). In a sense it is like a bucket: a container that alone is largely useless, but when filled becomes incredibly useful. Like a bucket, your trust needs to be filled with your assets in order for it to effectively govern where they go after your death.

 

How do you fill your trust? By funding it.

Funding can be a tedious and often complicated process. Houses and bank accounts must be retitled in the name of the trust. In other cases, such as with Life Insurance, the name of the trust must be made beneficiary of the account. It requires work with the various institutions that govern each piece of property, and can vary in terms of execution. Unfortunately, revocable trusts created by attorneys and individuals are often left completely unfunded. As a result, the trusts are rendered useless, and at the death of the respective grantors the entirety of their estates will have to pass through probate.

If you have a trust that has not been funded, begin the process right away, employing the help of trusted professionals. If you have not yet created your trust, we suggesting finding an estate planning attorney that will help you with the funding process, in addition to creating your trust document.

Consider contacting the estate planning and living will and trust attorneys at Celaya Law today to schedule an appointment to get your documents in order.

Are you looking to start building your trust plan but have a few unanswered questions? We have answered a few general FAQ’s below that might help put your mind at ease a little about trustee’s.

Who should I choose as my trustee?

When you choose a trustee, you should consider first and foremost your trust in that person. They will be handling the administration of your estate to its respective inheritors–do you trust them to do this according to your instructions? Any person for which you can answer this question in the affirmative would be an appropriate choice. This person is typically a family member or a very close friend. It may be prudent to choose a beneficiary as trustee, as such may simplify the process and put the power of distribution in the hands of the beneficiaries. That being said, in many family situations it is wiser to place a third, uninterested party in that position.

Take note that a trustee serves in a fiduciary role. This means that they are legally obligated to administer the trust according to the instructions written, and according to the best interest of the beneficiaries. Anyone who does not administer in such a manner can be held accountable before the court.

What if you have children you aren’t comfortable putting in that position, or what if they are still too young?

As mentioned above, a third party in the form of a trusted friend or family member can easily and effectively administer the trust to your beneficiaries without any interference on their part.

What if I change my mind later?

Revocable living Trusts are just that–revocable. You as the grantor of your trust can choose to make changes at anytime during your life, including who your chosen successor trustee is.

What if I want more than one person to serve?

One of the great benefits of a trust is the incredible amount of flexibility it offers to accommodate a nearly infinite amount of situations. In this case there are several options. You can—and should—build a list of succession. It is always important to have alternate successor trustees if your chosen trustee is unable or unwilling to act in their position. Building a list of succession allows you to include the names of more than one person, and provide for their intervention if required. You can also provide for more than one trustee to work together as co-successor trustees.

How can I be sure my trustee will know what to do?

Although they are not required to do so, it is advisable that they seek assistance from an attorney. The process of administration can be complicated, and the failure to complete the often inconspicuous steps can lead to undesirable consequences for the beneficiaries. If possible, it is often a good idea to reconnect with the firm that originally drafted the trust.

What should my successor trustee know now?

The most important things for your named Successor Trustee to know are first, that they have been named in that position; second, where they can access the trust when it is finally needed; and third, if applicable, the contact information of the estate planning attorney that drafted the trust.

Let the trusted estate lawyers at Celaya Law help answer any additional questions you might have.

Sometimes even the most meticulous planners fall victim to unexpected circumstances. While a living will and trust can be an effective tool used to avoid probate, some people find themselves unable to keep these tools updated. With each large purchase, new family member, or boom in the family business, living wills and trusts need to adapt. A revocable trust can account for these inevitable changes in family/financial dynamic and help you and your family to avoid the lengthy process of probate. Yes, probate can still be necessary even if only a few of your assets are unaccounted for.

 

One client we had here at Celaya Law had created their trust about five years before we met them and decided to refinance their home. The lender required the property be transferred out of their trust and into their individual name in order for the refinance to go through (some lenders require this) and the client forgot to transfer the property back into the trust. Unfortunately, the client passed away and the property had to go through probate because it was in the client’s individual name and not in their trust. We see this quite often as estate planning attorneys!

 

Reach out now to an estate planning attorney at Celaya Law for help creating a revocable trust. We can make sure you don’t have to endure the problems of probate!

We recently took time to consider those valiant brothers and sisters who gave their lives defending our freedom. Our hearts are turned not only to them but also to their families in this season of gratitude and honoring. Having a military spouse or parent poses unique challenges in the event of a tragedy: military families can move around frequently, estate planning costs can appear unrealistic, and parents may be separated for lengthy periods of time.

 

While the military often provides estate planning resources, they are usually rudimentary. Also, the life insurance and compensation offered by the military can be insufficient for a family’s needs. Taking the time to properly develop a living trust can save military families from a great deal of suffering. Whether they are moving across the sea or just to a neighboring state, these families will want to consider a revision of their living trusts, wills, and/or power of attorneys.

 

Our estate planners can help navigate these issues and provide the best security for your family’s future. Click here to schedule a free consultation with one of our attorneys.