Have you been named Executor? Trustee? Possibly both?

When clients have estate plans prepared, they must choose people they trust to fill certain roles in estate plan documents.  The biggest shoes to fill are the executor of a will, and the trustee of a trust (if the client is getting a trust).  The duties for both roles are different because the documents do different things.  Sometimes the same person fills both roles, if that’s what the client wants and if the person they choose agrees.

Executor

An “executor” is the person named in your Last Will and Testament to wrap up your affairs after you die.  You might be expected to:

  • Pay financial obligations including taxes of the decedent from estate assets
  • Manage the estate by possibly submitting a will for probate, gathering the decedent’s assets and holding them until they are sold or distributed
  • Contacting government institutions and agencies to stop benefit payments
  • Represent the estate in legal matters

The role of an executor typically lasts for 13 months or under in Ohio.   You are wrapping up someone’s affairs and distributing their assets as their will dictates.  Once bills are paid and assets are sold or distributed, your role ends.

Trustee

A “trustee” is the person named in your trust (often, a “revocable living trust”) to perform the duties stated in your trust.  You might be expected to:

  • Manage the assets in the trust, which might be monetary assets, a home, etc.
  • Distribute trust assets according to the terms of the trust.  Common terms include the trustee paying for a beneficiary’s college expenses, distributing portions of the assets of the trust at certain ages
  • Communicating with the beneficiaries

The role of a trustee lasts for the lifetime of the trust.  A trust ends once final distributions are made or assets are exhausted.  A trust can also be terminated, which mostly happens when the value of the assets of the trust make administering the trust impossible–the trust’s assets diminish in value to the point of the trust not being able to pay trustee fees or other expenses.

Both roles carry some amount of personal liability, impose fiduciary responsibility, and can be time consuming.  If you were named in either role, then the person creating the documents trusts you, your abilities and judgment.

If you have been named the executor or trustee in someone’s will or trust, and you have questions or need guidance, please email me at julie@juliemillslaw.com.

Misconceptions you might have with estate planning

I have heard all of these misconceptions mentioned, including just today.

  1.  The attorney who prepared my will must handle my probate.  No.  Many estate planning attorneys prepare wills with an eye toward being called upon to handle a probate if the client dies, but there is absolutely no requirement that the drafting attorney who prepared your will must handle your probate.  This includes if the attorney who prepared your will holds your original will for safekeeping.
  2. My will dispenses with all of my property. Some documents override a will.  If you have a will, and you leave all real (house, land) and personal property to John, yet you have a deed that is held somehow with Jane, Jane will get the house because she is on the deed, not John, even though your will gives it to John.  Generally, titled and deeded assets go to the person listed on the title, or beneficiary designation, or deed.  “I leave everything I own to Bob.”  At my death, I have a life insurance policy that lists Joanne on the beneficiary designation.  Who gets my life insurance?  Joanne.
  3. I had a trust prepared so I don’t have to worry about probate.  It is so frustrating to see clients come to me with trusts they had prepared (and paid a lot to have prepared), only to learn that the trusts are unfunded.  What the client has, then, is a stack of papers that likely will not do what was intended.  Funding your trust involves titling or deeding assets to your trust.  You can accomplish this by naming your trust on beneficiary designations so that asset goes into your trust at your death, or having a “transfer on death affidavit” prepared that puts your home into your trust at your death.  For example, you would have a deed prepared granting your home from Jenny Jones to “The Jenny Jones Revocable Living Trust.”   However you accomplish it, a discussion of “funding your trust” should be a critical part of planning from your attorney.  If you have a trust prepared and then never prepare a new deed putting your home into your trust, and you die, your home will likely require a probate to be opened, defeating one of the important reasons for having a trust prepared (avoiding probate, privacy).
  4. A will (last will and testament) is different than a “living will.”  A last will and testament is what we think of as a “will”–we state who is to inherit what, we name a guardian for our kids if they’re young, we name an executor.  On the other very different hand, a “living will” is a healthcare document stating whether we want artificial life support if (1) we are terminally ill and death is imminent, or (2) if we are in a permanently unconscious state (i.e., brain dead).  This is popularly known as “pulling the plug.”

Contact me at julie@juliemillslaw.com to discuss estate planning.

Barebones planning for life without you.

Some people plan for their death and the fate of loved ones, whether it’s by a will, trust, re-titling and re-deeding assets, or other ways.  These are my clients.  Other people do not do this planning, and the reasons are typically because 1) they don’t want to think about it, 2) they don’t have the time or money for it, 3) they think others will take care of everything if they die.  These are many of my family members and friends.

Frankly, people die, their loved ones do take care of everything, and life goes on.  But, if you practice probate and estate administration as I do, you see so many situations where loved ones are left trying to “take care of everything” in impossible or contentious situations, where families fight and relationships become extremely strained, or irreparably damaged.

What if you do not want to engage in any estate planning–for any number of reasons, you don’t want to have a will or a trust prepared.  At least not yet.  However, you do see the need to provide some guidance to loved ones should you die.  There are very basic steps you can take to provide this guidance.  It goes without saying that I always recommend a will or trust, but something–barebones planning–is better than nothing.  I guarantee you it would be appreciated.

The following is a list you can do, on your own, to make the lives of your loved ones easier if you die.  Some steps are specific to Ohio, where I’m licensed to practice.  Tailor to your own situation:

1.  Children: if you have children under 18 years old, write down 3 people in order of priority who you would choose to raise your children (guardian).  Sign it in front of two unrelated witnesses.

2.  Funeral: disagreements over your final disposition are common.  Write down whether you want buried or cremated.  If buried, name a cemetery.  If cremated, what happens to your ashes?  List two people in order of priority who will be in charge of decision-making and with making sure your wishes are followed.  Sign it in front of two unrelated witnesses, or have it notarized.

3.  Medical decision-making:  name a person and 2 successors to be in charge of decisions about your medical care if you cannot make them.  Explain your wishes about artificial life support–do you want kept alive by artificial means?  Sign it in front of two unrelated witnesses.

4.  Pets: please provide for their fate if you die.  Many family members take pets to shelters after their owner dies.  Who do you want to care for your pet?  List two successors after this person.  Will you leave them money to help with the care?  How much?  Sign it in front of two unrelated witnesses.

5.  Specific bequests:  do you have possessions that you want to go to specific people?  List the items, and to whom they go.  Sign it in front of two unrelated witnesses.

This list is not exhaustive, but it covers the areas where I see fighting among relatives.  Having guidance during a time of grief is a gift.

If you have any questions about this post, or about estate planning, contact me at julie@juliemillslaw.com.

 

What is a trust?

What is a “trust”?  What does it do?

There are three parties involved in a trust.  First is the person who makes the trust, called the settlor or grantor.  Second is the person who is to benefit from the trust, called the beneficiary (or beneficiaries).  Third is the person who manages the trust, called the trustee.  A trust is a contract, with terms determined by the grantor to govern how the trustee manages the trust, terms to decide how the assets in the trust are to be distributed to beneficiaries, terms to govern who is included in the class of “beneficiaries” if the beneficiaries are not clearly defined, terms to decide when the trust should terminate, among others.  Because a trust is a private contract, the settlor or grantor can decide upon whatever terms and conditions he or she wants in the trust, unless they are illegal or against public policy.

Essentially, a trust is a way for someone to control his or her assets “from the grave.”  For comparison, with a last will and testament, assets are distributed once the deceased’s debts are paid by his estate.  The administration timeframe with a will is usually no longer than thirteen months.  With a trust, the trust holds assets (typically by re-titling or re-deeding an asset) and the trustee makes distributions according to the terms of the trust, which could be at staggered ages (25, 30, 35), or to pay for college, etc., and could last for years.

There are several different types of trusts used for several different purposes.  Most of my clients use trusts to provide for children or grandchildren (pay for college, provide distributions at key ages in life), or they have a child or grandchild with a disability and they want to leave assets to their disabled loved one to maintain their quality of life, without jeopardizing government benefits.   Other common trusts include credit shelter trusts, life insurance trusts, domestic asset protection trusts, firearms (“gun”) trusts, pet trusts, IRA trusts, among many others.

Trusts have certain benefits that clients find attractive.  Unlike wills, which are public documents and can reveal private information including finances, a trust is not a public document.  Privacy can be a big concern for those wishing to keep certain things private, such as business owners and their finances.  Trusts, if properly funded, avoid the probate process.  In some situations, trusts can protect assets from creditors.  Particularly important for many of my clients (as mentioned above), trusts permit someone to control the distribution of their assets from the grave, often for years.

This blog post is a very general and condensed explanation of the benefits of a trust.  If you are interested in learning more about how a trust might benefit you, email me at julie@juliemillslaw.com or contact me via http://www.juliemillslaw.com.

Trustees for special needs trusts: “You must choose, but choose wisely.”

There are special considerations when choosing a trustee for a special needs trust.  As with any trust, the trustee should be responsible and trustworthy.  If the trust is for the benefit of someone with a disability, you have added issues to factor into your choice that are critical to family relationships, safeguarding assets in the trust, and maintaining the beneficiary’s eligibility for government benefits.

In my practice it is typically the parents or grandparents of a child with a disability who creates a special needs trust.  The natural choice to my clients for a trustee is someone who knows and cares about the child–usually a family member.  Oftentimes, however, the family member is unaware of what is involved with administering a trust for a disabled person, which could lead to legal and financial problems for the trust and the trustee.  Professional trustees (financial institution, etc.) are viewed with skepticism because the child often has specific, individual needs unfamiliar to someone who doesn’t know the child, and their fees can seem excessive.

ISSUES TO CONSIDER

  1.  Trustee will need to learn about government benefits, trust taxation, money management.  There are rules and regulations that the trustee will need to know.  Government benefits are complex, and maintaining them requires diligence.  Certain actions can jeopardize the beneficiary’s receipt of government benefits.   There are tax rules for trusts, and assets in the trust that need managed.  Your trustee should prepare to become very knowledgeable in unfamiliar areas of government benefits, trust taxation, and trust asset management.
  2. Trustee can be held liable.  A trustee of any trust can be held liable for “wrongdoing,” even for mistakes.  With a special needs trust, mistakes from a well-meaning family member serving as a trustee could result in the loss of crucial government benefits for the disabled beneficiary, most notably, medical insurance (Medicaid).  Unfortunately, family-member trustees often do not purchase trustee liability insurance, making them vulnerable if they make an improper distribution that jeopardizes receipt of benefits, or if they fail to file taxes or submit accountings correctly. (I highly recommend trustee liability insurance for trustees.)
  3. Family relationships might become strained.  If Uncle John is serving as the trustee of his niece Jane’s special needs trust, it is John who decides whether a distribution should be made.  If Uncle John and Niece Jane have always had a good relationship, and suddenly he is in a position of having to disappoint Jane by deciding against her request for something, their relationship might become strained.  Additionally, if John is a future beneficiary in the trust if Jane dies, an inherent conflict could also strain relationships.  Perhaps John is declining Jane’s distribution requests so as to keep as much money in the trust as possible for him if Jane dies?  Whether true or not, such a conflict has the potential of creating familial tension.
  4. Cost.  One of the main complaints with professional trustees is their fee.  For some financial institutions, annual trustee fees can range from 1-5% of the value of the assets of the trust.  This might not be excessive when you consider costs associated with a family member serving as trustee.  Due to liability and time concerns, it is advisable for the trustee to hire an attorney to advise on government benefits and maintaining eligibility.  A CPA is advisable due to tax filings and tax considerations with trusts.  An investment professional is suggested to meet the trustee’s fiduciary obligation to maintain trust assets.  The family-member trustee can be compensated a reasonable fee for his or her services as trustee.  It’s the trust that pays for these services.  A professional trustee’s fees might be comparable to the cumulative fees associated with having a family member serve as trustee–if so, then I suggest factoring in other considerations above when choosing a trustee.

There is a middle ground.  For clients who want the personal involvement of a family-member trustee, but want the expertise of a professional trustee, I recommend designating the family member as “trust protector” and a professional trustee as the trustee of the trust. The trust protector safeguards the financial and other interests of the beneficiary, and can take legal action on behalf of the beneficiary if there are problems with the trustee.  The professional trustee has the financial ability to compensate the trust if mistakes are made, and the expertise to reduce the chance of making mistakes.

If you have questions about special needs trusts, special needs planning, choosing a trustee, or the role of a trust protector, please contact me by email at julie@juliemillslaw.com, or visit my website for other ways to reach me.  Planning for the future of a loved one with a disability is both critical and complex!

 

 

 

Living trusts–do I need one?

You might see advertisements for seminars discussing trusts, and why you should have one.  For many people, a trust is a critical part of their estate plan.  For others, a trust might be unnecessary.  Perhaps you just need to change the way your assets are held, as I explained in this blog post.

However, if anything in the list below applies to you, then I recommend a living trust for you:

  1. You have minor-aged children and do not want them to inherit everything at age 18.” Most of us remember back to when we were 18, and how we were not experienced or mature enough to manage a large sum of money.  A living trust can pay for your child’s education, and make distributions at certain ages, ensuring financial support along the rites of passage in life.
  2. You have real property in other states.”  If you own a home or parcel of land or other real property in other states, ancillary probate would need opened in each state where you own property after you die.  This would be expensive and cause delay with distributing your assets.  Putting your real property in a living trust would eliminate the need for probate, and for ancillary probate in other states.
  3. You want privacy.”  Dying with only a will means anyone can drive to the courthouse and look up your will, including probate filings such as an inventory of your assets and their value, and your tax returns.  These are all considered “public records.”  For business owners, private business information could be made public.  A living trust is a private document, and if privacy of your assets is a concern, then you need a trust.
  4. You want to disinherit or there might be potential will contests.”  With a will, next-of-kin are required to receive notice that a will has been filed with the court, and a probate might be opened.  A relative who discovers he or she will not inherit might decide to contest the will.  Because a living trust is private and there are no notice requirements to next of kin, will contests can be avoided.

If you want to see if a living trust is right for you, contact me at julie@juliemillslaw.com.