Find Answers to Your Questions from Our Orange County Trust and Will Lawyers
We believe in client service. That means that we field questions daily! Our Villa Park and Placentia estate lawyers compiled a list of the most frequently asked questions about California trust issues, California wills, and California estate planning. We hope you find the answers you need.
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How do I choose an investment advisor to assist with a probate or trust administration?
As you administer a trust or an estate, you may find yourself responsible for investing assets. This is an important responsibility that cannot be taken lightly. Fortunately, trustees and personal representatives are often entitled to seek guidance from professional advisors. This includes attorneys, accountants, and financial advisors. Choosing the right financial advisor to assist you can feel overwhelming with so much at stake.
8 Guidelines for Selecting an Investment Advisor During a Trust or Estate Administration
As you begin the process of choosing an investment advisor, consider the following guidelines:
- Consult with an experienced trust and estate administration attorney. Often, an attorney can help you choose an investment advisor to assist in carrying out your responsibilities.
- Seek recommendations from a trusted tax advisor.
- Review the credentials of any potential candidates. Be certain to review any special certifications that the investment advisor may have that may be beneficial when managing the assets of a trust or an estate.
- Ensure that the investment advisor is familiar with the unique guidelines and rules that apply to trustees and personal representatives when investing the assets of a trust or an estate.
- Ensure that the investment advisor is familiar with the California Probate Code and the Uniform Prudent Investor Act. As a fiduciary, you may be bound by these laws; therefore, your investment advisor must be familiar with their terms.
- Ensure that the investment advisor is comfortable reviewing a trust and is familiar with the terms of the trust that you are in charge of administering.
- Choose an investment advisor who is responsive and communicates well and clearly.
- Select an investment advisor who is responsible and diligent. Ultimately, it is your responsibility to manage and invest the trust assets, so it is crucial to find an investment advisor who will help, and not hinder, the administration process.
To learn more about administering a trust or an estate, contact us today at (714) 459-5481.
How do I divide up the trust property in an A-B trust after the first spouse dies?
When a married couple creates an estate plan designed to minimize estate taxes, these plans often involve trusts known as A-B trusts, credit shelter trusts, or bypass trusts. The purpose of these trusts is to set aside a certain amount of trust assets after the first spouse dies, in order to preserve the first spouse’s estate tax exemption amount. Successor trustees of these trusts will be called upon to divide the trust assets into two sub-trusts, the “A” trust and the “B” trust, after the first spouse dies. The “A” trust is sometimes referred to as the marital trust, and the “B” trust is referred to as the bypass trust or the family trust.
5 Tips for Dividing Trust Assets Between Sub-Trusts in an A-B Trust
Dividing the trust assets between the sub-trusts is an important task that requires careful consideration of tax and other consequences. The following are five helpful tips:
- The court is typically not involved in the division of the trust assets between the two sub-trusts.
- The trustee must first obtain the fair market value of all of the trust’s assets. This value is determined as of the death date of the first spouse.
- The terms of the trust dictate how much of the trust assets should be allocated to each sub-trust. This is typically done through a variety of methods, such as by using various types of formulas, disclaimers, or what’s known as a Clayton election.
- The trustee must carefully consider whether the assets will appreciate or depreciate when determining what should be used to fund a sub-trust. Since the assets going to the “B” trust are valued as of the date of death of the first spouse, with no estate tax due on these amounts until the surviving spouse dies, it often makes sense to place higher appreciating assets into the “B” trust.
- The assets can also be split between the two sub-trusts.
Successor trustees are advised to seek assistance from tax advisors and an experienced attorney when dividing assets in a trust into sub-trusts. To learn more, we encourage you to contact us at (714) 459-5481.
Who receives my loved one’s airline miles during the administration of the estate?
Initially, airline miles and club memberships may seem less important than other assets during the administration of an estate, but these assets can sometimes prove to be quite valuable. This may be true from either a personal or financial standpoint. For example, if the decedent was a frequent traveler and earned many airline miles, he or she could have amassed a great deal of valuable points. In addition, if the decedent enjoyed many previous memories with a loved one spent golfing at a golf course, the decedent’s country club membership may have significant personal value to a beneficiary. For these reasons, it is important to understand how certain items are designated and who receives certain assets under the terms of the decedent’s estate.
5 Guidelines for Distributing Airline Miles and Memberships
Airline miles and similar assets are handled according to the decedent’s estate planning documents. The following are five general guidelines for estate administrators:
- Airline miles, rewards points, season tickets, and club memberships typically are not considered “tangible personal property.”
- If the will or trust specifically defines “tangible personal property” to include these items, however, that serves as an exception.
- If the asset is not considered tangible personal property, it will not pass to the beneficiaries outlined under that provision in the will or trust.
- The asset will, instead, be considered part of the residuary estate. The will or trust will direct who should receive these assets.
- The will or trust may, in some cases, specifically address these assets separately and distinctly from the other assets of the estate. In these cases, the asset should pass according to the decedent’s instructions.
It is crucial for estate administrators to understand how every asset of an estate should be distributed. Doing so can help avoid costly disputes during the administration process. We encourage you to learn more by contacting us today at 714-459-5481.
Do I have to use arbitration to resolve a dispute that arises during a trust administration?
If you’re in charge of implementing an estate plan, you may find yourself at the center of a dispute involving a trust. There may be other options for resolving these disputes short of heading to court and pursuing litigation. One such example is the arbitration process. Since there are pros and cons to using arbitration, it is important for trustees to understand whether arbitration is mandatory for a particular situation.
How to Determine Whether Arbitration Is Required to Resolve a Trust Administration Dispute
How can you tell whether arbitration is mandatory for resolving your trust administration dispute? Consider the following:
- Consult with an experienced attorney. The trust language may not be perfectly clear as to how disputes should be handled. An attorney can help you understand if arbitration is mandatory and how best to proceed with regard to the resolution of the dispute.
- Carefully review the terms of the trust you are in charge of administering. Some trusts may be silent with regard to the issue of arbitration. Others may present it as an option available to trustees. And in other cases, the trust document may dictate that arbitration is mandatory and must be utilized when a dispute arise among trustees, beneficiaries, or third parties.
- Consider whether or not the mandatory arbitration process will be binding on successor trustees and beneficiaries. These parties never signed the trust document when it was created. Therefore, the arbitrator may not have jurisdiction over these parties.
If you are facing issues while attempting to administer a trust, we are here to help. Check out our client testimonials page today to learn more.
Can funeral expenses be deducted from taxes?
After your loved one dies, you may be in charge of filing any related tax returns. This may include the decedent’s last income tax return, an estate tax return, and an estate income tax return. It is important for the person in charge of administering the estate to seek out all applicable tax deductions. One such deductible expense may be the expenses associated with the cost of the funeral.
4 Tips About Funeral Expenses and Tax Deductions
The following is an overview of the tax deduction rules for funeral expenses applicable to estates:
- If the estate’s funds are used to pay the costs of the funeral, those costs can be deducted on the estate’s estate tax return.
- If any funeral cost is relevant to the ceremony or burial and is a reasonable part of the service, it is eligible to be deducted. This may include the costs of hiring a funeral director, embalming and preparation fees, and internment of the body.
- If you choose to report funeral expenses on the estate’s tax return, use form 706. Schedule J—Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims—is the proper place to enter the expenses. Funeral expenses should be itemized on Line 1, Section A, and the total of the expense should be entered under “Total.”
- If the estate was reimbursed for any of the funeral costs, the reimbursed amount must be deducted from your total expenses before claiming them on Form 706. This may include government payments such as Social Security or Veterans Affairs death benefits.
Completing the tax returns for an estate is no easy task for those without the appropriate background and experience. Fortunately, we are here to help. Check out our client testimonials page today to learn more.
Why do I need to understand the distribution standard of a special needs trust?
If you are the trustee of a special needs trust, you may quickly discover that there are many unique rules and obligations that are associated with the administration of this type of trust. It is important for trustees to fully understand when and how distributions of the trust assets should be made to the beneficiary. Failing to do so could jeopardize certain benefits received by the beneficiary.
4 Tips for Understanding Distribution Standards and Special Needs Trusts
The following are four tips for trustees to consider with regard to the distribution standard contained within the special needs trust they are administering:
- If the trust distribution standard does not allow the trustee to make distributions that will reduce the Social Security benefit, the trustee will not be allowed to make distributions to the beneficiary for in-kind support and maintenance—for such things as food, rent, mortgage, property taxes, insurance, electricity, heating fuel, gas, water, garbage collection, and sewage expenses.
- If the trust distribution standard does not allow for the payment of these expenses as in-kind support, the trustee should consult with an attorney to determine whether the trustee should be modified in order to authorize such distributions. While this may reduce Social Security benefits, in some cases the payoff might outweigh that reduction.
- If a beneficiary receives Section 8 housing benefits, the public housing authority could consider that amount as income and adjust the monthly rent.
- Even if there are government benefits, it is important for the trustee to understand when and how distributions should be made, such as for the beneficiary’s health, education, maintenance, or support.
When it comes time for you to serve as a trustee, we can provide valuable guidance. We encourage you to learn more about how we have helped other trustees by checking out our client testimonials page today.
I have been asked to serve as trustee of a Crummey trust. What should I do next?
In order to minimize estate taxes, your loved one may have decided to create what’s known as a Crummey trust. This type of trust is often used to hold insurance policies. The creator of the trust is able to make annual, tax-free gifts to the trust in order to pay the premium on the policy. If all of the proper rules are followed, the value of the death benefit of the policy will not be included in the creator’s estate after he or she dies. Your loved one may ask you to serve as trustee over this type of trust. It is important to ask certain questions before proceeding.
8 Questions to Ask Before Administering a Crummey Trust
In order for a Crummey trust to work effectively, the trustee must follow the requirements carefully and exercise caution during administration. Before proceeding, we encourage you to ask questions about the following:
- The names and contact information of the beneficiaries of the trust. This is crucial because as trustee of a Crummey trust, you will be required to provide beneficiaries with notice whenever a gift to the trust is made. This is known as a Crummey notice.
- How the proceeds of the life insurance policy are expected to be used.
- The insured’s expectations as to how the policy and other trust assets should be managed.
- The general intentions of the grantor of the trust with regard to the purpose of the trust and the distribution of its assets.
- The amount of the policy’s death benefit.
- The premium amounts for the policy.
- The terms of the policy, including whether the policy is a term, universal, or whole life policy.
- The names of the grantor’s preferred tax and financial advisors.
The good news for trustees is that they can seek guidance from a knowledgeable professional to learn what’s required for a trust administration. To get started, contact us today at (714) 459-5481.
Do I have to notify the Social Security Administration that my loved one has died?
When your loved one dies, you may feel as though the list of responsibilities that you face is endless. There are many tasks placed upon the administrator of the estate, including the obligation to notify the proper entities of your loved one’s death. One such obligation is to notify Social Security.
5 Steps for Dealing with Social Security Benefits After a Loved One Dies
How do you notify Social Security of your loved one’s death? The following is an overview:
- Obtain your loved one’s Social Security number.
- Contact the Social Security office either by phone or in person.
- Contact the bank where your loved one’s Social Security checks are deposited. Notify them that your loved one has died. You will likely have to provide the bank with a copy of your loved one’s death certificate.
- Notify the bank that you would like all Social Security checks that are deposited after your loved one’s death to be returned to Social Security. Because Social Security checks are one month behind, the check received the month after your loved one dies must be returned also.
- Return any uncashed checks that are dated the month of your loved one’s death or later to your local Social Security field office.
In addition to Social Security, there are other government entities that may also need notification of your loved one’s death. These agencies may include the Veteran’s Administration, the Defense Finance and Accounting Service, the Office of Personnel Management, the U.S. Citizenship and Immigration Service, and the Department of Motor Vehicles. Fortunately, your attorney can help you identify the appropriate agencies and entities that need to be contacted during this process.
I am administering an estate that has unpaid credit card debt. What should I do?
During the process of administering your loved one’s estate, you may have many questions. One such question may involve what to do with the debts of the decedent. Credit card debt is one common example of a debt that may exist in an estate. Knowing how to handle this debt can help ensure that the administration is carried out properly.
7 Steps for Handling Credit Card Debt in an Estate
If you are in charge of administering an estate that contains credit card debt, consider taking the following steps:
- Determine whether the credit card account associated with the debt had a joint account holder or a co-signer. If so, other parties may share in the responsibility for the debt.
- Determine the final balance of the credit card account. To do so, you can contact the credit card company directly. The company has 30 days in which to provide the balance.
- Determine all existing debt and if there are sufficient funds or assets in the estate available to pay it.
- Contact a knowledgeable attorney for guidance. Under the law, debts must be paid in a certain order. For example, unpaid tax debt owed to the IRS will have a higher priority than credit card debt.
- Consider negotiating with the credit card company in order to reduce the balance that is owed. Many companies will agree to far smaller balances than what is truly owed in order to collect some amount of the debt.
- Sell an asset of the estate, if necessary, in order to pay the credit card debt.
Unless you have prior experience administering an estate, it is important to seek assistance from a knowledgeable attorney. We are here to help. We encourage you to check out our many case results for more information.
Am I still power of attorney if my loved one recovers from his illness or dies?
No. If your loved one named you power of attorney, the legal document allows you to act on his behalf while he is incapacitated. In other words, you have the authority to make financial decisions, pay bills, and access bank accounts while your loved one is sick and unable to do so himself.
However, your rights as power of attorney may end in one of three ways. You will no longer be power of attorney when:
- Your loved one recovers enough to make financial decisions again. If your loved one is healthy enough to make financial decisions again, the power to do so reverts back to him.
- Your loved one dies. When your loved one dies then the right to make financial decisions goes to the executor, trustee, and others provided with that authority for his estate plan.
- Your rights end as described in the power of attorney document or California law. The power of attorney document may have specific provisions that explain when the power ends. Additionally, if your spouse is named as your power of attorney and you get divorced, the power of attorney may no longer be valid in California.
Power of attorney is meant to be a temporary power that helps a loved one through a time when he may be unable to make financial decisions for himself. It is not a permanent appointment, but it is an important one.
To find out more about your duties as a power of attorney or to learn why you might want to name a power of attorney in your own estate plan, please read the related links on this page. Also, please follow us on Facebook to stay updated on estate planning news that might affect you.
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