Trust Administration: How a Trustee Can Collect Reasonable Fees

Posted January 24, 2017 in Estate Planning by Michael Lonich.

Blog

January 24, 2017
Trust Administration: How a Trustee Can Collect Reasonable Fees
Read more »

 

Although trusts do avoid the complication and expense of probate proceedings, a trustee—the person given power to hold legal title to and to manage trust assets—is not necessarily spared the administrative burdens that can accompany estate management.  Trustee responsibilities can include clearing title to property held in the decedent’s name, the preparation and filing of estate and income tax returns, and the collection of insurance proceeds—essentially any task necessary to administer the trust as the trust instrument instructs.  Typically, the creator of the trust—the settlor—will appoint a trustee in the trust instrument and provide compensation from his or her estate for the trustee’s services.  However, if the trust instrument does not specify any compensation, California Probate Code § 15681 allows a trustee to receive “reasonable compensation under the circumstances.”

In re McLaughlin’s Estate defines “reasonable.”  First, the trial court has wide discretion when making a fee determination, but it should consider the following factors:

1) The gross income of the trust estate

2) The success or failure of the trustee’s estate administration

3) Any unusual skill or experience which the trustee may have brought to his/her work

4) The fidelity or disloyalty displayed by the trustee

5) The amount of risk and responsibility assumed by the trustee

6) The time spent by the trustee in carrying out the trust

7) Community customs as to fees allowed by settlors/courts or as to fees charged by trust companies and banks

8) The character of the administration work done

9) Whether the work was routine or involving skill and judgment

10) Any estimate which trustee has given of his/her own services.

In McLaughlin, the appeal court concluded, after considering the above factors, that the trial court justly allocated reasonable fees—the trustees had profitably and with special skill managed the trust property, had accurately summarized receipts and transactions, and had committed a large amount of time to the trust’s administration.

Estate of Nazro provides another example of the above factors in action: Here, although the trustee received dividend checks, made bank deposits, wrote checks, prepared quarterly accountings, and reviewed trust assets, the work did not consume much of the trustee’s time.  Further, the court noted that corporate trustees in the area customarily charged management fees based on a schedule of percentages of the value of the various trust assets.  Therefore, the court held that $2,500 was an appropriate amount of compensation for the trustee’s services.

Ultimately, managing a trust estate is not always a walk in the park—if not otherwise provided, trustees should not be afraid to ask for compensation for their services.  However, keep in mind that compensation must reasonable and proportional to the work done on behalf of the trust.

If you have recently been named or appointed as a trustee or you are interested in creating a trust, please contact the experienced attorneys at Lonich & Patton.  We can help you understand what being a trustee entails, and if you want to create a trust, how you can properly compensate your chosen trustee.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Sources:

California Probate Code § 15681

In re McLaughlin’s Estate (1954) 43 Cal.2d 462

Estate of Nazro (1971) 15 Cal.App.2d. 218

This article has no comment.

Share |

Estate Planning for Millennials

Posted September 28, 2016 in Estate Planning by Michael Lonich.

While estate planning may sound like an activity reserved for the baby boomer generation, even Millennials can get in on the fun!  Further, estate planning is not only for people with ample assets—planning for your future can extend to healthcare decisions and even your Facebook account.  Of course, thinking about death—especially one’s own—is hard, but there are many benefits to be reaped from laying out a few guidelines for your loved ones.

To begin, estate planning at a young age may not involve complex financial considerations, but there are two key areas to focus on: healthcare and personal property.

First, once you turn 18 years old, family members no longer have the legal right to access your medical records, and should you become incapacitated, your family would not be able to speak to your doctors or make medical decisions on your behalf.  Estate planning ensures that in the event of your incapacitation, your health is taken care of according to your wishes and by people you trust—

1) Advanced Healthcare Directive: A legal document in which you detail what medical actions should be taken if you are incapacitated or unable to make decisions on your own.  This document can be used to record your preference (or not) for a “do not resuscitate” order.

2) Durable Power of Attorney: A legal document which, should you become incapacitated, gives power to a person of your choosing to make medical or financial decisions on your behalf.  A durable power of attorney works in conjunction with an advanced healthcare directive to ensure that your health preferences are understood and heeded.

3) HIPPA Release Form: This form allows people listed on your advanced healthcare directive to access your medical records.  Access to your records makes it easier for your designated caregivers to make informed decisions regarding your health.

Second, you may not have a lot of assets, but most likely, you do have some treasured possessions.  To prevent your assets from being waylaid by intestacy (in which state laws determine how your property is distributed), consider making a will or trust—

4) Wills and Trusts:  A will and/or trust details to where and to whom your assets will go after your death.  While you may be content to let intestacy laws distribute your estate, creating a will or trust can streamline the process and assure your relatives that they are honoring your true wishes.  Importantly, besides money, you should consider other cherished aspects of your estate.  First, your pet—who will take care of your beloved fur friend?  Second, consider family heirlooms passed down to you through grandma and grandpa—a will or trust ensures that those items fall into the right hands.  Third, do you want to allocate any assets to a significant other?  If you and your partner are not married, he or she is not entitled to any of your assets and will likely receive nothing through intestacy either.  Whether you want to leave money or possessions—valuable or sentimental—a will or trust ensures your significant other receives a piece of your estate.

5) Digital Assets:  Social media accounts and digital files need postmortem management, especially if you would like your family to shut down your various online accounts.  Federal law does not require that websites permanently delete the account of a deceased user.  Therefore, designating a digital “executor” and creating an inventory (with updated usernames and passwords) of your online accounts that details what you would like done with them can ensure your online presence is handled according to your wishes.

Death is a difficult subject, but estate planning ensures that your family is not left without direction for how your final wishes should be carried out.  Therefore, if you are interested in learning more about estate planning, please contact the experienced attorneys at Lonich & Patton.  We can help determine what documents would best safeguard your assets and/or your medical wishes.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

 

This article has no comment.

Share |

Three Things to Know About Creating a Living Trust

Posted July 27, 2016 in Estate Planning, Probate by Michael Lonich.

First, one of the biggest advantages of creating a living trust is avoiding probate court.  Administering a will or trust through probate court takes time and money.  A living trust is a great estate planning vehicle because it can keep the entire administration process court-free.  When the settlor of the trust passes away, the terms of the trust dictate how the estate should be administered. In turn, probate court is avoided.

Second, make sure that the successor trustee is someone who is capable of administering the trust.  Often times, the oldest child is chosen to be the successor trustee.  However, the oldest child is not always the right choice.  A successful administration requires a trustee who is organized, diligent, and capable of administering the trust.  It is also beneficial to have someone with an understanding of accounting.  If your oldest child does not have any of these characteristics, consider appointing another child, relative, or friend.  If no one you know is capable of administering the estate, you may have to hire a third party. There are a number of trust companies and banks that administer trusts.  The biggest concern about hiring a third party is the administration fees, which can be substantial.  If your estate can handle the fees, a third party may be the right choice for you.  Lastly, a trust will never fail for lack of a trustee.  If the elected trustee refuses, another one will be appointed.

Finally, creating a trust avoids California’s intestacy laws.  A state’s intestacy laws provide the default estate plan for those who die without a will.  In California, the beneficiary of a decedent’s estate depends on whether the property was community property or separate property.  Assuming that decedent was married and had community property, the surviving spouse’s intestate share is the decedent’s one-half share of the community property.  On the other hand, if the decedent’s property was separate property, the intestate share of the surviving spouse depends on how many children the decedent had, if any.  While it is important to know a state’s intestacy laws, they should be avoided at all cost.  Thus, creating a trust is a way to avoid intestate succession and have your estate administered the way you want it.

If you are interested in creating a living trust or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich & Patton for further information.  The attorneys at Lonich & Patton have decades of experience handling complex estate planning matters, and we are happy to offer you a free consultation.  Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Sources:

California Probate Codes § 6400-6414.

This article has no comment.

Share |

Going to California, The Quasi-Community Property State

Posted June 27, 2016 in Estate Planning, Family Law by Michael Lonich.

A move to the Golden State has the potential to change the character of your property.  Upon arrival in California, meeting with an experienced California estate planning attorney is a must!

Generally, there are two kinds of property systems: community property and separate property.  California is one of nine community property regimes in the United States.* Presumptively, community property is all property acquired by a couple during marriage.  The community property system gives each spouse a fifty percent (50%) interest in the property, among other characteristics.  In California, separate property is all property owned by a person before marriage and all property acquired by gift, bequest, or devise during marriage.

California’s community property system is unique because it also recognizes “quasi-community property.”  Quasi-community property includes all property, wherever situated, that would have been treated as community property had the acquiring spouse been domiciled in California at the time of acquisition.  For example, if husband bought a car with funds earned during marriage, while living in Minnesota, a separate property state, the property would be the husband’s separate property.  However, if husband and wife moved to California and then filed for divorce, the car would be considered quasi-community property.  The reason being is that if the husband was domiciled in California at the time he had purchased the car, it would have been characterized as community property.  Pursuant to California law, all property acquired during marriage, including a spouse’s earnings, is community property.  Therefore, in accordance with the quasi-community property statute, each spouse would have a fifty percent (50%) interest in the car.

The example above is just one of many that may give rise to quasi-community property.  Nonetheless, it illustrates the potential effect a move to California can have upon one’s property.  Moreover, each state has the authority to make its own property laws.  Therefore, it is imperative that when you move to a new state, especially from a separate property state to a community property state, you visit an experienced estate planning attorney.

For more information about quasi-community property or estate planning in general, please contact the experienced estate planning attorneys at Lonich & Patton for further information.   The attorneys at Lonich & Patton have decades of experience handling complex estate planning matters, including quasi-community property issues, and we are happy to offer you a free consultation.  Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

*https://www.irs.gov/irm/part25/irm_25-018-001.html

This article has no comment.

Share |

HOW AN ESTATE PLAN COULD HAVE CARRIED ON PRINCE’S CHARITABLE LEGACY

Posted May 27, 2016 in Estate Planning by Michael Lonich.

In the wake of rock & roll legend Prince’s untimely death, a number of issues have arisen regarding his estate plan – or lack thereof.  One of the biggest issues is that none of the charities that Prince donated to throughout his life will inherit from his approximately 150 million dollar estate.

CNN Political Commentator, friend, and philanthropic partner of Prince, Van Jones, described Prince as “The Silent Angel.”*  During Prince’s lifetime, he anonymously donated millions of dollars to dozens of charities.  Unfortunately, since Prince died without a will, the charities that used to receive substantial donations from Prince will inherit nothing.  Instead, his estate will be distributed pursuant to Minnesota’s intestacy laws.  For those who die without a will, intestacy laws are a state’s default estate plan.  The estate is usually distributed among the decedent’s heirs.  Prince dying intestate is strange because of the the size of his estate, and his propensity to give to charity.

It is uncommon for someone with an estate as big as Prince’s to not do any kind of estate planning.  In fact, those with big estates often do what is referred to as “advanced estate planning.” One advanced estate planning practice is to create a charitable trust.  A charitable trust is an estate planning vehicle that can fulfill your philanthropic endeavors, all the while, having your estate receive beneficial tax treatment.  There are generally two kinds of people that set up charitable trusts: those who are charitably inclined and those who take advantage of the tax benefits.

For those who are charitably inclined, a charitable trust can and should be tailored to accomplishing your philanthropic undertakings.  A charitable trust allows an individual to make charitable donations during life and after death.  Setting up a charitable trust is a way to ensure that a charity will continue to receive donations after the settlor has passed away.  Other benefits of creating a charitable trust, and an estate plan, include, but are not limited to, avoiding probate, minimizing conflict during trust administration, and fulfilling the settlor’s intent.

For those who are primarily tax-driven, there are various tax benefits of which one can take advantage.  In short, there are different kinds of charitable trusts.  Each receives different kinds of tax treatment, has different formation requirements, and other distinguishing characteristics.  If creating a charitable trust is something that you want to do, or are at least considering, meeting with an experienced estate planning attorney is imperative, because estate planning requires expertise and precision when determining which avenues should be taken.  Had Prince set up a charitable trust during his life, not only would the charities that relied upon his generous donations be taken care of, but his estate would be taking advantage of the tax benefits.

Unless a will is found, we will never know how Prince would have wanted his estate to be distributed. It is likely that he would have had wanted a portion of it to go to charity.  If you possess a philanthropic disposition, creating a charitable trust is something that should definitely be considered.  A few of the benefits of creating a charitable trust are accomplishing your charitable goals, helping those who need it, and receiving tax benefits.

If you are interested in creating a charitable trust or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich & Patton for further information.  The attorneys at Lonich & Patton have decades of experience handling complex estate planning matters, including charitable trusts, and we are happy to offer you a free consultation.  Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.



* http://www.cnn.com/2016/04/22/opinions/prince-eight-things-to-know-jones/

This article has no comment.

Share |
Phone:
408.553.0801
Address:
1871 The Alameda, Suite 475
San Jose, CA 95126
Email:
contact@lonichandpatton.com