Living Trust

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Trust Administration in Missouri…

Trust Administration in Missouri…

TRUST ADMINISTRATION IN MISSOURI

               Over the years, I have had the honor to serve as a trustee of a few living trusts, as my clients have requested.  It is an honor for these clients to choose me to help execute their estate plans and to work with their chosen trust beneficiaries in Missouri.

As a trust lawyer O’Fallon Missouri, it is interesting to see how things work in reality after a client has passed away.  I’ve always been pleasantly surprised at how much easier the process is than probate and a much less stressful process at that.

When a client passes away and I am the successor trustee, my job is to immediately secure all of the trust assets and to ascertain who are the beneficiaries of the trust.  It’s also my job to collect all the mail of the client to learn about any debts they may have.  This usually means having their mail forwarded to my office so that I can keep tabs on any amounts owed.

Because a revocable trust becomes irrevocable when the grantor (creator) dies, I have to obtain a tax identification number (TIN) from the IRS.  With the trust documents and the TIN in hand, I can visit the client’s bank of choice and access all funds held by the trust.  If the funds are payable on death to the trust, the process is a little different but I will still create a trust account to hold all the liquidated assets of the trust estate.

Assets like houses and cars have to be accessed and determined whether they are to go directly to a beneficiary via the trust.  If so, I make arrangements to work with that beneficiary to transfer that asset to them.  In a recent case, there was a mortgage against the property but very little cash.  The house was very nice but needed some money put into it to get it on the market.  Finding the right balance for this kind of situation is part of the job of the trustee.  In this particular case, we opted to stage the house but not to do things like paint it – we figured we could sell potential buyers on the fact that they could get it painted the color they want.  It turned out to be a great strategy.

Communication with beneficiaries is an important part of being a trustee.  In addition to providing a copy of the trust document to all beneficiaries, it’s important for the trustee to be proactive in letting beneficiaries know what’s going on and when they can expect their distribution of funds (or property) from the trust estate.

Finally, most trust documents empower the trustee to hire just about anyone they need to administer trust business, including financial advisors, attorneys and accountants.  It’s important that the trustee not moonlight as they are a fiduciary responsible to maintain trust funds for the beneficiaries.  Any loss attributed to malfeasance (investing in penny stocks resulting in financial loss, for example) by the trustee can result in personal liability.

Trust administration is a very complex area of law and requires the expertise of a trust administration lawyer O’Fallon, Missouri.

 

WHAT IS ESTATE PLANNING?

WHAT IS ESTATE PLANNING?

WHAT IS ESTATE PLANNING?

               As an experienced estate planning lawyer St. Charles, I spend much of my time explaining to clients what estate planning is and how it works.  Estate planning is the use of legal documents to not only distribute your assets when you pass away, but to name people to make decisions for you if you become disabled and/or incapacitated.

Overview of Estate Planning Documents

Common estate planning documents include a living trust, last will and testament, medical power of attorney, healthcare directive and financial power of attorney.

A living trust can help you avoid probate and provide rules about when your beneficiaries receive their inheritance.  An example would be creating a provision where your beneficiary only receives their inheritance when they reach a certain age.  That age is up to you and depends on your specific situation.

As one of the top estate planning lawyer St. Charles, you can count on me to also review the purpose of having a last will and testament, which is another document which can distribute property when you pass away.  If you have a living trust, the will usually leaves the property to the trust, not directly to a beneficiary.

Power of attorney documents allow you to name a spouse to make financial and healthcare decisions for you if you become incapacitated.  An example would be naming your adult children to do banking for you if you had dementia.  A medical power of attorney could name the same adult child to work with doctors if the dementia advanced to a point where you were considered mentally incapacitated by a doctor.

Choosing the Right Estate Planning Lawyer

You should feel comfort with the skill level and personality of any lawyer you meet with.  Many attorneys practice in too many areas of law, which reduces their effectiveness in all areas of law that they practice.  Therefore, you should focus on choosing a lawyer that practices almost exclusively in this area.

Making estate planning decisions is intensely personal due to everyone having different family dynamics, levels of wealth and health and concerns about the ability of children to make smart decisions if they inherit your nest egg.  There are many different components to determining how your estate plan is created and it’s important that we discuss all of the aspects that help you identify these components.

An initial meeting to discuss your situation will include who should be in charge of distributing your inheritance, who your beneficiaries are and specifics about their personality and what assets you have.  Our focus is always on identifying client concerns and worries, client goals and educating clients on how the documents we are drafting resolve their concerns and accomplish their goals.  If you’re in need of an estate planning lawyer St. Charles, contact Legacy Law Center today.

 

Estate Planning For Children Struggling With Addiction

Estate Planning For Children Struggling With Addiction

 

ESTATE PLANNING FOR CHILDREN STRUGGLING WITH ADDICTION

 Many parents who have children struggling with addiction or mental illness are often too consumed with caring for those children in the present to given thoughts about who and how those children will be cared for when they are gone. 

It’s a question I ask just about all of my estate planning clients who have children…do your children now or have they struggled in the past with alcohol, drugs, gambling or mental illness?  I’ll remind those clients that there is no stigma about their children’s addiction in my office.  I’m there to help and frank discussion of this issue is unavoidable for proper estate planning. 

So how might estate planning differ in this situation?

We start with a couple of baseline rules.  First, we acknowledge that an addicted child may never recover.  Second, because the child may never recover, we must ensure that the child never has easy access to funds, even if non-addicted children do have easy access. 

A special purpose trust is often the answer.  They offer traditional estate planning goals such as avoiding probate, minimizing taxes and ensuring the intended beneficiaries are named, but also can be tailored for unique family situations involving addiction.  Parents can include language that allows the trustee to deal with both the good and bad, including incentivizing the child to meet certain goals or requirements to receive a distribution from the trust.  An example would be staying sober as evidenced by a drug test or staying on a certain medication that helps the child control their addiction.

In 2017, delaying distributions of principal, as I’ve discussed in prior articles, is not always a bad thing.  As with estate planning for children who are spendthrifts, not distributing assets means they will be invested with a competent financial advisor instead, meaning the money should grow.  If the addiction problem worsens, this provides more resources to fight the addiction.  If the addiction problem recedes, the trustee has more resources to support the child and to encourage their growth through education and career changes.    

Another consideration for proper planning should be to have the child execute a healthcare power of attorney and HIPAA release after they reach 18.  These documents could allow you to help a child in crisis.  Without these documents, you have no legal authority to speak with doctors and discuss medical records and decisions.  While these documents can of course be revoked by your child, having them in place first is preferable to not having them at all. 

Estate planning for addictive children is different but much the same.  With careful consideration you can ensure that you protect your child from their addiction and from themselves. 

The Future Of Retirement and The Importance Of The Revocable Trust

The Future Of Retirement and The Importance Of The Revocable Trust

The Future Of Retirement and The Importance Of The Revocable Trust

As an estate planning attorney, I have had an interesting viewpoint of how the Great Recession affected my estate planning clients. Over the last two or three years, I have noticed a consistent worry of clients during initial conferences. They seem to be more worried in some cases about their children’s ability to retire than their own.

It makes sense. The Great Recession had far reaching effects on our country’s economy and some of those effect are still being felt today. But those with investments, they have not only recovered their nest egg but since increased the size of it handsomely as the stock market has reached all time highs. Retirement age parents, however, are concerned about their children’s student loan debt, costs of housing, delayed family creation and just generally about their well being when they are gone.

I met with a client couple recently who told me that each of their children had graduate degrees from prestigious schools and were now out in the world. One found a job pretty quick since he is in software engineering, but is getting crushed by a $1,500 per month condo rental, plus $1,500 per month in student loans (for the next 30 years). The other child had graduated last year, could not find a job in our area in her chosen field (computer science) and had taken a job as an office assistant at a company in St. Louis. She lives with them.

Each of them told me that they had started watching their spending habits so that they could leave as much of an inheritance to their children as possible, despite their terrific educations and work habits. This is a sea change in estate planning for those with a decent amount of assets to leave to their children.  So what I recommended at the end of our initial conference was a living trust whereby they would each act as the trustees and then when the second spouse had passed away, a successor trustee would take over. In their case, that successor trustee was not their children but a younger brother of the husband.

When the second spouse dies, unlike is often the case in traditional revocable trust planning, the children will not inherit everything. The younger brother will manage the trust for a set number of years at which time the 50/50 split inheritance of each child would be distributed outright. That will be a considerable some based on the couple’s current assets. But the beauty of this delayed distribution is that since the inheritance of each child will not immediately be received it can be invested and grow.

In other words, we are creating a retirement plan for the children via their inheritance. Bills of the children can still be paid as a supplement by the trustee, but the principal remains invested. So upon the death of the second spouse, the balance of any student loans could be paid off but the significant money left can continue to grow. Meanwhile, since the kids have careers starting, they can continue to save for retirement themselves as well. If the inheritance was given to them right away, that may not be the case. The plan we created ensures the kids will have the best of both worlds: A retirement source via inheritance, which will grow from the delay of distribution and the retirement they create for themselves, which should be easier through the assistance of at least some of their bills being paid as needed by the trustee of the revocable trust.

As an aside, I am not a financial advisor but one significant way retirement planning has changed and will continue to change is the loss of guaranteed income. Pensions are largely a thing of the past and workers have to invest more into building a larger nest egg so that they can replace that lost pension check, if necessary, with a draw from the nest egg itself. Many of my clients still enjoy significantly high incomes from combined pensions and Social Security. This can leave their nest egg largely intact. However, their risk tolerance is much lower than someone like their children. This again reinforces the beauty of the plan I outlined above.

Serving As Trustee of A Trust? Not As Easy As It Looks!

Serving As Trustee of A Trust? Not As Easy As It Looks!

SERVING AS A TRUSTEE OF A TRUST:  NOT AS EASY AS IT LOOKS

One of the services provided by Legacy Law Center is trust administration.  When a person passes away with a living trust (or other type of trust) in place, the assets in the trust must be administered, i.e. managed and/or distributed according to the terms of the trust document.

Serving as a trustee sounds like a glamorous position.  You’re in charge of money and you have a lot of power over that money, right?  Well, it’s not that simple.  For starters, a trustee is a fiduciary.  A fiduciary is a person who has the power and duty to act on behalf of another person (usually referred to as a “beneficiary”) under circumstances that require total trust, good faith and honesty.   A fiduciary must avoid self-dealing (buying trust property themselves at a discount for example) and must avoid conflict on interests.

Here’s where things get tough for most trustees.  They are in charge of a trust in which they are likely a beneficiary and other family members are beneficiaries as well.  Even in the best of families, one person in charge of significant assets is going to create circumstances in which the trustee’s moves and motives are questioned at every turn.

“Why was Mom and Dad’s home sold and not kept?”

“That accountant the trustee hired is too expensive, they should have used my accountant. “

“The trustee is using trust assets for himself.”

“What happened to Uncle Dave’s fabulous gun collection?  Everything just disappeared.”

Rest assured, in most family trusts, once the assets are in control of the trustee, the worst assumptions and second guessing will begin.  In some families it starts on the day of the funeral.  If the trustee lets things fester, trust litigation can develop.

I’ve seen circumstances where the trustee could not take the emotional toll that the role put on them.  They were desperate for my firm to help.   Hiring a trust attorney to assist in the administration of the trust can create a firewall between the trustee and beneficiary while ensuring the trustee carries out their duties effectively.  For example, in the situation where the beneficiaries are already doubting the moves of the trustee even before they have the assets in their control, the trust attorney can send out a letter stating that the beneficiaries are welcome to contact the firm for updates but that updates will come via letter once they are necessary.  A letter from the attorney outlining the timeline for resolution of the trust is often a good way to set expectations.  When that letter comes from the trustee, second guessing can only worsen.

Our firm does not draft trusts without a no-contest provision which states that any beneficiary who files a lawsuit contesting the trust potentially loses their inheritance for doing so.  Now, there are exceptions to these provisions, but courts will uphold them on the belief that if the grantor of the trust (the creator of it) wanted that provision, they meant for it to be enforced.

Remember this as well:  The trustee in most trust situations does not have to rush through the process of identifying assets and distributing them.  That’s a competing problem for a trustee because working too fast can lead to mistakes and a fiduciary that makes mistakes can be personally liable. 

Ultimately, the best move a trustee can often make is to utilize the provision in the trust allowing them to hire professionals to handle the investing of trust assets (financial advisor), to account for them (CPA) and to deal with the legal issues of the trust (attorney).  Once these professionals are hired, a trustee will often find that the mob puts down their pitchforks, that a path with an end in sight develops and that they handle their duties more effectively and efficiently.

One more thing:  We always remind our trustees that they were chosen for a reason and their crazy brother and angry sister were passed over as trustee for a reason.   You were the one chosen because you were the most dependable.