Nuts and Bolts I Successor Trustee Training

Presented by: Suzanne M. GravesAttorney and Counselor At Law

Legal Certified Specialist in Trust, Estate Planning and Probate by the

State Bar of California

1317 W. Foothill Blvd., Suite 245,Upland, CA 91786

Phone: (909) 981-6177 / Fax: (909) 981-8859E-mail: SGraves@SuzanneGraves.com

Estate Planning Overview

Definition of Estate Planning

I Want to Control My Property While I’m Alive and Well;

Plan for Me and My Loved Ones if I Become Disabled;

Estate Planning Overview

Definition of Estate Planning

• Give What I Have• To Whom I Want• When I Want• The Way I Want

All with fully disclosed and controlled settlement costs both to me and to those I love

Estate Planning Overview

Most Estate PlansJust Don’t Work!

Estate Planning Overview

• Proper Asset Ownership

• Control of Process• What to Do• How to Do It• How to Pay for It

Keys to an Effective Estate Plan

Estate Planning Overview

Estate Planning Strategy

• Work with a Counselling Oriented Attorney• Establish and Maintain a Formal Updating Program• Assure Controlled Settlement Costs After Your Death

Estate Planning Overview

Personal Planning Goals

• Catastrophic Illness Protection• Remarriage Protection• Creditor Protection• Divorce Protection• Values Promotion

Estate Planning Overview

Estate Planning Strategy

• Work with a Counselling Oriented Attorney• Establish and Maintain a Formal Updating Program• Assure Controlled Settlement Costs After Your Death

Estate Planning OverviewFour Types of Change An Estate Plan Faces

“LIFE”

• Changes in Your Family Situation

• Personal• Financial

Estate Planning Overview

Four Types of Change An Estate Plan Faces

“LAW”

• Changes in the Legal Environment

• Tax• Non-Tax (Personal Protections)

Estate Planning Overview

Four Types of Change An Estate Plan Faces

“LAWYER”

• Changes in Your Attorney’s Experience

• Static vs. Continuous Improvement?

Estate Planning Overview

Four Types of Change An Estate Plan Faces

“LEGACY”

• Changes in How You Choose to Leave Your Assets

Estate Planning Overview

Estate Planning Strategy

• Work with a Counselling Oriented Attorney• Establish and Maintain a Formal Updating Program• Assure Controlled Settlement Costs After Your Death

Estate Planning Overview

Three Factors of Overall Cost

• The Cost of the Documents

• The Cost of Updating (Or Failing to Update)

• The Cost After Death• Transfer of Assets• Death Tax Return Preparation

Estate Planning Overview Fees

Administration: Traditional Probate

– 3% “Traditional” Living Trust Planning

– 2.25%

Client Care– 1.5%

In the Living Trust Binder:

Trust Document Last Will Affidavit of Trust Documents proving what trust owns Powers of Attorney & Living Will Personal instructions for burial/anatomical

gifts Personal effects memo

Trust Binder : Operating Manual

Documents all in one place Personal instructions Lists of advisors A tangible way to explain your

planning

Trust Administration Goals

Collection and management of assets

Payment of debts, taxes, expenses

Distribution to named beneficiaries

Fiduciary Responsibility

Through successful planning, the methods are in place to ensure your wishes will be carried out and taxes and costs will be minimized. The successor trustee MUST use these tools correctly to achieve the best

advantage.

Estate Planning Goal

Why Trust Planning?

• It plans for your disability

• It plans for your loved ones

• Contains your loving instructions

• It’s private and confidential

• Reflects your hopes, fears, dreams and values

• It’s good in every state

Trust Administration

• Alive and well• Alive and not so well• Upon my death

Trust Administration

• Alive and well• Trustmaker is in Control

• Trust is revocable, and amendable

• No additional asset protection

Trust Administration

• Disability of Trustmaker• Alive and not so well

4 Ways1. Voluntary

2. Disability Panel

3. Court Order

4. Absence, Disappearance, Detention

• Disability Trustees Empowered

Before Disability Transition:

• Make sure Family Doctor has copies of Health Care Power of Attorney and Living Will

• Discuss, before disability, any concerns the Trustmaker may have

• Have Trustmaker tell family doctor who will speak for them

If Disability Occurs

“Disability” can be temporary –

Extended trips away from home Working on a full-time project

Short-term hospitalization

If Disability Must Be Determined

Check the trust document for who may determine disability

Disability Panel1. Primary Care Physician2. Specialist3. Family Member/Friend

Decision 1. Unanimous2. Majority

Certificate of Disability

• Ensure quality care in a health environment

• Look for guidelines – handwritten Health Care Instructions

• Carry out wishes in the best interests of the individual

When Disability is Permanent

• Locate important documents – Red Books• Living Trust• Power of Attorney• Healthcare Power of Attorney• Living Will• Asset Information• Notify Financial Institutions

When Disability is Permanent

• Determine Coverage & Apply for Benefits• Health Insurance• Disability Insurance• Long-term health coverage• Medicare - Medicaid• Social Security

Trust Administration

• Establish and Use a Record-Keeping System

• Inventory Assets

• Income

• Expenses

• Insurance Claims

• Medical Costs

• Consider using a CPA

When Disability is Permanent

• Establish and Use a Team of Advisors• CPA

• Financial Advisor

• Beneficiaries

• Trusted Friends

• Healthcare Advisors

• Attorney

When Disability is Permanent

Get new Affidavit naming successor Trustees Contact Financial Institution If the disability may lead to death, consider

personal counselling review for estate planning purposes

Do not enter any risky or long-term business ventures unnecessarily

Keep good records

Trust Administration

• ORGANIZATION

• ORGANIZATION

• ORGANIZATION

• Alive and not so well

When the Trustmaker Dies

First, you grieve

- Contact immediate family/friends

- Use trust binder information

- Arrange care for family and pets during next few days

When the Trustmaker Dies

• Complete Funeral Arrangements

• May be paid from trust assets

• Best not to pay from trustee’s own assets• Do not immediately accept benefits –

retirement accounts, annuities, investment accounts

• Consider use of disclaimers

• Possible Estate Tax benefits

• Postmortem Administration

After The Funeral - Begin Slowly• Postmortem Administration

• Locate important documents – Red Books

• Living Trust

• Last Will and Testament

• Asset Information

• Insurance Policies

• Retirement Plan Information

• Annuity Contracts

After The Funeral - Begin Slowly

Locate assets Gather and determine if the trust owns

the assets or is beneficiary Assets outside of the Trust Keep a list of money spent, especially for

the funeral and last illness

Collecting Assets

Keep jewelry, securities, personal items of great value in a safe place, to which only Trustees have access

Use “Location List” provided by Trustmaker Close or change brokerage accounts to reflect new

trustee - (Use Affidavit of Trust) Draw up new Affidavit if needed Maintain accurate records of all account activity

Make appointments early.

The first deadline is opening probate, if needed for any assets not owned by the trust and/or to eliminate creditors.

The most important deadline is the federal estate tax due 9 months after death.

If you get an extension for the return, the taxes are still due!

Trust Administration

• Trust Language• SS4 - EIN Application• Apply for and Collect Benefits• Prepare Inventory• Maintain adequate insurance coverage for homeowners, fire,

flood, liability.• May consider change in investment philosophy after death to take

advantage of step-up in basis or to recognize change in circumstances.

• Postmortem Administration

• The Administrative Trust

Trust Administration

• Pay final expenses and bills

• Tax Planning and Elections

• Pay taxes - income and estate

• Prepare Final Accounting

• Distribute Assets• Personal Property• Outright• In Testamentary Trusts

• Postmortem Administration

• The Administrative Trust• Establish accounting system

Paying Debts and Taxes:

Trustees and Personal Representatives may have different responsibilities in regard to taxes.

Get professional assistance with the estate tax return.

Remember federal estate taxes are due 9 months after death.

Trust Administration

• Postmortem Administration

• Establish and Use a Team of Advisors

• Attorney

• CPA

• Financial Advisor

• Beneficiaries

• Trusted Friends

Benefits and Insurance

Telephone employee benefits insurance, social security, Medicare offices, with the following:

DECEDENT’S NAME

SOCIAL SECURITY NUMBER

DATE OF DEATH (OR INCAPACITY)

WHETHER DEATH WAS DUE TO ILLNESS OR ACCIDENT

YOUR NAME AND ADDRESS

More Notifications

Veterans Benefits? Club and credit memberships? Disability Insurers? If Trustmaker lived alone, contact utility

companies, homeowners, landlord, arrange for maintenance of home (lawn mowing, etc.)

IRS - get a new Tax ID # for the trust

Trust Administration

• ORGANIZATION

• ORGANIZATION

• ORGANIZATION

• Postmortem Administration

• The Administrative Trust

What Is the Trust Called Now?

If John Smith had the JOHN SMITH LIVING TRUST, upon John’s death, we would continue the JOHN SMIT LIVING TRUST (with original date) until we complete the administration and then there would be two trusts created: the SMITH FAMILY TRUST AND THE SMITH MARITAL TRUST (BOTH DATED AS OF THE DATE OF DEATH)

These two trusts are created out of the original

Federal Estate Tax Reduction

Key Tax Savings Provisions

Unlimited Marital Deduction

$2,000,000 Exemption Equivalent

Federal Estate Tax Reduction

Family Trust also called: B Trust Credit Shelter Trust By Pass Trust Family

Trust

Trustee Instructions:

Split Trusts Into Two Sub-Trusts

Family

Federal Estate Tax Reduction

Marital

Survivor May Be Trustee and Beneficiary of Both!

Federal Estate Tax Reduction

Trustee Instructions:

Transfer up to Exemption Equivalent to Family Trust, Put Any Excess in Marital Trust

Marital

Excess 1st $2,000,000(Today)

Family

Federal Estate Tax Reduction

Effect of Growth

Excess

To LaterBeneficiaries But

Included in Survivor’s Estate

1st $2,000,000

8,000,000To Later Beneficiaries

WITHOUT Federal Estate Tax

FamilyMarital

Federal Estate Tax Reduction

Tax Savings Determined By:

Applicable Exclusion Amount

(Determined by Congress) Funding of Family Trust

Federal Estate Tax Reduction

Available

Individual Name Assets Living Trust Assets Beneficiary Designations

Payable to Trust

Not Available

Joint Assets

Beneficiary Designations Payable to Individuals

Funding the Family Trust

What Is the Trust Called Now?

If John Smith were single, his Living Trust could become either the John Smith Common Trust or could be broken in to multiple separate shares with trusts established for each child/beneficiary, depending on the features of the trust document and what John Smith intended.

CAUTION - GO SLOW

Pension and other retirement elections are tricky - check with us BEFORE YOU ACT for the best financial outcome

Don’t sell assets until you understand the tax implications of the sale to the trust and its beneficiaries.

Disclaimers: The Final Control

Disclaimers must be used in a timely fashion. They allow an asset to pass to the NEXT heir,

not the one YOU choose.

Follow the Trustmaker’s Wishes

The trust document is your OPERATING MANUAL. Use it as a guide for what the trustmaker intended.

Remind advisors to speak to the specific trust plan - not generally.

Be careful about gifting, other than trust distributions.

When is a trust terminated?

When the trust says so. Or When beneficiaries reach a certain age. Or When certain conditions are met. Or When administration is too expensive as to

become “burdensome” Or Not for many generations.

Trustee Responsibilities• Comply with terms of the trust• Comply with terms of the law relating to trusts• Be fair in dealings with the beneficiaries• Comply with tax requirements• Segregate, preserve and invest trust assets• Keep and render a full and accurate record

and accounting of trusteeship

Loving Duties

The trustmaker, out of loving concern, made an estate plan to provide protections from creditors and predators for heirs, while minimizing taxes and costs.

The successor trustee, out of love and duty, will honor that plan to ensure these instructions are followed.

Nuts and Bolts I Successor Trustee Training

Thank you for attending our seminar.

We hope you have enjoyed it.

The Law Offices of

Suzanne M. Graves, Inc.