Articles Posted in Trust administration

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digital-assets-fullimage-new-209x300As of January 1, 2017, California has a new law (The Revised Fiduciary Access to Digital Assets Act) that allows executors and trustees to gain disclosure of a person’s digital assets after the original user’s death under certain conditions. This is a good thing because, until now, federal and state law on digital access for executors and trustees made it difficult for executors and trustees to get such disclosure without a court order. Twenty other states have passed similar legislation but, of course, as is often the case, California’s version is slightly different than the model legislation it is based on.

Attempts to pass state laws to make such disclosure easier (in California and in other states as well) ran into difficulties as laws drafted by lawyers (who wanted to make it easy for executors and trustees to gain access to digital assets simply by virtue of the fact that they were executors or trustees) ran into opposition from privacy advocates (like the ACLU) and service providers/tech companies (like Google, Facebook, and Yahoo), who wanted to protect the privacy of deceased users from such disclosure without their consent and who pointed out that any disclosure without such consent violated federal law.

To read more about the legal issues involved and how content providers are (or aren’t) providing online tools to record your consent and to get a digital inventory form that you can use to catalog your digital assets and record your passwords and usernames, download an Ebook that I wrote, Estate Planning for Digital Assets, at my website, www.lizahanks.com .

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bank-building-300x225Most people know that the FDIC (Federal Deposit Insurance Corporation) insures bank accounts for up to $250,000 per depositor per covered bank. This insurance was increased from $100,000 to $250,000 in 2008, to reassure people during the chaos of the financial meltdown that started in that year. (This increase was supposed to be temporary, but was made permanent in 2010, as part of the Dodd-Frank Act).

So, if, for example, you are the sole owner of a bank account with $500,000 in it, that account is only insured for $250,000.  If that same bank account is co-owned by your spouse, that account is insured for $500,000 because each owner gets that $250,000 of insurance. For many of us, that’s enough insurance. But not always. I’ve had clients call me after they’ve sold a house, nervous about the fact that they have a large balance on deposit at the bank. What to do?

A living trust can help here. While it is true that everyday bank accounts that don’t accumulate much money (the ones you use to pay bills) are usually not put into a living trust, larger accounts are.  There are two reasons for this: first, large accounts should be held in trust to avoid probate at the owner’s death; second, holding a bank account in the name of a trust means additional FDIC insurance on that account.

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san-francisco-210230_640-300x225I can usually tell when mortgage rates begin to drop because my phone starts ringing with former clients who are trying to refinance.  Often, their loan broker wants them to supply assurances that, if the living trust owns the house, the trust gives the Trustee the power to mortgage the property and use the house as collateral so that the lender’s interest is secure. (That’s a lawyer way of saying that the lender wants to be certain that, if the mortgage isn’t paid, they can take the house.)

Sometimes the lender wants a letter from an attorney certifying certain things are true about the trust — usually that it is revocable, that is valid under California law, and the Trustee has certain powers including the power to borrow. Often, they want this letter right away because it’s holding up the deal.

The issue underlying all of this paperwork is that some (but not all) lenders are uncomfortable because something other than the individuals applying for the loan owns the property (the trust). Here’s an article that explains this in more depth from SF Gate.

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shutterstock_226347421 (2)As an estate planner, I get calls often from disgruntled beneficiaries, concerned parents, frustrated Trustees, or distrustful siblings.  Death and money don’t always bring out the best in families. But despite countless books, movies and television shows, rushing to court isn’t always (maybe ever) the best idea for families facing conflict.

Litigation, after all, is designed to create “winners” and “losers,” but family disputes are seldom winner-take-all scenarios.  Worse, the very adversarial nature of litigation can fracture and disrupt family relationships to the point that after the dispute is over, those relationships may be lost, forever. And finally, litigation is both expensive (think six figures to go to trial) and public (think family secrets filed as public documents).

Mediation, a process in which the parties themselves can negotiate an agreement to a family dispute, is a real alternative to litigation for trust and estates conflicts, but not one that many people know about.  Yet. (I aim to change that.)

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nostalgia-499988_640Estate planning is often motivated by the big things. I’m not getting philosophical here. Forget about life and death. On a practical level, what brings families into my office are often the big financial assets–the house, the brokerage accounts, the retirement assets, and a concern that these assets be shared equitably by loved ones. And I, like most estate planners, do my best to write trusts and Wills that do just that.

But, often, it is the little things that can become contentious after a parent dies. From Dad’s stamp collection, to (I kid you not) a parent’s lawnmower, I’ve seen families fight over things that weren’t even on their loved one’s radar when the estate plan was written. Somehow these physical object (in legalese this stuff is known as ‘tangible personal property’) can become the locus of much hurt feeling and much passion, seemingly to become imbued with a deceased person’s essence, or to evoke their memories in a way that money cannot.

Often, fights over tangible personal items becomes especially fraught when there are multiple marriages, with a surviving spouse and children of prior marriages sparring over a loved one’s personal items. I’ve been thinking of this a lot lately because of Robin Williams.  Less than six months after his death, his third wife and his children from his first and second marriages are involved in litigation over alleged ambiguities in what seems, from a distance, to be a well-drafted and thoughtful estate plan. As reported in the New York Times, here’s some of what they are fighting about:

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questionmarkThe Wall Street Journal recently published an article entitled, “The Trouble with Trustees” that outlined the issues that can come up between a trust beneficiary and a Trustee. The article focused on several themes that we’ve seen over the years:

  1. Frustration–a beneficiary is frustrated that they don’t have direct access to trust assets, even though a trust was established precisely to prevent that beneficiary from having direct access to trust assets.
  2. Poor communication – a beneficiary is angry because they don’t feel that they understand how trust assets are being invested or distributed or because a Trustee is not willing to disclose information about the details of a transaction.
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black-29972_150The IRS has extended the deadline for filing an estate tax return for decedents dying in 2011, 2012, and 2013 to December 31, 2014. The purpose of the extension is to provide time for surviving spouses to elect portability on the return, which would allow them to use their deceased spouse’s unused exemption from the federal estate tax. Electing portability means, in effect, that a married couple can combine their available exemptions, potentially saving a family a significant amount of money when the second spouse dies.

For example, if a person died in 2011, and had an estate worth $2 million, and that $2 million was allocated to a Credit Trust (as many of our client’s estate plans would do), their surviving spouse could file an estate tax return, elect portability, and gain an additional $3 million in exemption to be used at the spouse’s death. (In 2011, the available exemption was $5 million, and the decedent used up $2 million by funding the Credit Trust.)

In the above example, an estate tax return would not need to be filed for any other reason (because $2 million wasn’t a taxable estate in 2011), and many families may have missed the opportunity to file a return within nine months of the death (which is the usual deadline) because the decedent didn’t have a taxable estate, so no return was required.  The IRS, however, has extended the deadline for such returns until the end of this year to allow surviving spouses to take another look at the benefits of requesting this additional exemption.

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shutterstock_156185702Who knew?! I honestly had no idea that there was such a thing as National Estate Planning Awareness Week, but, in fact there is, and it’s the third week in October, established by House Resolution 1499 in 2008.

When I worked in the US Senate, I was particularly thrilled by National Ice Cream Day (the third Sunday in July) and when I worked in the California State Legislature there was one day when bikers from all over California rode around the capital to protest helmet laws (I’m not sure if that was an official day or not). But this, while not nearly as thrilling as either of those days, is still a good excuse to remind folks about the importance of having a plan in place and keeping it current.

The American Bar Association cites statistics that estimate 55% of Americans don’t have an estate plan. I’ve seen other estimates that over 120 million Americans don’t have an estate plan in place. Either way, that’s a lot of people.

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united-states-151582_150California is a big state, and it’s easy to get near-sighted. Because California has no state-specific gift or estate taxes, it’s easy to focus almost exclusively on the federal estate and gift tax exemptions when planning for the taxes due after there’s been a death.

But nineteen states and the District of Columbia levy their own state estate taxes or inheritance taxes, with widely varying exemptions and tax rates, and these taxes can come due, even to California residents–either because they own property located in another state, or because they inherit assets from a resident of a state with an inheritance tax.

If you, for example, own property in a state with an estate tax, like Minnesota, you might find an estate tax bill due as a result.  Estate taxes fall on the estate of the person who died; Minnesota currently exempts property worth up to $1.2 million, then levies a maximum estate tax rate of 16%. So, if your luxury duck blind is valued at more than $1.2 million,  your estate may owe tax on the transfer of that blind at your death.

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shutterstock_128072579The New York Times published an interesting story this weekend on the expectations that parents and children have with respect to inheritances. The article summarized a study published in The Gerontologist last year, in which older adults and their children were polled on whether or not they expected to leave or inherit an inheritance.

It turns out that 86.2% of the parents expected to leave their children something, but only 44.6% of the kids were expecting to receive anything.  Interestingly, the adult children who were getting money from their parents during life had a higher expectation about getting more after their parents died than did children who were not receiving such support. Even more interesting, adult children who were providing support for their elderly parents were less likely to expect an inheritance, even though their parents were more likely to leave one. (The article doesn’t say what ‘support’ means here and whether it was financial or more in the realm of help with daily living.)

Psychologists opine that older adults feel morally obligated to provide for their adult children, partly out of concern for their children’s ability to maintain a similar standard of living, given the decline in earning power, and partly out of a sense that family matters most.