Planning Your Living Trust: Four Things You May be Overlooking

As you start thinking about what belongs in your Living Trust, here are four things that often get overlooked—and can have significant, often costly consequences.

Creating Joint Tenancy Assets

In Living Trust conversations, joint tenancy generally refers to real estate and how you hold title to a property. If two people own a property, joint tenancy (with the right of survivorship) means that if one owner dies, that owner’s interest in the property will pass evenly to the surviving owner or owners without having to go through Probate.

Funding, the process of transferring assets into a Living Trust, is part of the Living Trust process. A Grant Deed transfers real property into the Trust. This Deed will also remove property from your Trust–many banks require your home to be removed from your Trust in order to refinance. Guideway can help remove your property from the Trust, then place it back in after the Refi is complete.

Disposing of family keepsakes 

You can’t put a price tag on sentimental value. Small insignificant items that may not hold any monetary value can be important sentimental icons for family members. They can also be the cause of family strife. Smart families divide these up long before anyone dies. In my own family, as my folks aged, they encouraged us to take things home with us when we visited. Other families explicitly identify these items and their distribution in their Living Trusts. When Robin Williams died, his kids sued his wife to get possession of the substantial collection of memorabilia that their father had collected over his career. If he’d identified their distribution in his Trust he would have saved his family a whole lot of grief.

RELATED CONTENT: We Learned Many Things from Robin Williams . . . and Now We’re Learning from His Estate Plan

Assets passing outside of the Trust

Assets such as life insurance, annuities and retirement plans fall outside a Living Trust. Naming a beneficiary for these accounts supersedes whomever you might name in your Trust.

We see this one all the time. You named your ex-wife as your beneficiary for your 401k—but that was in happier times. After your divorce, you removed her as the beneficiary in your Trust. But unless you also remove her as the beneficiary in your 401k account, it’s your ex who will benefit if something happens to you.

Naming backup Executors and alternates

Think carefully about whom you name as your Executor and alternate. Your brilliant banker cousin Jerry may be the perfect choice because he totally gets this stuff, but he’s 67, he’s still sneaking cigarettes and he has a heart condition. Keep Jerry, but identify an alternate who is healthier and younger.

As you update your Trust over the years, plan to review your Executor and alternate appointments. Make sure they’re still available and capable of taking on the responsibilities of this role.

Guideway, we’re a single point of contact

When creating your Living Trust, you’ll work with a dedicated specialist who is available for questions and support throughout the process. We’ve been in business since 2003 and have expanded to three Bay Area offices–Dublin, Oakland and Walnut Creek. More than 60% of our business comes from referrals and repeat business.

We’re also proud of our comprehensive Living Trust package that includes a Power of Attorney and Advanced Healthcare Directive. We provide a hard copy as well as a soft copy of your documents. More questions? Contact us today.

Guideway services the entire Bay Area

Berkeley, El Cerrito, Richmond, Pinole, Alameda, San Leandro, Castro Valley Newark, San Lorenzo, Concord, Alamo, Danville, Lafayette, Orinda, Moraga, Pleasant Hill, Martinez, Pittsburg, Antioch, Brentwood, Oakley, Discovery Bay, Pleasanton, San Ramon, Livermore, Tracy and Fremont. Our clients also live in the Napa Valley, Benicia, Vallejo, Martinez, Fairfield.

RELATED CONTENT:

5 Steps to Funding Your Trust

Your Living Trust: Avoiding the Pitfalls

Is It Time to Check Your Beneficiary Designations?

Executor Anxiety: What if the Estate Doesn’t Sell?

There is often confusion about the role of the Executor/Successor Trustee who manages the family’s estate after the death of a parent. An article in The New York Times underscores the uncertainty and anxiety that an Executor may be experiencing. An “Executor” carries out a person’s Will (common in New York because Probate is more workable there), whereas most California people will have a Trust, so the person doing all these tasks is the “Successor Trustee”. Anxiety is not uncommon—none of us has trained for this role, and we don’t normally bring any experience to the job.

 

In the article, one person is the Executor of her mother’s estate. The sale of her house and its belongings will be divided equally among the surviving children. The Executor had the home’s furnishings appraised and is preparing them for sale. She’s concerned that if the furnishings don’t sell, as Executor, she will be responsible for the shortfalls.

Fiduciary duties: Acting in the best interest of the beneficiaries

An Executor is legally responsible for sorting out the finances of the person who died, generally making sure debts and taxes are paid. What’s left is distributed among the heirs. As an Executor, you can’t act against the interests of any of the beneficiaries—these are your fiduciary commitments.

According to these fiduciary duties, you can’t sell assets for less than fair market value without agreement of the beneficiaries. Your job is to settle the financial affairs and divide the assets in accordance with the Will. It’s not your job to pay your siblings if the estate is ultimately not as valuable as everyone seems to think. You are expected to make prudent decisions about how you liquidate it.

 

What’s “prudent” can be a matter of supply and demand

“What’s prudent is going to depend on the nature of the assets,” said Douglas F. Allen, Jr., a trusts and estates attorney in the Manhattan office of the law firm Seyfarth Shaw. If the estate has a valuable 19th-century armoire and you sell it at a yard sale, your siblings could hold you responsible for being careless with their inheritance. Your job is to figure out how to appraise it and find the best venue to sell it, whether that’s at an auction or through an antiques dealer. If the piece appraises for a modest sum, you may decide to sell it at an estate sale. If it sells for far less than the appraised value, then it was only worth that much—it’s a matter of supply and demand. If it’s perceived as just a hulking piece of furniture in the marketplace, then the estate is responsible for the cost of disposing of it. 

A reality check: No one seems to want old bulky furniture

I recently helped a friend downsize. They sold the estate where they had lived for 30 years. They had a home full of beautiful things, including dishes, silver and antique furniture. All of these items were expensive and in excellent condition. We tried all of the online sales sites and didn’t get as much as a nibble. No one wants this stuff, including her own children. So while they may have paid a lot of money for these items, they were virtually worthless in today’s marketplace. They only have value when someone wants them.

When it comes to real estate, partner with a broker you can trust

Decide whether to list property as-is or spend money from the estate on upgrades, repairs and staging. If the broker suggests listing it for $750,000, but it sells for $700,000, then that’s all the money you have to split up, minus whatever expenses you incurred for staging, repairs and broker fees, according to Robert D. Steele, a partner at the Manhattan law firm Schwartz Sladkus Reich Greenberg Atlas, where he is head of the firm’s trusts and estates department.

Have these conversations now

To avoid a conflict among your siblings, start the conversation now, before any heirlooms are sold or divided up. Do some research to understand the local market value. Explain the process and whatever guidelines have been laid out in the Will. For heirlooms that have sentimental but limited monetary value, split these up now to avoid turmoil at what will undoubtedly be a difficult time.

Schedule an appointment to create your Living Trust: Zoom or in-person!

You now have a choice–via Zoom or an in-person meeting. Our Trust package includes a Power of Attorney, an Advance Healthcare Directive and a Pour Over Will. Best of all, we guide you through it and we prepare the legal documents.

We service the entire East Bay and North Bay areas

Berkeley, El Cerrito, Richmond, Pinole, Alameda, San Leandro, Castro Valley Newark, San Lorenzo, Concord, Alamo, Danville, Lafayette, Orinda, Moraga, Pleasant Hill, Martinez, Pittsburg, Antioch, Brentwood, Oakley, Discovery Bay, Pleasanton, San Ramon, Livermore, Tracy and Fremont. Our clients also live in the Napa Valley, Benicia, Vallejo, Martinez, Fairfield.

This article is based on an article in The New York Times by Ronda Kaysen.

 

 

Probate Executor? Tips for Defusing Volatile Family Dynamics

Sometimes death has a way of bringing out the worst in families. The death of a parent and the subsequent efforts to settle the estate can renew old rivalries among siblings. Ask those who grew up in dysfunctional families, and they’ll tell you that just because they’re older doesn’t mean that relationship problems disappear. The issues that divided that family 20 years ago likely still remain. Grudges and perceived inequities still can feel fresh. If there’s a significant amount of money to be divided among family members, things can quickly become hostile. If you’re the Probate Executor, here are some tips for defusing volatile family dynamics.

Inheritance fights are on the rise

A huge number of baby boomers have done nothing to prepare for retirement, and accumulated assets from their more frugal parents become a critical part of their retirement planning. When things go badly, people realize that they need their inheritances. A lot of people are living off the parental dole. As their parents near the end, these children grab as much as they can and are far less willing to share it with their siblings. An uneven economy, layoffs and shrunken retirement plans have hurt many.

Here are three common trigger points for family fights over inheritances:

1. Mom always liked you best

While nobody really wants to be an Executor, deep down inside we want to be asked, because we equate being named Executor as both a vote of confidence and a validation of our relationship with the person who died. It’s also an indicator of leadership and intelligence. Not being asked can create resentment toward the person who was asked. That resentment can create distrust of the process and constant questioning of the decisions that are made. If you have been named the Executor, you can minimize resentment by being sensitive to others’ feelings, staying approachable and encouraging collaboration.

2. Fair isn’t always equal

There’s often a gap between what beneficiaries expect to receive and what they actually get. One of the most common refrains is “Mom said she wanted me to have [fill in the blank] after she died.”

This becomes a slippery slope. If the Will doesn’t specify the distribution of an individual item, the item belongs to the estate. If there’s no Will, that item and everything else belongs to the estate. While some requests from family members may seem small enough, they present risks. If the Executor were to let Joanne take that one heirloom vase that wasn’t specifically bequeathed to her, everyone else will want to take something. They may decide to take one more item each. Then another. Before you know it, the estate becomes diminished.

3. Facing your judge and jury

Family members are stakeholders, and they can be harsh critics. Questions can escalate into accusations if they aren’t answered, or if the other beneficiaries don’t like the answers. Constant criticism can put tremendous pressure on Executors. Fear of conflict can be paralyzing, which is one of the reasons Probate can drag on for years.

Simple steps for keeping family members on board

An Executor may not be able to control a dysfunctional family. If you’re an Executor, what you can do is be transparent, document everything you’re doing and communicate early and often.

• Tell everyone the rules. Let family members know that there will be some collaboration. There are going to be decisions that you will have to make on your own. Just keep your siblings updated.
• Consider a Mediator. If you know that your family’s level of dysfunction could complicate Probate, consider bringing in a Mediator. A Mediator will remain neutral and work with your family to resolve disputes over inheritance. Having a third party can defuse volatile situations.
• Take care of yourself. Take care of yourself through this difficult and emotional process. Set boundaries about the time you’ll focus on Probate issues and keep up with the rest of your life. Many Executors also have demanding full-time jobs and families. It’s critical to find a balance.

California Document Preparers assists our clients with Probate. While Probate can seem overwhelming, it’s a methodical process and we assist you through each step for one fixed fee of $4,500. Schedule an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

We recently had a call from Josh, a client we’ve assisted on other matters. He had a question about a family disagreement—not unusual when there’s an inheritance at stake. Their father died in 2012; their mother in 2016. They had an AB Trust. The estate included the family home that was paid in full, but a mortgage was opened a few months before their mother died to pay for health care expenses, property, a timeshare and personal belongings.

After nearly two years, the estate is still not completely settled for two reasons:

1. A timeshare. This was a last-minute revelation; it was not included in the Trust, and therefore, needed to go through Probate. Each sibling had sent a release of any interest in the timeshare.

2. Withholdings. Josh’s brother, Peter, became the estate Executor, and he hired a lawyer to navigate the process. $100,000 ($25,000 per child) was held back until the siblings “released” Peter from any future claims and/or contests against him or the estate. The siblings also discovered that Peter took an Executor fee of $20,000. Once settled, the estate would be worth about $600,000.

How much should the estate’s Executor be paid?

Josh wanted to know if the Executor fee is a standard practice, and if so, what determines the amount. None of the siblings disputed that Peter worked hard to settle their parents’ affairs, and all agreed that Peter was the most qualified sibling to fill this role, and that he deserved compensation. They also agreed that the compensation should have been clarified in the beginning and that the fee was excessive.

Being the Executor for the family estate is a thankless job

The estate can drag on for more than a year in even simple cases. It’s not uncommon that a family’s loved ones are incapacitated at the end of their lives, and bills from endless healthcare providers, Social Security and Medicare continue to trickle in. Peter already had a family and a demanding full-time job; he managed their mother’s estate for two years, including dealing with a Probate. A fee of $20,000 is likely not unreasonable.

When my own parents died within months of each other, my brother became the Executor and we were all eternally grateful. He was diligent in his efforts to be fair and professional; he communicated with us at regular intervals. I believe he took $10,000 for his fee, and I would have gladly paid him much, much more not to have to do this myself. He took care of everything—the nursing home, assisted living, their CPA, etc. Ours was a fairly straightforward case, yet it dragged on for well over a year.

Under California Probate Code, the Executor typically receives 4% on the first $100,000, 3% on the next $100,000 and 2% on the next $800,000. For an estate worth $600,000 the fee works out at approximately $15,000. They usually take a year to settle, but can take longer, depending on the complexity of the estate.

We can learn from Josh and his family’s experience

Signing release forms at the end of this process is pretty standard. In retrospect, Peter should have been more upfront about his fee, and he should have explained how he arrived at the $20,000 figure. Peter’s siblings also might have been more generous. Peter had always been the siblings’ leader, and as usual, they assumed he would be the Executor. They should also have assumed that he needed to be adequately compensated for his efforts.

Is creating a Living Trust one of your 2019 resolutions? Schedule an appointment today!

Schedule an appointment at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

Have You Been Named Probate Executor? Brush Up Your Bookkeeping Skills

Elise sat in her kitchen staring at a huge, meaningless pile of bills, bank statements, outstanding invoices and cancelled checks. She had always been close to her dad, but right now she was furious at him for dying and making her the Executor of his estate in his Will. Elise was a musician with an MFA, not an accountant. She was nearly 50 and had never so much as balanced her own checkbook. She was not irresponsible, just not equipped to deal with this kind of challenge.

She finally called her friend Joe, a bookkeeper. Joe arrived, looked at the sea of bills and quickly agreed that her dad’s records were a mess. He’d never recorded checks, and some of the invoices were three years old.

Joe helped Elise create a plan that started with getting methodical and organized

• Create a pile of all the bills and invoices.
• Look for receipts, cancelled checks or other verification that a bill has been paid, such as bank statements, and create another pile.
• Keep a separate pile for anything that’s going to affect a credit balance–checks that might have been received or automatic deposits that were made to an account.
• Create a spreadsheet. List all of the bills found; match them with cancelled checks and receipts.
• If you can’t find something, first check bank statements. If nothing is there, call the company that sent the invoice and ask if the bill has been paid.
• If it has been paid, request a receipt. If it hasn’t, create a separate spreadsheet category for unpaid bills or outstanding debt and note the amount.

Key responsibility of the Executor: Accounting for assets and liabilities

To those who are not used to keeping careful financial records, this may seem like a lot of work, and it is. But until the assets and liabilities have been accounted for, Probate cannot move forward. It is important to document every step taken to verify liabilities and assets. It is also important to document the liquidation of assets to either pay bills or divide the estate among the heirs. This will include the cost of an appraiser who will estimate the value of any property that needs to be sold, then recording the sale.

• Invest in financial software. A spreadsheet is fine; Excel will do the math for you.
• Focus on the numbers. Check and recheck the numbers—they need to balance.
• Match every number to a source document. It is much easier to locate an error if every entry is matched to a source document–a receipt, account statement, correspondence, bills paid or pending, and photocopies of checks and deposit slips. Note the source on the spreadsheet, file the documents and keep on hand.
• Document everything. Keep comprehensive notes on all expenses and transactions made on behalf of the estate, including dates, purpose and the exact amount. Keep receipts.

Don’t take questions or challenges personally

If the estate closes and a mistake is later discovered, those who received disbursements may be required to reimburse the court to correct a deficiency. Discovering errors before an estate closes protects the heirs and the estate. Conducting an accounting of an estate during Probate is a technical process that requires attention to detail and accuracy. When done well, Probate proceeds smoothly.

Probate is a growing service for us

If your Probate is uncontested, you don’t need an attorney, and we can assist you—all for one flat fee of $4,500. Contact California Document Preparersat one of our three Bay Area offices today to schedule an appointment. Our dedicated team is helpful, compassionate and affordable.

Forget the Drama; Probate Court is a Methodical Process

Abby’s mother died in a tragic automobile accident in January. She had never prepared a Living Trust because, like many people, she assumed that this was something she’d have plenty of time for when she grew old.

An only child, Abby would be the Administrator of her mother’s estate

When Abby came in to our Oakland office, we reviewed the Probate process and her responsibilities as Administrator. On the day of our Probate hearing, Abby showed up at the courthouse, and she clearly had prepared for her day in court—she was wearing a suit and heels, makeup and she’d had her hair done. She confessed that she wanted to look professional, but there was another reason. “There were going to be all those good-looking lawyers in the courtroom.” Abby was turning her mother’s Probate hearing into a drama. Hearing her description of how she scanned the courtroom for witnesses, the judge and prosecutor, we couldn’t help thinking that she’d watched too many old episodes of Law & Order.

There’s no prosecutor or jury in Probate Court

Our client was in the courtroom specifically to get the judge’s permission to proceed with the Probate of Abby’s mother’s estate. “The judge will review your petition and grant Letters Testamentary, the document that authorizes the Executor of a Will to take control of a deceased person’s estate.” When the required paperwork is completed and submitted to the court, the judge is most likely to review and approve it without any discussion.

California Document Preparers generally manages this process for our clients. We answer our client’s questions and ensure the Probate process continues to move forward after the hearing. Disputes and objections are rare. Settling an estate is a straightforward, orderly process.

Probate can be intimidating, yet it’s a very methodical process

As part of Probate, the Court appoints a personal representative, or Administrator, to settle the estate, so we work with that person throughout the Probate process. The Administrator is responsible for:

• Collecting all Probate property of the decedent.
• Paying all debts, claims and taxes owed by the estate.
• Collecting all rights to income, dividends, etc.
• Settling all disputes.
• Distributing or transferring the remaining property to the heirs.

Access to the decedent’s accounts

As the Administrator, Abby will gain access to all of her mother’s records–bank statements, savings accounts and income tax returns–to fully understand the financial landscape. This may include valuing assets, taking physical custody of assets and selling assets, as necessary, to pay off debts or expenses.

During Probate, the deceased’s estate becomes a separate tax entity, so Abby will need to obtain a federal identification number and open a bank account in the name of the estate to pay creditors. It is also necessary to file the estate’s tax return and a final individual tax return.

Distribution of remaining assets

Once all taxes and debts have been satisfied, the Court will then distribute any remaining assets according to the Decedent’s will, or according to state law when there is no Will. In California, as in most states, when there is no will, the first priority is given to the deceased’s spouse, followed by the deceased’s children.

In Abby’s case, her father died in 2013, and she was an only child. Once all debts are paid and the estate is settled, the remaining assets will be hers.

We encourage everyone to create a Living Trust

We all hope to live long, happy lives, but sometimes circumstances intervene. Creating a Living Trust is one of the most thoughtful things you can do for your family. Our dedicated team is helpful, compassionate and affordable. Contact California Document Preparers at one of our three Bay Area offices today to schedule an appointment

Executor Creates Process for Distributing Mother’s Assets

Clients who prepare their Living Trusts identify their assets and how they will be distributed among their heirs when they die. Assets include the obvious things such as real property, brokerage accounts, life insurance policies and other financial resources, but they also include other high-ticket items such as cars, jewelry, artwork, antiques, valuable collections, etc. Many people carefully allocate the large items but fail to identify how the smaller items will be distributed among their surviving family members. These are often items that may not have great financial value but are rich in sentiment, and their distribution can become highly contentious.

An Oakland client distributes mother’s assets

An Oakland client, the executor for his mother’s estate, shared this story of how he successfully distributed his mother’s assets among his siblings. His mother had created a Living Trust and had divided her estate equally among her three children. But she had not identified how the many small, sentimental items were to be divided among her three children. His brother and his wife were aggressive and greedy, and he wanted to avoid their taking the most valuable items, leaving his sister and him with the leftovers. He wanted to prevent potentially hard feelings and conflict, making sure that each of them was the recipient of household items and mementoes that would comfort them and keep their mother’s memory alive.

He knew, for instance, that his sister loved a beautiful Wedgewood plate that his mother always used for their birthday cakes, and she had a lovely gold bracelet that he would like to give his daughter. A wicker rocker in her study was where his mother used to sit and read, and he would love to have that chair in his own study. None of these things was worth a lot of money, but each was rich in memories.

As executor, he devised a plan that included only the three siblings, not their spouses

• Each would create and prioritize a written list of the items he/she wanted from their mother’s belongings, without saying one word to each other.
• They would flip a coin to see who would choose first.
• The sibling who won the coin toss would select the first item, segregating it physically into a pile.
• The person who came second would do the same, then the third, continuing until all of their mother’s belongings were taken.
• If somebody’s choice was already taken, they would take the next item on their list, if that item was still available.
• After all items were chosen, conversation was allowed and trading could begin. “You really wanted that item bracelet, and I really wanted that ring; would you be willing to trade?” Etc.

Siblings satisfied with the process

There was only one case where two siblings really wanted one item and a settlement/deal couldn’t be reached. Our client’s sister wanted something that he had chosen, but he wasn’t willing to part with it–their mother’s favorite pasta bowl that she had bought in Italy. There was no dispute, no loud discussion, and everyone was very satisfied with the process and the results—including his brother.

Have you created your Living Trust and named your executor? Contact the California Document Preparers team today to schedule an appointment. We help you through every step of the process.