Trusts can be essential to an estate plan. Individuals can spend a great deal of time deciding which assets are placed in a trust. Estate planning advisors say equal consideration should be given to choosing the fiduciary or trustees who will manage the trust.

The size of a California estate, the complexity and scope of a trust and the financial skill set of a potential trustee are factors used to come to a trustee decision. Family members, close friends or associates are often first choices. Professional estate managers, like trust companies or banks, offer expertise and neutrality on family matters.

A trustee’s duties can be extensive. Estate asset management and distribution are time-intensive tasks, especially when trusts affect heirs over several generations. Financial and legal savvy or experience is almost an unavoidable requirement for the trustee position.

What might be hardest for a family member who becomes a trustee is managing the trust without overlapping personal influence. A trustee’s own feelings or the desires of heirs cannot affect administrative duties.

Corporate trustees have no personal investment, but they do cost money. Fees paid for professional trustees are inescapable, usually equal to an asset percentage. Family members are often willing to manage a trust for little or nothing.

Banks or trustee companies are frequently recommended for trusts with more than $50,000, although a larger trust that is not complicated could readily be handled by an individual. Corporate trustees are also advised for long-term trusts, simply because the trusts often outlive individual trustees.

Consider the work the trustee job entails, especially when considering an individual to do the job of asset management. Asset distribution, tax filings, investment choices and administrative work are required.

Third-party or professional trustees can be useful for individuals who expect disputes among heirs. A compromise solution that an increasing number of estate planners are suggesting is a co-trustee arrangement – a family member and a corporate entity who work together to manage the trust.

Source: online.wsj.com, “A Matter of Trust,” Jeanine Skowronski, Sept. 10, 2012

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Legal professionals stress choosing estate executors and trustees carefully. One of the reasons is the enormous financial responsibility that trustees carry for beneficiaries of an estate. The person assigned to a trustee position must have the competence and professional advice and resources to do the job.

Among the duties of a California estate trustee is a trust accounting, a yearly statement that is sent to beneficiaries detailing trust activities. The accounting must meet the requirements of the California Probate Code and fully explain how the trust’s assets, liabilities and expenses have been handled in the previous year.

Beneficiaries receive the trust accounting along with a mandatory notice, which spells out the recipient’s legal rights to dispute the trustee’s work within three years. Sometimes trustees ask a court to preapprove the accounting to limit the time beneficiaries have to contest it.

Trustees are expected to retain all the supporting documents for the information provided in the accounting. Trusts may instruct trustees to add new beneficiaries to the accounting update over time or dispense completely with the accounting duty. Trustees who are absolved of providing a trust accounting often voluntarily provide it to minimize the chances of a legal claim against the management of the estate. Beneficiaries always have the opportunity to ask a court to intervene when they believe an estate is being mishandled.

Rules pertaining to trust accounting differ from similar tax or business document preparations. Trust accountings involve “balancing” estate charges and credits using unique “carry values” and separate schedules for liabilities, processes that could easily overwhelm a trustee with little financial experience.

The complexity of a trustee’s duties, especially for estates of great depth and wealth, are open to constant legal scrutiny. Estate planning experts encourage individuals to take into consideration how much time, effort and expertise are needed to deal with estate management before appointing a person for the role of trustee.

Source: lakeconews.com, “Estate Planning: Basics trustees should know about trust accountings,” Dennis Fordham, Aug. 31, 2012

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Legal experts say some people are so paralyzed by unknown changes in gift and estate tax laws that they are placing estate planning on hold. Many California experts believe not drafting estate planning documents, because estate tax exemptions and rates are uncertain, is a mistake.

Wills and trusts can be designed to be flexible enough to accommodate tax law shifts, according to estate planning specialists. Creating a foundation with a basic estate plan is the initial goal. The plan can always be modified later to fit changing life and lawmaker events.

There are still items within an estate plan that remain relatively constant, whether tax rate zoom or exemptions fall. Choices for the guardian of your children, an executor, a trustee or a charitable organization can be made regardless of tax laws. Medical directives and powers of attorney can be established without tax interference.

Every estate plan requires an accounting of estate assets and debts, which should be compiled and updated annually to prevent later confusion among estate managers, heirs and courts. It is important to share information about the location and content of the list with an executor.

Legal experts also urge clients to create estate cash plans. Attorneys, estate management fees, survivors and tax bills all require cash payments. Estate plans can include a cash account or instructions to create liquidity.

Many people automatically choose a spouse or adult child to be a trustee or executor. Estate planners recommend making this decision carefully. Trust and the ability to do the job well are qualities not every immediate family member possesses.

Informing family members about your estate plan gives them an idea what to expect, although most estate advisors discourage passing around copies of wills or over-sharing details.

Estate plans are never finished. They always need revising throughout the duration of a person’s life. Relationships, assets and tax laws change. That’s why estate plan updates need to be updated regularly. Advisors suggest reviews every two to three years or sooner, if life-changing events occur.

Source: investingdaily.com, “10 Basic Rules for Every Estate Plan,” Bob Carlson, Aug. 20, 2012

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Economic times have been hard in California. So, it would stand to reason, if there is a way to save a buck (or two) by doing something yourself, it would be a good idea. Right?

The advent of online resources and do it yourself legal forms for many counties has made many legal processes to appear more streamlined and less likely require legal assistance. So, why not skip the attorney and fill out a do-it-yourself will or trust? No doubt generic forms will save you money. Or will they?

Individuals who take over setting up their own wills, beneficiaries, executors, trusts and trustees can download or obtain copies of legal forms. The fill-in-the-blank documents appear easy to manage.

An estate planning attorney does cost more than the prefab legal documents. There are plenty of reasons for that. An experienced lawyer understands the complexity of probate laws, the subtleties associated with constantly-changing state and federal rules and is up-to-date on estate-related tax issues.

When you fill out a generic will or trust, you may have a question. How do you know if a generic form is acceptable in California? What if estate tax rules change? Instructions, advice and answers may be sparse, if available at all.

Every estate plan is different. No matter what size estate you have, you are not a generic individual. The only person to be held accountable for an error on some of the most important paperwork you’ll ever sign is you. Victims of your mistakes could be your heirs.

An article recently described the dilemma of a man who thought he was saving money in 1984 by creating a do-it-yourself living trust. The only problem was that he misdated the deed to his home, which was transferred to the trust.

Twenty-five years later, the now-elderly man wanted to borrow against the paid-off property to give his daughter a cash gift. The bank refused the loan. The incorrect date on the deed transfer blurred the legal chain of title.

The 75-year-old man contacted an estate-planning lawyer. The legal bill to straighten out the mess was $2,000, about twice what the man would have paid if he had used an attorney to draft the trust two-and-a-half decades ago.

This example is one of many that illustrates the importance and value of legal advice when it comes to estate planning. While it may seem wise to save money at the moment, the long-term cost of that frugality can be much more costly later.

Source: forbes.com, “What Could Happen If You Write Your Own Living Trust?” Deborah L. Jacobs, Aug. 16, 2012

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If you don’t have an estate plan, you aren’t alone. Many Californians die before drafting wills, creating confusion among heirs and leaving asset distribution to probate judges. Even individuals who have estate plans can wreak havoc among beneficiaries, if the plans are not updated regularly.

Wills and trusts preserve assets and shield them from over taxation. The entire legal strategy to leave assets to loved ones can be upended when estate plans fail to reflect changes in relationships, income and laws.

Some experts recommend reviewing an estate plan every time a significant event like a windfall, marriage or tax law change occurs. If none of these events occurs, a review every five years is recommended.

Estate assets that aren’t taxed this year might be taxable in 2013. The 35 percent federal estate tax rate and exemption ceiling are likely to change without congressional action. The $5.12 million estate tax exemption for 2012 could dwindle to $1 million. What goes for tax revenues does not get passed to heirs.

Flexibility allows estate plans to weather tax changes and income fluctuations. Experts recommend transferring blossoming assets to family members. Shifting an asset now that is expected to increase in value later can benefit the recipient and keep the appreciation from being taxed with your estate.

Take advantage of tools to transfer wealth before they become unavailable. Some vehicles like trust or family installment sales and GRATs (grantor retained annuity trusts) could disappear with next year’s presidential budget proposal.

Marriage, births, deaths and divorce have immediate impacts on estate plans. New parents can establish a guardian for their children with a will. Grandparents may want to reconfigure asset distribution with every grandchild born.

Estate plan reviews allow individuals to include new family members and exclude outdated beneficiaries like a former spouse or a spouse who is deceased. Along with an estate plan revision, individuals will also want to update beneficiary names on insurances, retirement plans and other inheritable accounts.

Source: forbes.com, “When Should You Redo Your Will?” Deborah L. Jacobs, Aug. 9, 2012

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One of the most challenging factors in estate planning can be preserving your assets for heirs and beneficiaries. When wills and trusts are not set up properly, monitored and changed appropriately, assets that were meant for loved ones can turn into unintentional government tax revenue.

Estate planners have been urging clients with sizeable assets to pay special attention to congressional action on the federal estate tax. The liberal $5 million estate tax exemption and 35 percent tax rate were expected to expire at the end of this year. Congress recently voted to keep those beneficial amounts intact through 2013.

Federal lawmakers made no promises to keep exemptions or the tax rates at those levels beyond that date.

Individuals now have an extra year to strategize asset protection plans according to these generous standards. Unfortunately, the extension may not be repeated beyond next year. Without a congressional compromise after the presidential election, there is a strong likelihood that the $5 million exemption rate will fall to $1 million and the estate tax rate will jump from 35 to 55 percent in 2014.

The uncertainty of future estate tax laws has many individuals searching for ways to protect what they hope to share after death. One suggestion estate planners make is the purchase of life insurance policies to cover the tax burden of heirs.

A tax professional, legal advisor and insurance expert can help you review the policies you already have. If old policies are too costly or don’t serve the purpose for which they were intended, it might be time to sell them and reinvest in better coverage.

If an estate is worth less than $5 million – as long as tax rates and exemptions remain constant – the extra insurance protection may be unnecessary.

Source: huffingtonpost.com, “Life Insurance Can Be Your “Lifeline” In Estate Tax Debate,” Wm. Scott Page, Aug. 9, 2012

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The brothers, sisters and father of legendary pop singer Michael Jackson were not named as heirs of their late brother’s estate and now the siblings have publicly, but not legally, challenged the validity of Jackson’s will. Many legal experts say the famous siblings’ argument would be futile in probate court.

Jackson’s brother, Randy, has been the most vocal. He claims the will Michael Jackson signed in Los Angeles a decade ago is false. The youngest Jackson says his brother was at an event in New York that day and could not have signed the legal document. Randy Jackson and his siblings want estate executors to resign.

The will excluded all of Michael Jackson’s family except his mother, Katherine Jackson, and the singer’s three children. The court also has possession of a previous will Jackson signed in 1997 that cut off his siblings from any inheritance.

Legal observers say the chance to wage a court battle over Michael Jackson’s will has expired. Even if the will were invalidated, the siblings would gain nothing financially. In any California court, Jackson’s children would take priority.

A Superior Court accepted the Jackson will in November 2009. Family members had four months to dispute it. Legal advisors say if the Jackson siblings had any argument at all; it would be that they were not notified of the court action in time to challenge it.

Jackson’s father made an appeal in court the year after his son’s death to receive a fraction of the estate. A California 2^nd District Court of Appeals denied the request because Jackson’s father was never listed as an heir and because the request too late.

Jackson estate executors updated a probate judge on the late singer’s estate value. Jackson died $500 million in debt. Posthumous earnings of $475 million have allowed the estate to pay off most creditors and provide a lavish lifestyle for Jackson’s mother and children.

Executors recently approved a request by Jackson’s mother to increase her monthly estate allowance by $35,000.

Source: huffingtonpost.com, “Michael Jackson’s Will: Siblings To Resume Questions About Will’s Validity,” Anthony McCartney, Aug. 1, 2012

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The management of a California family’s $11 million trust fund is under careful watch by federal law enforcement officials and family members. A probate judge in Los Angeles County recently approved a $50,000 compensation payment to one of the estate trustees, who is under FBI scrutiny.

The trustee handles the multimillion dollar trust for an 88-year-old woman whose heirs say has suffered dementia for several years. The estate manager is also a financial advisor for the Kabbalah Centre, which accepted a $600,000 donation from the elderly woman’s trust fund in 2005.

Law enforcers in Palos Verdes Estates and later FBI agents began to wonder if the donation was legitimate and launched an investigation. The Kabbalah Centre is under a separate investigation for possible tax evasion.

Officials are also questioning the dementia patient’s purchase of a piece of real estate owned by the trustee. The woman had lived in the same home for 30 years before emptying the family trust fund of $2 million to buy the vacant land and build a new home.

The real estate deal allegedly netted the trustee a profit of $300,000. The trust has not been charged with any wrongdoing and insists that the family’s money was managed frugally and without waste.

The $50,000 payment approved by a probate judge is a sum equal to the yearly service the trustee provides for the trust fund’s management. The probate court issues payments from the fund because the trust was created by the dementia victim’s mother. The trustee’s compensation request received written approval from the elderly trust beneficiary.

Fourteen family members stand to benefit from the family trust at the time of the elderly woman’s death. The relatives have made no allegations against the trustee. Some have made inquiries into the federal investigation.

Perhaps as a precaution, family plans are now underway to sell off the Beverly Hills home built on land formerly owned by the financial advisor. Proceeds are earmarked to be returned to the family coffers.

Source: articles.latimes.com, “Probate judge OKs payment for trustee under investigation,” Harriet Ryan, July 18, 2012

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Teenagers typically do not think about medical directives, guardianships and estate planning. Most California teens and many parents don’t realize or recognize that, once a child reaches 18, some health care and financial options are lost.

The moment a teen becomes a legal adult, the doors to the child’s health care information close. Doctors do not defer to parents for an adult teen’s medical decisions, to avoid violating patient privacy provisions in the Health Insurance Portability and Accountability Act (HIPAA).

If a teenager, who is at least 18, is incapacitated by an accident or illness and cannot make medical choices, doctors and courts — not parents — step in. The legal method to avoid this unfortunate event is to create a durable power of attorney for health care, which allows family members to have access to their teen adult’s medical information and make decisions.

A health care durable power of attorney will also clarify guardianship, should incapacitation require a young adult to have a long-term or lifetime caregiver beyond a medical setting. Without a legal document that spells out these health care terms, a judge becomes the child’s decision maker.

A second durable power of attorney for property would give parents a way to retrieve a teen adult’s financial records and savings. Monies would be accessible to parents for paying the adult child’s medical bills and managing the young person’s finances.

Estate planning attorneys recommend drafting durable powers of attorney as soon as a child reaches legal adulthood. Some states provide laws that protect families in these awful circumstances, but only durable powers of attorney are effective legal tools that can expand beyond state and international borders.

An 18-year-old may be looking forward to positive events of getting older, like social gathering or a college education, without giving a thought to health care directives or estate issues. Parents can provide a measure of extended protection for their child into adulthood with health care and property durable powers of attorney.

Source: dailyherald.com, “Your teenager is now an adult, but what does that really mean?,” Jean Murphy, July 15, 2012

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He was her boyfriend and the company controller in her Silicon Valley trust administration business. Unfortunately, the man may also be the embezzler behind a scheme that caused more than $17 million in clients’ funds to evaporate.

The FBI is tracing the California backstory of the relationship between a Santa Clara County businesswoman and a partner she thought she could trust with over $104 million.

Furthermore, probate records say the trust administrator was inadequately insured to cover losses to the trust funds and estates of her clients.

The private asset manager must restore the accounts, even as she convinces the FBI that her former boyfriend is responsible for bleeding them dry. No arrests have been made to date.

Government officials have confirmed that they are investigating a theft at Backhouse Fiduciary Services.

The trust administrator’s attorney claims his client had been duped until February, when she discovered a large discrepancy between company records and a Heritage Bank balance. The bank supplied the business owner with nearly 50 wire transfers from 35 trusts, dating back to May 2010. Every transfer was authorized by the controller.

The woman’s now ex-boyfriend allegedly fled after the she questioned him about the transfers.

A separate law firm is working on behalf of the depleted trusts attempting to follow the money trail. Attorneys are expected to canvas the controller’s associates and company lenders to find out why no red flags signalled the alleged white collar wrongdoing.

The FBI, California authorities and clients were notified of the depleted trust funds immediately after the money was discovered missing.

Many individuals and families automatically assume that the credentials and business practices of a trust company are impeccable. Private trust companies may not have the same fee structure, account management, investment strategies or legal reviews as commercial institutions.

Experts recommend making no assumptions about the integrity of a trust company. The custodians of estate and trust funds may be just as vulnerable to theft and corruption as any other business. Uninsured trust funds may never be recovered after poor money management or crime depletes, or erases, them.

Source: miamiherald.com, “FBI probes $17.3 million in thefts from trust funds,” Karen De Sa, July 7, 2012

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