Traditionally, the three roles that must be filled when setting up a trust are the settlor (also called a grantor, trustor, or trustmaker), the trustee, and the beneficiary. All three roles are necessary to create a trust that functions properly. Although it is relatively common to use trust protectors in foreign asset protection trusts, a trust protector is a fairly new role in trusts drafted in the United States for estate planning purposes. However, as the number of trusts designed to last for generations grows, estate plans need more built-in flexibility. Giving a trust protector, through the terms of the trust, certain powers over the trust, such as removing or appointing trustees, adding or removing beneficiaries, and amending or even terminating the trust, ensures that your intentions for creating the trust are fulfilled despite changing law or circumstances.
How is a Trust Protector Selected?
A settlor may select as a trust protector any individual or group of individuals, such as family members, business associates, friends, attorneys, accountants, or other professional advisors. The naming of a trust protector may be specific, such as “my neighbor John Doe,” or general, such as “a CPA selected by the majority of the owners of the [ABC CPA Firm].” The settlor provides for and selects a trust protector in the trust agreement.
Who Makes a Good Trust Protector?
Because of the many and varied powers that a trust protector can hold, you should name a trust protector who has attributes, knowledge, or skills suitable for the responsibilities of the role. For example, if the trust protector has the power to amend the terms of the trust to account for changes in tax law, the trust protector should have some understanding of tax law and how it will impact the trust. If a trust protector has the power to veto or direct trust distributions to beneficiaries, the selected trust protector should understand the family history and desires of the settlor. Different powers may require the selection of different trust protectors or possibly a committee of trust protectors.
What Does a Trust Protector Do?
Based on your wishes, the purposes of the trust, and applicable laws, the trust protector can hold many different powers, including administrative powers traditionally held by a trustee, such as the power to make distributions, and judicial powers traditionally held by a court, such as the power to remove beneficiaries. Trust protector powers can include the power to:
remove a trustee or appoint a successor trustee,
add or remove beneficiaries,
amend the trust agreement,
exercise the voting rights of closely held business interests owned by the trust,
interpret the terms of the trust,
veto or direct trust distributions,
terminate the trust
appoint and remove members of a distribution or investment committee.
This list is not exhaustive, and you should include any of these or other trust protector powers only after careful consideration of your desires and purposes for creating the trust.
Reasons for Including a Trust Protector in Your Trust-Based Estate Plan
There are several reasons to include a trust protector in your trust-based estate plan:
Trust protectors offer increased flexibility and peace of mind. The administration of a perpetual trust that may last for generations can be a daunting task because no one knows what the future may hold. Including trust protector provisions in your trust agreement can ensure that your trust achieves your goals despite changing circumstances and laws.
Trust protectors can provide additional oversight and support for a trustee. A trust protector can ensure that a trustee is properly administering the trust and carrying out the trust’s purposes. If the trustee is delinquent in its duties, a trust protector may remove the trustee and appoint a better-suited trustee. A trust protector can also help a trustee correctly interpret trust provisions and address changes in the law or beneficiary circumstances.
Trust protectors provide an easier and less costly means of modifying a trust. If a trust needs to be modified after the settlor’s death, usually the only route is through the court system, a complicated and costly process. Giving a trust protector the power to modify the terms of a trust can prevent the need to go to court to modify the trust.
Can I Name a Trust Protector for a Testamentary Trust?
A testamentary trust, usually created through a will, comes into existence after the settlor dies and the will has been probated. A testator (the person who makes the will) can, and in many cases should, include trust protector provisions in a testamentary trust to ensure that their intent for the trust is properly carried out over time.
Does Every State Allow Trust Protectors?
State law varies in its treatment and classification of, and guidance for, trust protectors. Though many states have adopted a uniform set of laws governing trust protectors, or a modified version of these uniform laws, other states have not addressed trust protectors at all. It is important to consult an attorney familiar with your state’s laws to understand whether trust protector provisions are right for you and your goals.
Lewman Law, APC
Please contact us to learn more about naming a trust protector and discuss whether it is a good idea for you. We are happy to answer any questions you may have and help you craft an estate plan that is perfect for you and for your loved ones. Request a consultation by clicking here.
Creating a Treasure Map: The Benefits of Preparing an Inventory Before Death
If you have already done your estate planning, you have taken a significant step toward ensuring that your loved ones will know how to manage your affairs if you become incapacitated or die. However, simply having a will or a trust and related estate planning documents is often not enough. A detailed inventory of all of your accounts and property is crucial for helping your loved ones manage your legal and financial affairs effectively.
Most estate planning attorneys have received calls from distressed children who knew that a deceased parent had a will or a trust, but had no idea what accounts, insurance policies, or items of real and personal property the parent owned. If an inventory was never prepared and shared with the parent’s attorney, the child likely had to spend countless hours meticulously combing through the parent’s file cabinets, drawers, tax returns, mail, and online accounts to identify what the parent owned.
Needless to say, this is not something that anyone wants to happen. Even if you do not have a will or a trust in place, you do not need to wait to prepare an inventory of your property until you have created these legal documents. In fact, assembling an inventory can be an excellent first step when it comes to your estate planning. This preliminary effort will allow your attorney to immediately begin focusing on the creation of a will or a trust that takes into account each of your accounts and pieces of property and how they should be coordinated with your estate planning goals. If you take this step, your attorney is guaranteed to be impressed and grateful for your preparation.
How to Create an Inventory
Creating an inventory of your accounts and property does not need to be very complicated. It can be a simple word processing document or even a handwritten list. Many individuals create spreadsheets in software programs like Microsoft Excel, Numbers, or Google Sheets. There are also numerous online services that can help you create a thorough inventory of your property. Many of these services enable you to automatically share your inventory with chosen individuals at a time that you designate before death or disability strikes. The bottom line is that any of these methods can work well—the important thing is that you create an inventory. Below is an example of an inventory formatted as a spreadsheet with columns and rows:
Of course, this is just an example of what an inventory could look like. You should include any information that you think will be helpful to someone who is put in charge of collecting your property after you have passed away. You might include additional details, such as where the property is located. For example, if you keep certain items of jewelry in a safe, or a boat you own is stored in dry storage, this would be crucial information to include.
In addition, though you will not share this with your attorney, consider using a software program or other service to store passwords for online accounts and even store digital copies of your important documents.
Probate and Your Property
As you create your inventory, you will review how each item is titled or who is named as the beneficiary on certain accounts, which will enable you to identify those items of property that will have to go through probate. Probate is the court process that appoints an executor or personal representative to inventory your probate property and distribute the property according to state law or the terms of your will, if you have one. Generally speaking, any account or property that meets the following conditions will have to go through the probate process: (a) is owned only in your name, (b) is not owned jointly with another person, (c) is not titled in the name of a trust or business entity (like an LLC or partnership), and (d) does not have a named pay-on-death (POD) or transfer-on-death (TOD) beneficiary associated with the property.
Probate can be an expensive, time-consuming, and public process that most people would rather avoid. If avoiding probate is a goal of yours, preparing an inventory well before you pass away can alert you to those items of property that will require a probate so that you can take steps prior to your incapacity or death to transfer ownership or retitle them.
Additional Benefits of a Complete Inventory
By creating an inventory with the type of information demonstrated in the example above, you can help your loved ones understand their next steps with regard to taking control of your property for management and distribution. Certain items and accounts, such as the following, may be distributed according to the unique legal aspects of that type of property:
Property owned in joint tenancy with rights of survivorship (such as real estate or bank accounts) will pass automatically to the surviving joint owner and outside of a trust or probate.
Some bank or investment accounts may have POD or TOD designations that allow those accounts to skip the probate process and be paid directly to a named beneficiary such as a child, spouse, trust, or charity.
Life insurance proceeds typically will not have to go through probate if you have properly completed the beneficiary designation form by naming your loved ones, a trust, or a charitable organization as beneficiaries on the policy.
Accounts and property titled in the name of a trust (i.e., owned by the trust) can be distributed outside of probate according to the terms of the trust agreement.
Retirement accounts usually require the listed beneficiaries to file a claim with the account custodian before the account will be paid out. Probate courts and trusts usually have no control over retirement accounts.
Vehicles will typically need to be transferred through the local department of motor vehicles, which requires an affidavit along with a death certificate and the physical car title.
Certain items of personal property (e.g., furniture, jewelry, art, collections, etc.), if above the value determined by state law, may be subject to probate, unless they are transferred into a trust before death.
What to Do with Your Inventory Once Created
After creating your inventory, make sure to store a copy where your loved ones will be able to easily find it should something happen to you. Consider the following locations:
an estate planning portfolio or binder
a file folder that is clearly marked and easily accessible to your loved ones
your client file with your estate planning attorney
an electronic document format that can be shared with your trusted loved ones online
a clearly labeled USB drive in your safety deposit box or safe (as long as you let your loved ones know what to look for, where to find it, and how to access it)
your client file with your other professional advisors (so that they can help your loved ones easily identify all of your property if your loved ones call them first after your death)
Once you have created and shared your inventory, you should create a plan for updating it. Over time, accounts get closed or consolidated with other accounts, property is sold or acquired, stocks get converted to cash, and retirement accounts get depleted. If you do not regularly update your inventory, there is a chance that you could create confusion and send your loved ones down rabbit holes as they try to handle your affairs.
Some people find it helpful to choose a specific date each year when they will review and update their inventory and also review their estate planning documents. Whatever will work best for you, make a plan, implement it, and then stick with it. Your loved ones will praise your name for years to come if you do. If you need assistance or have questions reviewing your important documents, feel free to give us a call.
Brought to You By: Lewman Law APC
The focus of Lewman Law is estate planning, estate litigation, probate, trust administration, and Medi-Care planning which is designed to help seniors and their families preserve their legacy and prevent the devastating financial effects of long-term care. Please contact us at (925) 447-1250.
It’s always important to have your affairs in order, but more people have been thinking about their estate planning needs this last year due to the pandemic. And with so many options, how do you choose the right Livermore and Pleasanton estate planning attorney to manage these sensitive documents? If you need estate planning services in the Bay Area, read on to learn more about what Lewman Law has to offer.
John Lewman is the founder of Lewman Law, APC. He first studied economics before going on to complete his legal training at the McGeorge School of Law, located in the state’s capital. He passed the bar in 1994, the same year he graduated. Since then, he has distinguished himself as a dedicated and compassionate attorney.
John’s mission at Lewman Law is to safeguard your family as if it were his own. With over twenty years of professional legal experience, both in and out of the court room, John has the know-how you need to provide the best possible care.
At Lewman Law, we offer probate and trust administration, estate planning, will disputes and trust litigation, as well as help with Medi-Cal qualifications. You can take a more in-depth look at our services by clicking here.
Whether you’re wondering what should be included in your will, or the best trust to set up for your children, Lewman Law is here for you. These are some of the most important decisions you’ll ever make, so you need a skilled attorney who can guide you through the process—from start to finish. Or, maybe you already have an estate plan, but it hasn’t been updated in a while. We can take care of that, too.
Pleasanton Estate Planning Attorney
For a Pleasanton estate planning attorney who can handle all of your estate planning and probate needs, contact Lewman Law. Office hours are Monday through Friday 9:00 am to 5:00 pm. We’re happy to answer any questions you have. Call today at (925) 447-1250, or email by clicking this link.
Probate is a process supervised by the court for sorting and authenticating assets left after someone dies. The process ensures the properties are evenly distributed to the creditors and inheritors. It is a daunting process that is full of challenges in case a lawyer is not involved.
Most chosen executors are ever overwhelmed by handling this complex and lengthy process. It includes:
Validating the Final Will
The estate planning attorney has to validate any testament or will of a deceased. Therefore, anyone who might have the will is required to visit the probate court and file it at the right time.
Appointing the Executor or a Personal Representative
Tracy will lawyer a personal representative to oversee the probate litigation and settle the property.
At times the executor is needed to post a bond, an insurance policy to protect the estate in case of any losses. However, some will do not require the bond. For such, it all depends on the judge.
Identifying the Assets
Here, the probate lawyer will locate then take possession of all the deceased assets to secure and protect them.
Defining Date of Death Charges
The executor is needed to determine the date of death rates for the lest estates through account appraisals and statements.
Identifying and Notifying Creditors
The probate lawyer will now alert the decedent’s creditors on the death. Some executors publish the information in the newspaper to notify other creditors.
Clearing the Deceased Debts
In the case of debts, the creditors’ claims are paid. The probate lawyer pays all the deceased bills and debts using the assets funds.
Preparing and Filing Tax Returns
After the final debts are settled, the executor now files all the deceased the tax returns for the time they passed on.
Dividing the Remaining Estate
After all the above guide is followed, the probate lawyer petitions the probate court for a permit to distribute the left assets to inheritors named on the will.
Close the Estate
After everything is distributed, records, and receipt to the probate court, the estate is closed.
At Tracy law, we have probate lawyers that will take you through the probate litigation. They make a comprehensive plan designed to help your family in the future. Their services uncomplicated the probate process.
In case of any matters related to the probate process, call our professional and compassionate team at Tracy law estate planning attorney to assist you through the probate litigation.
Disclaimer: The materials available at this web site are for informational purposes only and not intended as legal advice. You should contact a lawyer before acting on any information contained in this website.