When their father died, Allison was surprised to learn that she had been named Successor Trustee of the family Trust. It seemed like a stretch—her brother, Oliver, was a banker, and her sister, Zoe, a lawyer. She, on the other hand, was a wife and mother with an unused elementary education degree. “Why would Dad name me Trustee?” Allison wondered. She had no qualifications and wouldn’t know a Trust from a greeting card. Both of her siblings were far more qualified for this role.
Their father had named Allison as the Trustee because he trusted her
Zoe and Oliver suggested that their father may have felt that Allison had the time to devote to the Trust’s administration and would rely on her siblings for help. But there was a likelier reason. “Allison was always Dad’s favorite. He trusted her. I am not sure he always trusted us.” Allison remained anxious about the new role that she had inherited. She had just started working as a substitute teacher and needed the money, with her kids headed off to college.
“As the administrator, you do get paid from the Trust.” Zoe told her. “Perhaps the fee will be sufficient to cover your lost income, and it’s not a full-time job, so you can still work. Track your hours and we can decide what’s reasonable.”
As usual, Allison was skeptical of advice from her brother and sister “Unfortunately, what may be reasonable to me may not be reasonable to you. I’m going to be facing a big learning curve, and to make this realistic, I need to be able to charge for the time that I spend researching and learning what I need to do. It might be more economical to just hire a professional.”
“Don’t do that,” Oliver said. “They’re expensive and that fee will eat into our income. Let’s agree on a reasonable hourly rate.” Allison promised to talk to her husband and make a decision that was right for her family. Her domineering siblings had always tried to interfere with her decisions and it clearly wasn’t going to stop with their father’s death. “I don’t want to get so bogged down with this that I can’t take care of my family and my job.”
When it comes to Trusts and inheritance, family conflicts have a way of surfacing
The selection of a Trustee is an important, and often difficult, decision. As the previous scenario illustrates, longtime family conflicts have a way of surfacing—especially when there’s money involved. Selecting a family member as Trustee can alleviate Trustee fees, if that person agrees to waive the right to be compensated.
But volatile family situations can make Trust administration difficult. While appointing a third party, such as a trusted friend, a financial adviser or a fiduciary may sustain a fee, it does circumvent family politics. If it’s a complex Trust, a professional trustee may be better qualified to administer it.
It’s a Trustee’s job to administer the Trust according to the instructions set forth in the legal document. They may include monitoring investments, assessing property and other resources, managing the sale of assets, paying taxes, making distributions to beneficiaries, complying with reporting and accounting requirements and responding to beneficiary requests for information. If the Trust is a simple one, these tasks can be managed fairly easily without a significant commitment of time. For more complex Trusts, however, settling the estate can become very time consuming.
Under California law, if a Trust does not specifically identify a fee for trust administration, a trustee is entitled to “reasonable compensation” that may be set by a probate court or the approval of the beneficiaries.
The Trustee’s fee is considered taxable income
Because the fee is taxable, a Trustee who is also a beneficiary may choose to waive payment of a Trust administration fee. An inheritance passed on through a Trust is generally tax-free. In addition, by waiving a fee, more resources remain in the Trust, gaining interest or otherwise accumulating value while the estate is being settled—and if it’s a complex estate, it can take a significant amount of time.
Trust administration requires careful documentation. It means creating descriptions of tasks performed and saving receipts for administrative expenses. When it comes to naming a Successor Trustee, the primary consideration should be focused on that child, friend or professional who will ensure that the Trust is administered impartially for all, in accordance with the grantor’s instructions.
In our case, their father well may have appointed Allison for a very good reason. While he knew that Oliver and Zoe were far more qualified to be dealing with legal and financial records, he wasn’t convinced that they would be honest and impartial in distributing his estate among the three children. But he knew he could trust Allison to do what was right.
This is a story with which many will be familiar. We likely know a friend, colleague or family member who has gone through just this kind of tragic situation.
It starts with two mature people, Jack and Stella, who meet, fall in love and begin a committed relationship that lasts more than 20 years.
Jack has significantly more assets than Stella.
Jack and Stella never legally marry, yet they live together, and for all intents and purposes act and live as husband and wife for a large part of their adult lives.
Jack comes from significant family wealth . . .
Jack’s mother, who has never approved of his girlfriends, does not want her son to marry. After all this time, Stella has never developed a relationship with Jack’s mother, and Jack has led her to believe it is because she thinks all women are after his money.
Stella is well-educated, teaches music at the local high school and has no family money. Despite Jack’s wealth, she wants to maintain her independence in the relationship and insists they split everything fifty/fifty. She quickly becomes accustomed to Jack’s expensive tastes, yet she finds herself splitting the cost of lavish trips and expensive meals that she really can’t afford.
Twenty years later, Jack falls in love with Karen
After more than 20 years, Jack finds himself falling in love with Karen, a new colleague, and leaves Stella. More specifically, he tells Stella about Karen, and Stella moves out of the home they have shared for two decades.
Stella, now in her 60s, must endure the pain and loss of what feels like a Divorce, but because they never created any legal documents defining their relationship—they never married, created a Domestic Partnership or a Living Trust naming Stella as the beneficiary of any of Jack’s assets–she is entitled to nothing–no spousal support, none of the income Jack earned during their relationship, no property. Stella has to find an apartment and start over.
This cautionary tale makes a strong argument in favor of marriage or a Domestic Partnership
Jack’s and Stella’s relationship consisted of 20-plus years of long-term dating. Had they married or created a Domestic Partnership, under California Probate law, Stella would be entitled to community property, assets and a portion of Jack’s separate property assets. If Jack had died, the results would have been the same. Pain and heartbreak for Stella, but nothing in the way of property or assets.
While marriage isn’t necessary, to be protected in the event of death or a breakup, a couple needs to register as Domestic Partners and/or create a Will or Living Trust identifying those assets that the partners will inherit. Creating these legal documents is particularly important when two people come from different economic levels.
A New Year is a very good time to update your Living Trust to reflect on important changes in your life
End of life planning can be an unsettling process. No one wants to think about death, much less plan for it.Yet while the majority of our Living Trust clients are older, often retired or thinking about it, anyone who has assets and a family should have a Trust. It documents how you want your property to be distributed, how you want your children cared for if something should happen to you. Rather than being unsettling, many of our clients tell us that creating their Living Trust provides important peace of mind.
A New Year and a fresh start
There’s a good chance that you’ve been putting this off for a while, so here’s a countdown to a stress-free 2018. Make this the year you finish creating your Living Trust and related documents.
5. Create an Advance Health Care Directive
Creating an Advance Healthcare Directive is an important part of long-term planning. Unless your wishes are stated explicitly in writing, doctors, hospitals and EMTs are taught to keep people alive—not necessarily to follow their wishes. Healthcare professionals are not legally bound to listen to your loved ones.
Think about how you want to spend your final days. If you should become incapacitated, do you want to be at home, surrounded by family, perhaps with the help of an aide or hospice, or in a nursing facility? You will need to think about whether you want to sign a Do Not Resuscitate (DNR) Order. Whatever your wishes, you need to share them with your family and your doctor. Make sure you choose people whom you trust to carry out your wishes—even if their views conflict with their own beliefs or feelings.
4. Appoint a Power of Attorney whom you trust
A Power of Attorney is that person whom you trust to manage your life if for some reason you are no longer able to do this yourself. A Power of Attorney will be responsible for paying your bills, taking care of your taxes and other financial commitments as well as making important healthcare decisions. This can be a demanding role that requires time as well as the ability to manage financial matters, so choose this person carefully.
3. Review a Will or Trust if it is more than five years old
Surprisingly, more than 50% of Americans die without a Will or a Living Trust. The result? Their families will have to go through Probate—a lengthy and expensive process at what will already be a very difficult time.
Many people create their Trusts but fail to update them. That can be a problem if someone dies and his/her Trust is 20 years old–there were likely a number of significant life changes over those 20 years that were not reflected in the Trust.
Consider updating your Trust if it is an AB Trust
There have also been several significant law changes over the last 20 years that affect married couples with Trusts. Many couples did “AB” Trusts in the past because the estate tax threshold was much lower than it is today. Those AB Trusts come with very onerous administration after the first spouse dies, including segregating assets and filing an additional annual tax for the Trust. The surviving spouse is also prohibited from changing part of the terms of the Trust because it partly becomes irrevocable.
With the recent tax bill, estates under $10,000,000 are not subject to the estate tax, so a married couple should check their joint trust to see whether it is an AB Trust, and whether that is still appropriate for them. We can help convert an old AB Trust into a simpler and more flexible plan.
Anything that will affect the inheritance of your family is a reason to update a Trust. Births, deaths, divorces, purchases of property and assets need to be reflected in your Trust.
2. Make provisions for your pets
Pets these days are spoiled and pampered for good reason—they’re funny and charming and provide comfort and companionship to millions of people who might otherwise be lonely. If something were to happen to you, whom would you trust to care for your pets? Think about the costs of feeding your pets and trips to the vet. Most important, identify someone who will love your pets as much as you do.
1. Provide access to your digital assets and accounts
Most of us conduct the bulk of our personal business online, but what happens to these online assets and accounts after you die? Take some steps now to help your family deal with your digital property.
Make a list of all of your online accounts, including e-mail, financial records, Facebook and other social media accounts–anywhere you conduct business online.
Include your username and password for each account.
Include access information for your digital devices, including smartphones, tablets and computers.
Make sure the Agent for your Power of Attorney and the Successor Trustee of your Trust have authority to access your online accounts.
California Document Preparers makes it easy for our clients
Living Trusts are an important service for us, and because many of our Trust clients are either retired or thinking about retiring, conversations about healthcare, assisted living and long-term care frequently surface. Hospice is another topic that gets a lot of attention. It’s an industry that has exploded over the last few years as healthcare providers strives to provide services for an aging baby-boomer population.
A recent article in TheNew York Times, This Was Not the Good Death We Were Promised, is a very moving story about one woman’s hospice experience with her father, who was diagnosed with pancreatic cancer, which is notoriously difficult to treat. They had decided that he would die at home, surrounded by his family and those things which were familiar and dear to him. The author spent the final weeks with her father, watching favorite TV episodes, poring over old photos and reminiscing.
A family enlisted the support of hospice to help their father die
There was little she could offer her father at this point in his life, but what she could promise him was a painless, easy death. They were wary of the unnecessary medicalization of hospital deaths, so they had enlisted the support of an in-home hospice agency to ease him through his final days.
When a doctor determined that her 83-year old father had about six months to live, the author invited a hospice representative to their home. The representative provided a summary of the Medicare-provided services. Most importantly, she told them that if a final “crisis” came, such as severe pain or agitation, a registered nurse would stay in his room around the clock to treat him.
Looking back, the problem centered around inadequate staffing levels
Things went well for a few months. A caretaker made regular visits and a physician’s assistant prescribed pain medication for the relatively little pain he was having. But towards the end, her father experienced a deterioration—and hospice failed to respond as promised.
At 7:00pm on the last day of her father’s life, his pain spiked dramatically. His nurse turned her phone off at 5:00pm, so the author called the hospice switchboard. No doctor was available, and it took the receptionist an hour to reach a nurse by phone, who told them to double his dose of oxycodone. Yet that had no effect; her father needed another level of care.
The only on-call nurse was helping another family two hours away. The author and her sister experimented with Ativan and more oxycodone and fumbled through administering a dose of morphine their mother found in a cabinet. A nurse arrived at midnight, and, incredibly, had brought no painkillers.
After the nurse left, the father’s pain broke through the morphine
The author called the switchboard again, and it took three hours for a new nurse to arrive. She was surprised the patient hadn’t been set up with a pump for a more effective painkiller. This nurse agreed that they were now in a crisis that should trigger the promised round-the-clock care. She made a phone call and told the family that the crisis nurse would arrive by 8 a.m. But the crisis nurse did not arrive by 8:00, 9:00 or 10:00am. Apparently the nurse had strep throat, but another nurse would arrive by noon. By 2:00pm, no nurse had arrived. By this time, the father had slipped into a coma, leaving his family heartbroken that he had been in severe pain and would not be able to hear their final goodbyes. The crisis nurse finally arrived at 4 p.m., but there was little left to do.
At the end of life, things can fall apart quickly
Neither a medical specialist nor a hospice worker can guarantee a painless exit. But this family was assured that a palliative expert would be at their father’s bedside if he needed it. No one mentioned the strain on their staffing levels that would make this impossible.
The author saw in a report several months later that the home hospice system is stretched thin and falling short of its original mission. Many of the more than 4,000 Medicare-certified hospice agencies in the U.S. exist within larger healthcare or corporate systems, which are often under pressure to keep profit margins up. Hospice began as a nonprofit, with pure motives. With the large, aging baby-boomer population and the profit potential, many more for-profit hospice organizations have sprung up.
Hospice complaints are in the minority
Kaiser Health News discovered that there had been 3,200 complaints against hospice agencies across the country in the past five years. Few led to any recourse. In a Medicare-sponsored survey, fewer than 80% of people reported “getting timely care” from hospice providers, and only 75% reported “getting help for symptoms.” That said, more than a million Medicare patients go into hospice care every year, and those with complaints are in the minority. A new government-sponsored website called Hospice Compare will soon include agency ratings, which may inspire some to raise their level of service. When the author looked up the agency they had used, its customer-satisfaction rate for handling pain — based on the company’s self-assessment — was 56%.
Just as this family had an unfortunate hospice experience, many other people can tell stories of the wonderful care their family members received from hospice providers. Thoroughly researching the background of a hospice agency before engaging it may help ensure that your loved ones receive excellent care.