Selecting a Trustee is just as important as every other decision that you make when creating a Trust. If you are creating a Trust for the benefit of one of your family members, it is often a good idea to appoint another family member to be the Trustee. However, you should not do so blindly as there are risks to consider.

A Trustee needs to be financially responsible. Ideally, you would select someone who has shown a history of being responsible, not only with his or her own money, but with other people’s. How someone handles something that belongs to others is often different than how they handle their own property. Some people are more responsible with other people’s assets, and some are less responsible. When selecting a family member to act as a Trustee, make sure that you choose someone who is responsible and who also makes sound investment decisions. Do not appoint a relative whose investment strategies involve going to casinos, for example.

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Ryan M. Denman and Dennis D. Duffy

Duffy Law Office

Usually, the best Trustees are not family members. They are professionals. However, professional Trustees cost money and in some cases are too expensive for a particular Trust. In those cases be careful about which family member you appoint.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

One reason to create a Revocable Living Trust is to avoid family conflicts over your assets after you pass away. While your family may not fight in Probate court over your Will with a Revocable Living Trust, a trust does not remove the potential for all family conflict, especially if you appoint a family member as the trustee.

A trustee has the legal duty to act as a fiduciary for the trust beneficiaries. That means that the trustee must administer the trust in a way that is for the benefit of the beneficiaries. However, if a beneficiary does not like the way the trustee is handling the trust, the beneficiary can sue for breach of fiduciary duty. If you have family members who tend to argue about other things, imagine the arguments they could have over money. One way to avoid these family arguments is to appoint a lawyer to be the trustee. Attorneys who specialize in estate planning often serve as a professional administrators of the trusts. This removes the chance that a family member will argue over the trust just because he or she does not normally agree with another family member.

There are other ways to minimize family conflict over trusts. Speak to your estate planning attorney about your options.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

Placing your assets in a Revocable Living Trust is a great way to protect and preserve them for your loved ones after you pass away. However, you need to make sure that you take the appropriate steps to preserve the assets in the trust while you are still alive. If you have appointed yourself as the trustee, you will need to make sure that any money in the trust is invested wisely.

In today’s economy, investing wisely is not what it used to be. High-yield savings accounts used to be a great way to preserve some money and maybe make a little interest. It was never a way to get a huge return, but it was a good vehicle to make sure that some money was left if other investments went sour. However, today the annual inflation rate is 2.9% after taxes. With banks offering savings accounts around 1%, placing your trust’s money in a savings account actually loses money.  You need to educate yourself about how to prudently invest a portfolio. Learn some basics concepts to protect yourself. Do not violate the golden rule of investing which is  “Don’t put all your eggs in what basket” — You need to diversify.   But the real trouble then begins because, how do you accomplish diversification?   Finally,  after you do this you must then rebalance from time to time to manage risk.

Speak with an experienced attorney about ways to preserve your trust’s assets. Many estate attorneys offer trust administration services and you can appoint the attorney as the trustee. This is a great way to let a professional help you in making sure that your assets are still there when your family needs them.  You can also ask the attorney how to make sure a trustee is prudently inviting assets and not violating their fiduciary duty leading to personal liability for their acts or omissions.

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Thanks again.

Dennis D. Duffy

Duffy Law Office

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

Are you privy to this living trust information? Read on to see if you and your family have all the trust protections you can have. Here are 9 living trust secrets revealed.

1. You can minimize or eliminate federal estate taxes by using a credit shelter (i.e. AB trust) within your living trust.
2. You can provide asset protection for your spouse and children’s inheritance by creating lifetime trust shares within your own living trust.
3. You can avoid court interference into your financial affairs and having your assets frozen if you have strong disability language in your living trust and your trust is funded.
4. You can avoid probate by using a fully funded living trust.
5. You don’t have to disinherit a spendthrift, addicted, disabled, or minor beneficiary if you plan with a trust.
6. If you’re married and include a tax plan in your living trust, a significant portion of your legal fees to set up the trust are tax deductible.
7. Your trust is not a magic book, you must name trustees (and contingent trustees) to carry out your instructions.
8. Your trust needs to be updated every three to five years (or sooner if you experience a significant life event such as a new child, divorce, marriage, or move to a new state.)
9. You maintain control of your assets with a living trust.

If any of these 9 living trust secrets are a surprise to you and you don’t have an up-to-date trust in place, consult with a qualified estate planning attorney.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

You can determine how your assets are owned by looking at the title of the accounts on financial statements or the title of real estate on the deed.  Proper asset ownership is imperative to an estate plan that works.  If you don’t own your assets correctly, your estate plan won’t work.

If you have a revocable living trust, proper asset ownership includes funding your trust.  For most assets, this means transferring the title of assets to the name of your trust.  For beneficiary designation assets, this means changing the name of the beneficiary to the title of your trust.

A living trust title looks something like this, though it can be abbreviated:

Kimberly and Michael Jones, Trustees, or their successors in trust, under the Kimberly and Michael Jones Living Trust, dated October 23, 2011.  This is a joint trust for married persons. 

A separate for a married person would look like this:

Kimberly and Michael Jones, Trustees, or their successors in trust, under the Kimberly Jones Living Trust, dated October 23, 2011.

An individual trust for a single person or a person who is in a blended family and does not name a spouse as co-trustee would look like this:

Kimberly Jones, Trustee, or her successors in trust, under the Kimberly Jones Living Trust, dated October 23, 2011.

Important Points to Remember

• Your living trust only controls assets in the name of your living trust.
• Your will only controls assets in your individual name, that don’t have a beneficiary designation.
• You cannot control jointly owned assets (joint tenants with right of survivorship), unless you change the form of ownership
• Your will and trust do not control life insurance, retirement assets, or annuities made payable to an individual.
• Your will doesn’t control your house or financial accounts if you own them jointly with a spouse, child, or other individual.

To best ensure that your estate plan works, you must own your assets properly.  Consult with a qualified estate planning attorney to determine the best way for you to own your assets.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

Many clients do pick a family member trustee; however, other times professional trustee such as a corporate fiduciary or a CPA is chosen.  It depends on the type of trust, the assets involved, legal requirements that must be followed, and family relationships.

The advantages of using a family member trustee is that they care about you and your family, often don’t charge, and can get things done faster because there’s less red tape.  The disadvantage of using a family member trustee is that they often aren’t organized, don’t have experience, and may drop the ball on trustee duties.

The advantages of using a professional trustee is that they have experience, know how to jump through the legal hoops, and are covered by malpractice insurance.  The disadvantages of using a professional trustee are the expense and delay in getting things done.

Often, if a client is married, he or she will name the spouse as co-trustee of a revocable living trust to serve together when they are both alive and well.  If one spouse becomes incapacitated or dies, the other spouse can continue to serve as trustee.

For advanced planning trusts that are set up to avoid the federal estate tax, it’s important that the trust maker have no control and that legal procedures are carefully followed; therefore, a professional trustee is more commonly used.

Lifetime trusts are used to provide assets for the benefit of beneficiaries without giving the assets directly to them.  This provides asset protection so assets can’t be taken by creditors or divorcing spouses.  If the beneficiary holds both full legal title as trustee and full beneficial title as the beneficiary, the doctrine of merger applies and the court can order the beneficiary to distribute trust assets to his creditor.

On the other hand, if a professional trustee serves as trustee (or as a co-trustee with the beneficiary), the doctrine of merger does not apply and the assets are protected.

Consult with a qualified estate planning attorney to determine whether a family member trustee or a professional trustee is right for you in each trust situation.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

Avoiding probate is a common goal; many clients walk in the door with avoiding probate as a priority.  We can definitely avoid probate, but won’t recommend that you use jointly owned property to do it.  Owning property as joint tenants with right of survivorship is fraught with problems; and, there are other ways to avoid probate.

The best way to avoid probate is with a fully funded revocable living trust.  With the help of a qualified estate planning attorney, you design, draft, execute, and fund the trust.  The title of your assets (excepting qualified assets) is changed from your individual name or from joint names to the name of your trust.

Qualified assets are your tax deferred retirement assets; changing the tile of qualified assets accelerates all of the income tax.  Yikes!  Don’t do that.  Your estate planning attorney will give you specific instruction on how to fund your assets into your trust.

Regarding retirement assets, you do name your trust as the beneficiary of your retirement accounts.  This doesn’t change the title and it doesn’t accelerate income tax.

The title of life insurance policies can be transferred to the trust; and, be sure to change the designated beneficiary of the policy to your trust, as well.

Jointly owned property is NOT the best way to avoid probate because:

• It only avoids probate on the first death.  Probate is guaranteed at the second death, if there’s not good planning.
• Joint property often disinherits children and always disinherits children from a previous relationship.
• Jointly owned property can be seized by your joint owners’ creditors or divorcing spouse.
• It’s a loss of control.
• Your joint owner can force sale of the property.
• Your joint owner could take all of the assets out of the account; he or she owns 100% of the total assets, as do you

Wanting to avoid probate is completely normal; but, avoid probate with the help of a qualified estate planning attorney, not jointly owned property.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

If you’ve been appointed the settlement trustee of a loved one’s trust, you will be required to handle trust administration duties after your loved one dies.  It’s important to make sure that you fully understand the process of trust administration, so that you’re able to correctly handle your responsibilities.  Take a look at the information below, to better understand trust administration.  If you have any additional questions about the trust administration process, contact an estate planning attorney.

• As a trustee, you will be required to keep in contact with beneficiaries during the trust administration process.  This includes notifying beneficiaries that they are included in the trust.  Good communication is key.
• It’s also important to always follow the guidelines that are outlined in the trust document. This will help you make wise decisions and handle in alignment with the trust instructions.
• During trust administration, a trustee must keep proper inventory of assets.  This includes also properly managing assets so that they’re preserved and so that they’re distributed correctly.
• As a trustee, you must keep proper documentation that is organized and easy to read.  This allows others to understand the actions you’ve taken during trust settlement.
• You must handle all financial and tax responsibilities.  It’s imperative that you keep good records and make smart financial decisions.  If you ever need help, you should get the experience and advice of a professional.
• The trustee must always act in the best interest of the trust and its beneficiaries.  This is especially important when making any decisions as a trustee.

It’s imperative to fully understand your duties as a settlement trustee as well as the many aspects of trust administration.  This will allow you to perform your duties with due care.  If you have any questions about trust administration, consult with a qualified estate planning attorney.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.