TRUST ADMINISTRATION

Published on: May 26, 2017

When is a Trust Not a Trust?

The term “trust” refers to an arrangement in which one person holds property for the benefit of another. In estate planning we commonly use revocable and irrevocable trusts as tools to bypass traditional probate. You give your assets to a trustee, who then administers the property for the benefit of the persons you name in the trust instrument.

Sometimes the word “trust” is used to signify something else. For example, you may have heard the term “Totten trust” used by banks. A Totten trust is really not a trust; it is a type of payable-on-death bank account. The person establishing the Totten trust has the unrestricted ability to withdraw money from or close the account. The “beneficiary” is simply the person who receives the remainder of the account, if any, upon the account holder’s death.

Court Imposes “Constructive Trust” After Stepson’s Mistake

Published on: March 11, 2017

Can a Special Needs Trust Help My Disabled Child?

by Scott C. Soady

There are many kinds of trusts used in estate planning. One you may not have heard about before is a special needs trust. This is a trust designed to provide for a person who is receiving certain types of government benefits, such as Medi-Cal or Supplemental Security Income.

Because these programs are means-tested, a beneficiary can lose his or her eligibility if he or she suddenly receives a large amount of cash, say from an inheritance or a lawsuit judgment. But by creating a special needs trust, that money can be placed in the hands of a trustee, who retains legal ownership. The trustee can then use trust funds to purchase goods and services for the beneficiary without compromising government benefits.

Trustee Removed After Questionable Property Deal

Published on: March 3, 2017

Will My Business Continue After My Death?

by Scott C. Soady

Many Californians are self-employed or own their own small business. If you are among this group, it is important to make appropriate provisions in your estate planning, especially if you have partners, employees, or family members who need to continue the business after your death. The type of planning required will depend on the specific legal structure of your business.

Sole Proprietorships

A sole proprietor is anyone who is self-employed and does not incorporate his or her business. This can include anything from a work-at-home consultant to someone who operates a retail store with multiple employees. Basically, if you file a Schedule C with your federal tax return and you do not have any partners, you are a sole proprietor.

Published on: February 25, 2017

Do I Need to Amend My Trust Following a Divorce?

by Scott C. Soady

Following a divorce there are a number of collateral issues you need to deal with. Among other matters, you may need to reconsider your estate planning situation. For example, if you and your former spouse created a living trust, you will probably want to revoke that trust and create a new separate trust.

Ex-Wife May Seek Removal of Ex-Husband From Children’s Trust

Of course, unwinding an estate plan is not always so simple, as a recent case from Los Angeles illustrates. This case involves a divorced couple who created an irrevocable trust during their marriage. While most estate planning trusts are revocable, irrevocable trusts are frequently used for legal and tax planning reasons.

Published on: February 24, 2017

The Importance of Properly Funding a Living Trust

by Scott C. Soady

As any estate planning lawyer can tell you, a living trust can help you avoid probate, as assets in a trust do not pass under your will, which can save your heirs time and money. However, an improperly executed trust can lead to unnecessary confusion and even litigation.

Courts Sort Out Conflicting Trusts

Trusts do not fund themselves. Once you create a trust you must legally transfer title of your assets to the trustee (which is usually yourself). If you later decide to revoke the trust, you must similarly transfer title from the trustee back to yourself as an individual.

Published on: February 10, 2017

Father’s Trust Not Liable for Failing to Help Daughter Keep House

by Scott C. Soady

Parents often create a trust as part of their estate planning to ensure their children have ongoing access to financial resources. When you create a trust, the trustee has certain legal and fiduciary obligations to the beneficiary. But how far does that duty actually extend?

“Opportunities Lost” Not Grounds for Breach of Duty Lawsuit

A California appeals court recently looked at this issue. The question was whether or not an adult child could sue the former trustees of a trust created by her father because of “opportunities lost” due to the trustees’ alleged neglect. Specifically, the child said she lost her house because she was never informed that she had access to the financial assets in the trust.

Published on: January 20, 2017

How Should I Dispose of My House in My Estate Plan?

by Scott C. Soady

Dealing with real estate is often the most complicated part of estate planning, particularly if you want to provide for multiple family members. Unlike cash or stocks, it can be logistically difficult to divide a house or a rental property among multiple children. In many cases it makes sense to direct the executor of your estate (or the trustee of your trust) to sell the property upon your death and divide the cash proceeds among your designated beneficiaries.

Leaving it Up to Your Trustee

Then again, there are cases in which you might want to afford one member of your family the chance to keep the property. For example, your will might give one person the right to purchase your house upon your death. Such provisions must be carefully drafted by a qualified attorney to avoid any misunderstanding or confusion.

Published on: January 18, 2017

The Risks of Making Charitable Gifts Through Trusts

by Scott C. Soady

Charitable giving is a common feature of many estate plans. In many cases this takes the form of a simple gift in a person’s last will and testament, but charitable giving can also involve complex trust arrangements designed to benefit both the charity and the donor or their family.

Trustee, Charities Spar Over Terms of 1967 Trust

Of course, the more complicated the gift, the more chances there are for a dispute to arise. For example, upon the death of a California man in 1967, his will established a trust for the benefit of his grandson. A corporate trustee was named to oversee the trust with instructions to pay the grandson $100 per month for the rest of his life. The trustee was also permitted to make additional payments to the grandson if he was “without sufficient funds to defray expenses incurred by illness, accident, or other dire need.” After the grandson’s death, the trustee is supposed to divide the remaining trust assets between a number of specified charities.

Published on: December 31, 2016

Does a Spendthrift Trust Protect Against Spousal or Child Support Orders?

by Scott C. Soady

If you have a child or other relative who is irresponsible with money or is the subject of a number of creditor judgments, you might consider including a spendthrift clause as part of your estate planning. A spendthrift clause, also known as a spendthrift trust, allows you to leave money to a beneficiary with certain restrictions. Technically, you leave the money to a trustee, who can make payments to the beneficiary per your instructions.

Since the principal of the spendthrift trust remains with the trustee, in most cases the beneficiary’s creditors cannot go after these funds. For example, a creditor could not attach a lien against the trust’s assets. But there are exceptions to this rule, as illustrated by a recent California appeals court decision.

Trustees Ordered to Pay Brother’s Wife

Published on: December 21, 2016

How Does a “Power of Appointment” Affect My Estate Plan?

by Scott C. Soady

In a revocable living trust, the person making the trust (the grantor) usually decides how the trust’s assets should be distributed after he or she dies. However, there may be circumstances where the grantor wants to give that power to someone else, usually one of the trust’s beneficiaries. This is known as a “power of appointment.”

Court Rules Son Improperly Used Father’s Power of Appointment

If the grantor places no restrictions on a power of appointment, it is considered a “general” power. This means the beneficiary can name anyone–including themselves or their creditors–as recipients of the trust property. A special power of appointment, in contrast, restricts the beneficiary’s discretion.