TRUST ADMINISTRATION

Published on: August 24, 2010

Appraising Trust or Probate Assets

When someone dies, either with a will or a trust, the assets owned by the decedent have to be valued to determine the fair market value. The date used for valuation of assets is usually the date of death. Sometimes the document, whether a will or a trust, will provide that another date can be used such as 6 months from the date of death. The important thing is that the date is consistent for all of the assets.

Assets that have to be valued can be real property, personal property, investments, bank accounts, IRAs, pension and retirement plans, stocks, bonds, mineral rights, and business interests. Some of these may not be trust assets but still have to be valued if there is going to be an issue with estate taxes. For example, assets held in joint tenancy may not be subject to probate or trust administration, but they still have to be valued for estate tax purposes.

Property such as real property is valued by obtaining a written appraisal by a licensed experienced professional appraiser. The appraisal should include descriptions and photos of the subject property, comparable sales, and a determination of value. Sometimes real property can also include having to appraise personal property as well such as farm equipment, livestock, crops, etc. or in the case of a professional building, the value of equipment and trade fixtures.

Published on: July 15, 2010

Inheriting an IRA From a Spouse

by Scott C. Soady

IRAs can be a substantial asset when someone dies. Inheriting an IRA from a spouse can be a great opportunity to continue tax-deferred investing. Surviving spouses have a unique opportunity that that don’t apply if you inherit an IRA from someone else. A surviving spouse has the ability to roll over an IRA inherited from a spouse into their own new or existing IRA and treat the assets as if they were theirs. The 4 basic options for a surviving spouse are:

1. Roll the inherited IRA over into your own IRA. Rolling the inherited IRA into your own IRA gives you the benefit of having the amount and timing of the required distributions based on your age as the surviving spouse. If for example, your spouse was over the age of 70 ½ but you are not, this option allows you to stretch out the tax deferred benefits until you reach 70 ½. Beneficiaries who are not spouses cannot roll over an inherited IRA or contribute to it.

2. Remain a beneficiary. As a spouse you can choose to keep your name on the IRA. If you transfer the inherited IRA into your own name, the amount of the required distributions will be based on your age as the surviving spouse. This can be a good option if the surviving spouse is younger than 59 ½ but wants to take out funds from the IRA without incurring early withdrawal penalties.

Published on: May 27, 2010

How Can a Trustee Resign?

by Scott C. Soady

A trustee is the person who handles the distributions to the beneficiaries according to the terms of the trust document. Some trusts can go on for years if there are distributions to be made for the benefit of minors or for other reasons. There may be some circumstances where a trustee may wish to resign from his duties as a trustee of a trust before the trust is completely administered. There are basically 4 ways.

1. As Provided in the Instrument. Most trusts by their express provisions allow a current trustee to resign with written notice and an accounting. For example, suppose you are the successor trustee of your parent’s trust and find that you must take a job abroad. If the trust names an alternate successor trustee and specifies that a currently serving trustee may resign by giving written notice to the beneficiaries, it is easy for you to resign. Some trusts also provide that when trustees resign, the resigning trustee must account for the transactions and dispursements he made while acting as Trustee.

2. With a Revocable Living Trust With the Consent of the Trustor. Suppose you are the Co-Trustee of your father’s trust and you want to resign. If your father consents, you can resign and your father can appoint another Co-Trustee if he wishes. It is a good idea to put the consent and resignation in writing. There is no requirement that you give notice to the beneficiaries.

Published on: April 8, 2010

Do It Yourself Trust Administration?

by Scott C. Soady

Trust administration is the work that has to be done after the death of a Trustor. The person or entity that is named as successor trustee has certain duties and obligations they have to perform to wind up the Trustor’s financial affairs and make distributions to the beneficiaries. If any of the beneficiaries are minors who are receiving distributions at various intervals, the administration of the trust can last years.

Your basic duties as a successor trustee involve the collection, management, investment, and distribution of the trust assets. One of your duties to the beneficiaries is to keep them informed of the trust administration so you need to keep careful records of all the transactions that you perform as trustee. Here is an example of some of the tasks you need to do when you become successor trustee of a trust. Some are time sensitive and lead to consequences if not done in a timely manner.

1. Obtain a taxpayer ID number for the trust.

Published on: March 31, 2010

The Importance of Family Dynamics in Estate Planning

by Scott C. Soady

When planning your trust, most people of course think about how they want their assets distributed, who will be their successor trustee, who will be the guardian of their minor children, and on what terms will their beneficiaries receive certain assets. What many people overlook is the family dynamics, ie. how will the decisions they have made in creating their estate plan affect their children and other family members? Will certain provisions in their trust cause discord leading to difficulties administering the trust and even litigation?

There are definite topics that seem to cause family disharmony. One is the choice of a successor trustee (the individual who will administer your trust after your death, pay the bills, and distribute the assets). Some clients name their oldest child. Others may make all 4 of their children co-trustees. Whatever you decide, it is important not to choice a trustee “because he or she is the oldest”, or “he knows more about finances” or “I will name them all so no one feels slighted”. You should consider the family dynamics of your family. Will naming them all make it difficult to make unanimous decisions? Sometimes clients will even choose a private professional fiduciary because they want to avoid the family conflict and sibling rivalry they fear may occur if they name a family member.

Another area that can be a big issue after death is the family home. You may want to leave the home to one child because they will not sell it. You may choose another child because they will sell it. When you make provisions in your trust for one child to buy out the others, you should be sure all the terms are spelled out so there is no dispute later. Whatever your choice, again think of the consequences. Disharmony among your children can result in arguments and litigation after your death which just increases the cost of trust administration.

Published on: March 8, 2010

Genetic Material is an Asset of Your Estate

by Scott C. Soady

With the advances in reproductive medical technology we are now seeing genetic material including sperm, eggs, stem cells, and even embryos being stored. Such genetic material is stored in a cryobank for later use, but what happens when the individual who stored the material dies? Is a child born posthumously entitled to inherit from its parent? The Courts have ruled that genetic material is property which like any other property can be bought, sold, or transferred so can you leave it to someone in your will?

The case of Brandalynn v Vernoff addressed the question of the rights of a child conceived with the sperm of a dead man. Sperm had been extracted from her father when he died in 1999 and were later used to perform an invitro fertilization on the widow which led to her birth. The courts ruled that the child, although born posthumously, had the rights to inherit from her father. There is a time limit in California. The sperm has to be used to create a child within 2 years from the death of the donor or the child will not have any entitlement to inheritance.

All of these issues should be addressed before you die. You can of course set up a sperm deposit while you are alive, however you should set out in an agreement with the cryobank what should be done with the sperm upon your death.

Published on: February 24, 2010

What Does it Mean to be a “Fiduciary”?

by Scott C. Soady

In the estate planning world we used the term “fiduciary” a lot. Trustees, administrators, executors, and agents under a power of attorney are all “fiduciaries”. What does that term mean?

A fiduciary is an individual who undertakes to act for and on behalf of another in a particular matter. A fiduciary has to perform his duties with the utmost of trust and honesty. A fiduciary is expected to be loyal to the person to whom he owes the duty (the “principal”). He must not put his personal interests before the principal and must not profit from his position as a fiduciary unless the principal consents.

The most common circumstances where a fiduciary is involved in estate planning is when a trustee administers a trust. The trustee is a fiduciary who must administer the trust estate for the benefit of the beneficiaries. If an individual dies with a will, the executor of the will is the fiduciary who administers the will and distributes the estate to the beneficiaries. An estate administered for someone without a will is called an administrator, also a fiduciary. All of these individuals have the duty to act with the utmost of loyalty and impartiality.

Published on: November 17, 2009

Executors, Administrators, and Trustees Accountable to Beneficiaries

by Scott C. Soady

In addition to handling probate, trust administration, and preparation of all types of trusts, we often get inquiries from heirs and beneficiaries with concerns about the way an executor, administrator, or trustee is administering an estate in San Diego. Sometimes beneficiaries cannot get an accounting of the trust assets. Sometimes they have issues with the distribution of assets. In some cases, they may have suspicions that the individual handling the estate is self-dealing or guilty of outright fraud.

The executor, administrator or trustee of an estate has a fiduciary duty to the beneficiaries. This means that they must act with the highest degree of honesty and integrity. They have certain duties under the law that they must fulfill. Among those duties are the duty to collect and protect the assets; duty not to commingle estate assets; and a duty to be impartial. They also are required to communicate with the beneficiaries, provide an accounting of the assets, and distribute the assets according to the testamentary instrument (will or trust) or if there is none, according to the Probate Code.

Law Office of Scott C. Soady, A Professional Corporation represents heirs and beneficiaries as well as executors, administrators, and trustees. If you can concerned about the way an estate is being handled, you have options and remedies. One remedy could be filing a petition in the Probate Court to have the Court address the issue, order an accounting, or remove an executor, trustee, or beneficiary. There are also civil remedies for fraud, breach of fiduciary duty, or constructive trust. If you are over 65 years if age, you may have a action for elder abuse.

Published on: October 31, 2009

Appraisal Method to Change?

by Scott C. Soady

In trust administration and probate in San Diego County, appraisals of the decedent’s real property are an important part of settling an estate. At Law Office of Scott C. Soady, A Professional Corporation, one of the first tasks is to obtain an appraisal of real property as of the date of death. The appraisal, in addition to valuations of the rest of the decedent’s estate, form the basis for determining the total value of the estate for purposes of distribution to beneficiaries.

Recently, a bipartisan amendment approved in October by the House Financial Services Committee proposes a new set of rules for obtaining appraisals. The old rules imposed nationwide by mortgage giants Fannie Mae and Freddie Mac, according to realtors and mortgage brokers, produced appraisals often below the agreed-upon price, causing delays and disputes and the necessity for multiple appraisals. The new rules are more likely to encourage independent appraisals, not influenced by loan officers and mortgage brokers. The new amendment has the endorsement of President Obama and the House of Representatives but may face an uphill battle in the Senate.

Appraisals are just one part of trust administration and probate. We use independent appraisers for real property and can help with appraisals of valuable personal property as well. There are numerous tasks that must be done by a successor trustee of a trust or an executor or administrator of a probate estate. Our estate planning lawyers at Law Office of Scott C. Soady, A Professional Corporation can assist you with all aspects of trust administration or probate. Please call or email with questions or to set a complimentary consultation.

Published on: April 17, 2009

Being a Successor Trustee in These Tough Economic Times

by Scott C. Soady

Depending on who you talk to about the economy, “things are going to get worse before they get better” or “things are looking up.” There is no question though that the real estate market is down in San Diego. The stock market is also not what it was several years ago. How does this affect a Successor Trustee who is trying to administer an estate and make distributions to beneficiaries?

A Trustee of course has a duty to safeguard the trust assets, invest and manage the assets in some cases, and distribute the assets to the beneficiaries according to the terms of the trust. The beneficiaries naturally want to receive as much as possible and sometimes do not want to wait for the market to turn around. You may find yourself as a Trustee having to decide whether to convert some assets into cash to put into a money market account or CD. You may have no choice but to sell real property even though home sales are down. It is a difficult decision to make as to whether to wait out the problems in the market and it is just one of the many decisions you may have to make as a Trustee.

One thing that makes it easier is if all the Beneficiaries are on the same page as to what should be done. As a Trustee, try to keep all the beneficiaries informed. If the property is on the market, keep them apprised of the sales price, comparable sales in the area, and all offers. Consult with financial advisors, realtors, or others in the know to get their opinions. An experienced estate planning firm such as Law Office of Scott C. Soady, A Professional Corporation can help you administer a trust in a way that will limit your liability as a Trustee and make your responsibilities and duties a bit easier. Contact us for a complimentary consultation.