Nuts & Bolts Truth Successor Trustee Training


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Educational Overview of Successor Trustee Training

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Nuts & Bolts Truth Successor Trustee Training

  1. 1. Nuts and Bolts I Successor Trustee Training Presented by: Suzanne M. Graves Attorney and Counselor At Law Legal Certified Specialist in Trust, Estate Planning and Probate by the State Bar of California 1317 W. Foothill Blvd., Suite 245, Upland, CA 91786 Phone: (909) 981-6177 / Fax: (909) 981-8859 E-mail:
  2. 2. Estate Planning Overview Definition of Estate Planning I Want to Control My Property While I’m Alive and Well; Plan for Me and My Loved Ones if I Become Disabled;
  3. 3. Estate Planning Overview <ul><li>Definition of Estate Planning </li></ul><ul><li>Give What I Have </li></ul><ul><li>To Whom I Want </li></ul><ul><li>When I Want </li></ul><ul><li>The Way I Want </li></ul><ul><li>All with fully disclosed and controlled settlement costs both to me and to those </li></ul><ul><li>I love </li></ul>
  4. 4. Estate Planning Overview Most Estate Plans Just Don’t Work!
  5. 5. Estate Planning Overview <ul><li>Proper Asset Ownership </li></ul><ul><li>Control of Process </li></ul><ul><ul><li>What to Do </li></ul></ul><ul><ul><li>How to Do It </li></ul></ul><ul><ul><li>How to Pay for It </li></ul></ul>Keys to an Effective Estate Plan
  6. 6. Estate Planning Overview <ul><li>Estate Planning Strategy </li></ul><ul><li>Work with a Counselling Oriented </li></ul><ul><li>Attorney </li></ul><ul><li>Establish and Maintain a Formal </li></ul><ul><li>Updating Program </li></ul><ul><li>Assure Controlled Settlement Costs </li></ul><ul><li>After Your Death </li></ul>
  7. 7. Estate Planning Overview <ul><li>Personal Planning Goals </li></ul><ul><li>Catastrophic Illness Protection </li></ul><ul><li>Remarriage Protection </li></ul><ul><li>Creditor Protection </li></ul><ul><li>Divorce Protection </li></ul><ul><li>Values Promotion </li></ul>
  8. 8. Estate Planning Overview <ul><li>Estate Planning Strategy </li></ul><ul><li>Work with a Counselling Oriented </li></ul><ul><li>Attorney </li></ul><ul><li>Establish and Maintain a Formal </li></ul><ul><li>Updating Program </li></ul><ul><li>Assure Controlled Settlement Costs </li></ul><ul><li>After Your Death </li></ul>
  9. 9. Estate Planning Overview <ul><li>Four Types of Change An Estate Plan Faces “LIFE” </li></ul><ul><li>Changes in Your Family Situation </li></ul><ul><ul><ul><li>Personal </li></ul></ul></ul><ul><ul><ul><li>Financial </li></ul></ul></ul>
  10. 10. Estate Planning Overview <ul><li>Four Types of Change An Estate Plan Faces “LAW” </li></ul><ul><li>Changes in the Legal Environment </li></ul><ul><ul><ul><li>Tax </li></ul></ul></ul><ul><ul><ul><li>Non-Tax (Personal Protections) </li></ul></ul></ul>
  11. 11. Estate Planning Overview <ul><li>Four Types of Change An Estate Plan Faces “LAWYER” </li></ul><ul><li>Changes in Your Attorney’s Experience </li></ul><ul><ul><ul><li>Static vs. Continuous Improvement? </li></ul></ul></ul>
  12. 12. Estate Planning Overview <ul><li>Four Types of Change An Estate Plan Faces </li></ul><ul><li>“ LEGACY” </li></ul><ul><li>Changes in How You Choose to Leave Your Assets </li></ul>
  13. 13. Estate Planning Overview <ul><li>Estate Planning Strategy </li></ul><ul><li>Work with a Counselling Oriented </li></ul><ul><li>Attorney </li></ul><ul><li>Establish and Maintain a Formal </li></ul><ul><li>Updating Program </li></ul><ul><li>Assure Controlled Settlement Costs </li></ul><ul><li>After Your Death </li></ul>
  14. 14. Estate Planning Overview <ul><li>Three Factors of Overall Cost </li></ul><ul><li>The Cost of the Documents </li></ul><ul><li>The Cost of Updating </li></ul><ul><li>(Or Failing to Update) </li></ul><ul><li>The Cost After Death </li></ul><ul><ul><li>Transfer of Assets </li></ul></ul><ul><ul><li>Death Tax Return Preparation </li></ul></ul>
  15. 15. Estate Planning Overview Fees <ul><li>Administration: </li></ul><ul><li>Traditional Probate </li></ul><ul><ul><li>3% </li></ul></ul><ul><li>“ Traditional” Living Trust Planning </li></ul><ul><ul><li>2.25% </li></ul></ul><ul><li>Client Care </li></ul><ul><ul><li>1.5% </li></ul></ul>
  16. 16. In the Living Trust Binder: <ul><li>Trust Document </li></ul><ul><li>Last Will </li></ul><ul><li>Affidavit of Trust </li></ul><ul><li>Documents proving what trust owns </li></ul><ul><li>Powers of Attorney & Living Will </li></ul><ul><li>Personal instructions for burial/anatomical gifts </li></ul><ul><li>Personal effects memo </li></ul>
  17. 17. Trust Binder : Operating Manual <ul><li>Documents all in one place </li></ul><ul><li>Personal instructions </li></ul><ul><li>Lists of advisors </li></ul><ul><li>A tangible way to explain your planning </li></ul>
  18. 18. Trust Administration Goals <ul><li>Collection and management of assets </li></ul><ul><li>Payment of debts, taxes, expenses </li></ul><ul><li>Distribution to named beneficiaries </li></ul><ul><li>Fiduciary Responsibility </li></ul>
  19. 19. <ul><li>Through successful planning, the methods are in place to ensure your wishes will be carried out and taxes and costs will be minimized. The successor trustee MUST use these tools correctly to achieve the best advantage. </li></ul>Estate Planning Goal
  20. 20. Why Trust Planning? <ul><li>It plans for your disability </li></ul><ul><li>It plans for your loved ones </li></ul><ul><li>Contains your loving instructions </li></ul><ul><li>It’s private and confidential </li></ul><ul><li>Reflects your hopes, fears, dreams and values </li></ul><ul><li>It’s good in every state </li></ul>
  21. 21. Trust Administration <ul><li>Alive and well </li></ul><ul><li>Alive and not so well </li></ul><ul><li>Upon my death </li></ul>
  22. 22. Trust Administration <ul><li>Alive and well </li></ul><ul><ul><li>Trustmaker is in Control </li></ul></ul><ul><ul><li>Trust is revocable, and amendable </li></ul></ul><ul><ul><li>No additional asset protection </li></ul></ul>
  23. 23. Trust Administration <ul><ul><li>Disability of Trustmaker </li></ul></ul><ul><li>Alive and not so well </li></ul><ul><li>4 Ways </li></ul><ul><li>Voluntary </li></ul><ul><li>Disability Panel </li></ul><ul><li>Court Order </li></ul><ul><li>Absence, Disappearance, Detention </li></ul><ul><li>Disability Trustees Empowered </li></ul>
  24. 24. Before Disability Transition: <ul><ul><li>Make sure Family Doctor has copies of Health Care Power of Attorney and Living Will </li></ul></ul><ul><ul><li>Discuss, before disability, any concerns the Trustmaker may have </li></ul></ul><ul><ul><li>Have Trustmaker tell family doctor who will speak for them </li></ul></ul>
  25. 25. If Disability Occurs <ul><li>“ Disability” can be temporary – </li></ul><ul><li>Extended trips away from home </li></ul><ul><li>Working on a full-time project </li></ul><ul><li>Short-term hospitalization </li></ul>
  26. 26. If Disability Must Be Determined <ul><li>Check the trust document for who may determine disability </li></ul><ul><li>Disability Panel </li></ul><ul><li>Primary Care Physician </li></ul><ul><li>Specialist </li></ul><ul><li>Family Member/Friend </li></ul><ul><li>Decision </li></ul><ul><li>Unanimous </li></ul><ul><li>Majority </li></ul>
  27. 27. Certificate of Disability <ul><ul><li>Ensure quality care in a health environment </li></ul></ul><ul><ul><li>Look for guidelines – handwritten Health Care Instructions </li></ul></ul><ul><ul><li>Carry out wishes in the best interests of the individual </li></ul></ul>
  28. 28. When Disability is Permanent <ul><ul><li>Locate important documents – Red Books </li></ul></ul><ul><ul><ul><li>Living Trust </li></ul></ul></ul><ul><ul><ul><li>Power of Attorney </li></ul></ul></ul><ul><ul><ul><li>Healthcare Power of Attorney </li></ul></ul></ul><ul><ul><ul><li>Living Will </li></ul></ul></ul><ul><ul><ul><li>Asset Information </li></ul></ul></ul><ul><ul><ul><li>Notify Financial Institutions </li></ul></ul></ul>
  29. 29. When Disability is Permanent <ul><li>Determine Coverage & Apply for Benefits </li></ul><ul><ul><ul><li>Health Insurance </li></ul></ul></ul><ul><ul><ul><li>Disability Insurance </li></ul></ul></ul><ul><ul><ul><li>Long-term health coverage </li></ul></ul></ul><ul><ul><ul><li>Medicare - Medicaid </li></ul></ul></ul><ul><ul><ul><li>Social Security </li></ul></ul></ul>
  30. 30. Trust Administration <ul><li>Establish and Use a Record-Keeping System </li></ul><ul><ul><ul><li>Inventory Assets </li></ul></ul></ul><ul><ul><ul><li>Income </li></ul></ul></ul><ul><ul><ul><li>Expenses </li></ul></ul></ul><ul><ul><ul><li>Insurance Claims </li></ul></ul></ul><ul><ul><ul><li>Medical Costs </li></ul></ul></ul><ul><ul><ul><li>Consider using a CPA </li></ul></ul></ul>
  31. 31. When Disability is Permanent <ul><li>Establish and Use a Team of Advisors </li></ul><ul><ul><ul><li>CPA </li></ul></ul></ul><ul><ul><ul><li>Financial Advisor </li></ul></ul></ul><ul><ul><ul><li>Beneficiaries </li></ul></ul></ul><ul><ul><ul><li>Trusted Friends </li></ul></ul></ul><ul><ul><ul><li>Healthcare Advisors </li></ul></ul></ul><ul><ul><ul><li>Attorney </li></ul></ul></ul>
  32. 32. When Disability is Permanent <ul><li>Get new Affidavit naming successor Trustees </li></ul><ul><li>Contact Financial Institution </li></ul><ul><li>If the disability may lead to death, consider personal counselling review for estate planning purposes </li></ul><ul><li>Do not enter any risky or long-term business ventures unnecessarily </li></ul><ul><li>Keep good records </li></ul>
  33. 33. Trust Administration <ul><ul><li>ORGANIZATION </li></ul></ul><ul><ul><li>ORGANIZATION </li></ul></ul><ul><ul><li>ORGANIZATION </li></ul></ul><ul><li>Alive and not so well </li></ul>
  34. 34. When the Trustmaker Dies First, you grieve - Contact immediate family/friends - Use trust binder information - Arrange care for family and pets during next few days
  35. 35. When the Trustmaker Dies <ul><ul><li>Complete Funeral Arrangements </li></ul></ul><ul><ul><ul><li>May be paid from trust assets </li></ul></ul></ul><ul><ul><ul><li>Best not to pay from trustee’s own assets </li></ul></ul></ul><ul><ul><li>Do not immediately accept benefits – retirement accounts, annuities, investment accounts </li></ul></ul><ul><ul><ul><li>Consider use of disclaimers </li></ul></ul></ul><ul><ul><ul><li>Possible Estate Tax benefits </li></ul></ul></ul><ul><li>Postmortem Administration </li></ul>
  36. 36. After The Funeral - Begin Slowly <ul><li>Postmortem Administration </li></ul><ul><ul><li>Locate important documents – Red Books </li></ul></ul><ul><ul><ul><li>Living Trust </li></ul></ul></ul><ul><ul><ul><li>Last Will and Testament </li></ul></ul></ul><ul><ul><ul><li>Asset Information </li></ul></ul></ul><ul><ul><ul><li>Insurance Policies </li></ul></ul></ul><ul><ul><ul><li>Retirement Plan Information </li></ul></ul></ul><ul><ul><ul><li>Annuity Contracts </li></ul></ul></ul>
  37. 37. After The Funeral - Begin Slowly <ul><li>Locate assets </li></ul><ul><li>Gather and determine if the trust owns the assets or is beneficiary </li></ul><ul><li>Assets outside of the Trust </li></ul><ul><li>Keep a list of money spent, especially for the funeral and last illness </li></ul>
  38. 38. Collecting Assets <ul><li>Keep jewelry, securities, personal items of great value in a safe place, to which only Trustees have access </li></ul><ul><li>Use “Location List” provided by Trustmaker </li></ul><ul><li>Close or change brokerage accounts to reflect new trustee - (Use Affidavit of Trust) </li></ul><ul><li>Draw up new Affidavit if needed </li></ul><ul><li>Maintain accurate records of all account activity </li></ul>
  39. 39. Make appointments early. <ul><li>The first deadline is opening probate, if needed for any assets not owned by the trust and/or to eliminate creditors. </li></ul><ul><li>The most important deadline is the federal estate tax due 9 months after death. </li></ul><ul><li>If you get an extension for the return, the taxes are still due! </li></ul>
  40. 40. Trust Administration <ul><ul><ul><li>Trust Language </li></ul></ul></ul><ul><ul><ul><li>SS4 - EIN Application </li></ul></ul></ul><ul><ul><ul><li>Apply for and Collect Benefits </li></ul></ul></ul><ul><ul><ul><li>Prepare Inventory </li></ul></ul></ul><ul><ul><ul><li>Maintain adequate insurance coverage for homeowners, fire, flood, liability. </li></ul></ul></ul><ul><ul><ul><li>May consider change in investment philosophy after death to take advantage of step-up in basis or to recognize change in circumstances. </li></ul></ul></ul><ul><li>Postmortem Administration </li></ul><ul><ul><li>The Administrative Trust </li></ul></ul>
  41. 41. Trust Administration <ul><ul><ul><li>Pay final expenses and bills </li></ul></ul></ul><ul><ul><ul><li>Tax Planning and Elections </li></ul></ul></ul><ul><ul><ul><li>Pay taxes - income and estate </li></ul></ul></ul><ul><ul><ul><li>Prepare Final Accounting </li></ul></ul></ul><ul><ul><ul><li>Distribute Assets </li></ul></ul></ul><ul><ul><ul><ul><li>Personal Property </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Outright </li></ul></ul></ul></ul><ul><ul><ul><ul><li>In Testamentary Trusts </li></ul></ul></ul></ul><ul><li>Postmortem Administration </li></ul><ul><ul><li>The Administrative Trust </li></ul></ul><ul><ul><ul><li>Establish accounting system </li></ul></ul></ul>
  42. 42. Paying Debts and Taxes: <ul><li>Trustees and Personal Representatives may have different responsibilities in regard to taxes. </li></ul><ul><li>Get professional assistance with the estate tax return. </li></ul><ul><li>Remember federal estate taxes are due 9 months after death. </li></ul>
  43. 43. Trust Administration <ul><li>Postmortem Administration </li></ul><ul><ul><li>Establish and Use a Team of Advisors </li></ul></ul><ul><ul><ul><li>Attorney </li></ul></ul></ul><ul><ul><ul><li>CPA </li></ul></ul></ul><ul><ul><ul><li>Financial Advisor </li></ul></ul></ul><ul><ul><ul><li>Beneficiaries </li></ul></ul></ul><ul><ul><ul><li>Trusted Friends </li></ul></ul></ul>
  44. 44. Benefits and Insurance <ul><li>Telephone employee benefits insurance, social security, Medicare offices, with the following: </li></ul><ul><li>DECEDENT’S NAME </li></ul><ul><li>SOCIAL SECURITY NUMBER </li></ul><ul><li>DATE OF DEATH (OR INCAPACITY) </li></ul><ul><li>WHETHER DEATH WAS DUE TO ILLNESS OR ACCIDENT </li></ul><ul><li>YOUR NAME AND ADDRESS </li></ul>
  45. 45. More Notifications <ul><li>Veterans Benefits? </li></ul><ul><li>Club and credit memberships? </li></ul><ul><li>Disability Insurers? </li></ul><ul><li>If Trustmaker lived alone, contact utility companies, homeowners, landlord, arrange for maintenance of home (lawn mowing, etc.) </li></ul><ul><li>IRS - get a new Tax ID # for the trust </li></ul>
  46. 46. Trust Administration <ul><ul><ul><li>ORGANIZATION </li></ul></ul></ul><ul><ul><ul><li>ORGANIZATION </li></ul></ul></ul><ul><ul><ul><li>ORGANIZATION </li></ul></ul></ul><ul><li>Postmortem Administration </li></ul><ul><ul><li>The Administrative Trust </li></ul></ul>
  47. 47. What Is the Trust Called Now? <ul><li>If John Smith had the JOHN SMITH LIVING TRUST, upon John’s death, we would continue the JOHN SMIT LIVING TRUST (with original date) until we complete the administration and then there would be two trusts created: the SMITH FAMILY TRUST AND THE SMITH MARITAL TRUST (BOTH DATED AS OF THE DATE OF DEATH) </li></ul><ul><li>These two trusts are created out of the original </li></ul>
  48. 48. Federal Estate Tax Reduction <ul><li>Key Tax Savings Provisions </li></ul><ul><li>Unlimited Marital Deduction </li></ul><ul><li>$2,000,000 Exemption Equivalent </li></ul>
  49. 49. Federal Estate Tax Reduction <ul><li>Family Trust also called: </li></ul><ul><li>B Trust </li></ul><ul><li>Credit Shelter Trust </li></ul><ul><li>By Pass Trust </li></ul>Family Trust
  50. 50. <ul><li>Trustee Instructions: </li></ul><ul><li>Split Trusts Into Two Sub-Trusts </li></ul>Federal Estate Tax Reduction Family Marital Survivor May Be Trustee and Beneficiary of Both!
  51. 51. Federal Estate Tax Reduction <ul><li>Trustee Instructions: </li></ul><ul><li>Transfer up to Exemption Equivalent to Family Trust, Put Any Excess in Marital Trust </li></ul>Marital Excess 1st $2,000,000 (Today) Family
  52. 52. Federal Estate Tax Reduction <ul><li>Effect of Growth </li></ul>Excess To Later Beneficiaries But Included in Survivor’s Estate 1st $2,000,000 8,000,000 To Later Beneficiaries WITHOUT Federal Estate Tax Family Marital
  53. 53. Federal Estate Tax Reduction <ul><li>Tax Savings Determined By: </li></ul><ul><ul><li>Applicable Exclusion Amount </li></ul></ul><ul><ul><li>(Determined by Congress) </li></ul></ul><ul><ul><li>Funding of Family Trust </li></ul></ul>
  54. 54. Federal Estate Tax Reduction <ul><li>Available </li></ul><ul><li>Individual Name Assets </li></ul><ul><li>Living Trust Assets </li></ul><ul><li>Beneficiary Designations Payable to Trust </li></ul><ul><li>Not Available </li></ul><ul><li>Joint Assets </li></ul><ul><li>Beneficiary Designations Payable to Individuals </li></ul>Funding the Family Trust
  55. 55. What Is the Trust Called Now? <ul><li>If John Smith were single, his Living Trust could become either the John Smith Common Trust or could be broken in to multiple separate shares with trusts established for each child/beneficiary, depending on the features of the trust document and what John Smith intended. </li></ul>
  56. 56. CAUTION - GO SLOW <ul><li>Pension and other retirement elections are tricky - check with us BEFORE YOU ACT for the best financial outcome </li></ul><ul><li>Don’t sell assets until you understand the tax implications of the sale to the trust and its beneficiaries. </li></ul>
  57. 57. Disclaimers: The Final Control <ul><li>Disclaimers must be used in a timely fashion. </li></ul><ul><li>They allow an asset to pass to the NEXT heir, not the one YOU choose. </li></ul>
  58. 58. Follow the Trustmaker’s Wishes <ul><li>The trust document is your OPERATING MANUAL. Use it as a guide for what the trustmaker intended. </li></ul><ul><li>Remind advisors to speak to the specific trust plan - not generally. </li></ul><ul><li>Be careful about gifting, other than trust distributions. </li></ul>
  59. 59. When is a trust terminated? <ul><li>When the trust says so. Or </li></ul><ul><li>When beneficiaries reach a certain age. Or </li></ul><ul><li>When certain conditions are met. Or </li></ul><ul><li>When administration is too expensive as to become “burdensome” Or </li></ul><ul><li>Not for many generations. </li></ul>
  60. 60. Trustee Responsibilities <ul><li>Comply with terms of the trust </li></ul><ul><li>Comply with terms of the law relating to trusts </li></ul><ul><li>Be fair in dealings with the beneficiaries </li></ul><ul><li>Comply with tax requirements </li></ul><ul><li>Segregate, preserve and invest trust assets </li></ul><ul><li>Keep and render a full and accurate record and accounting of trusteeship </li></ul>
  61. 61. Loving Duties <ul><li>The trustmaker, out of loving concern, made an estate plan to provide protections from creditors and predators for heirs, while minimizing taxes and costs. </li></ul><ul><li>The successor trustee, out of love and duty, will honor that plan to ensure these instructions are followed. </li></ul>
  62. 62. Nuts and Bolts I Successor Trustee Training Thank you for attending our seminar. We hope you have enjoyed it. The Law Offices of Suzanne M. Graves, Inc .