San Diego Estate Planning Lawyer Blog

Currently there is a feud going on involving two of Walt Disney’s grandchildren and their share of the huge Disney fortune. Walt Disney died in 1966 leaving two daughters and 10 grandchildren. One of his daughters Sharon Disney had married and then divorced a real estate developer named Bill Lund who located and assisted in the purchase of the land which became the Disney World site. Sharon and Bill had two children Michelle and Brad. Sharon created an estate plan to leave her share of the Disney fortune to her two children from her marriage to Bill and one child from a previous relationship. She made her ex-husband as one of the four co-trustees of the childrens’ trusts. The trustees were to determine whether the three children were competent to receive the monetary distributions at ages 35, 40, and 45 and the yearly payments of income. The disbursements were approximately $20 million per child every five years.

To complicate everything, Sharon then died and her ex-husband remarried. Then in 2009 Michelle, Sharon and Bills’ daughter, suffered an aneurysm and her father began caring for her as the trustee of her trust. Family members sued in court to remove Bill claiming that he was trying to isolate her from family and friends and take over her estate. As time went on, the other co-trustees of Michelle’s trust also filed petitions in the probate court to remove Bill as a co-trustee. Eventually Bill agreed to resign as trustee in exchange for significant yearly payments.

The drama continues over the Disney fortune because Brad, the son of Sharon, is developmentally disabled and needs a conservator to manage his affairs. Michelle, his sister, does not believe that her father Bill and his new wife should be managing Brad’s estate. The huge attorneys fees are draining the estate.

Such family feuds that are occurring in the Disney family occur even in non-wealthy families. What this illustrates is that even with careful estate planning, there can be court battles. Beneficiaries file petitions to remove a trustee for not doing his job properly. Family members disagree as to who should be the conservator of a developmentally disabled beneficiary or a beneficiary who is incapacitated.

The attorneys at Scott C. Soady, A Professional Corporation handle all of the issues that are involved in the Disney estate: conservatorships, representation of beneficiaries, trust litigation including petitions to remove an existing trustee, and other estate planning issues that are involved when beneficiaries disagree about the trust distributions. If you need assistance, we always offer complimentary consultations on any estate planning issue.

Sometimes a trustee of a trust has to be removed for a violation of his fiduciary duties. In California the Probate Code sets forth the various duties a trustee of a trust has to the beneficiaries. Some of these duties are the duty of loyalty, duty not to self deal, the duty to keep the beneficiaries informed, duty to act impartially, and the duty to use skill and care in administering the trust.

You may recall the late Dr. Atkins, the author and physician who created the Atkins diet. When he died in 2003, he left 90% of his estate to a Marital Trust for the benefit of his wife Veronica and the balance to his charitable foundation. Dr. Atkins had named three business associates to serve as co-trustees with his wife. The three business associates resigned their trusteeship within 9 months of Dr. Atkin’s death and were replaced with individuals who were named as beneficiaries in Veronica Atkins estate planning documents. Agreements were entered into with these co-trustees agreeing to pay them millions of dollars for trust administration. Mrs. Atkins was obligated to pay her co-trustees a minimum of $100,000 per month. In the first six months, two of the trustees were paid more than $1 million in fees. When Mrs. Atkins stopped paying them, they sued her for breach of contract.

Finally in 2007, Mrs. Atkins filed a petition to remove her co-trustees in a New York probate court. New York has similar codes to California which allow a trustee to be removed if they engage in a breach of their fiduciary duty or if hostility between the co-trustees or the trustees and the beneficiary impair the administration of the trust. In ruling that the trustees should be removed, the Court said when the trustees are chosen by the testator, the court is reluctant to remove a trustee but there was a clear showing of misconduct and a level of hostility between Mrs. Atkins and her co-trustees such it would affect the trust administration.

At Scott C. Soady, A Professional Corporation, we frequently have to petition the local probate court to remove a trustee or conversely, defend a client who is acting as a trustee and the beneficiaries are seeking to remove him. In either case, it is the type of trust litigation that requires you as a potential client to seek out experienced counsel. Contact us about probate or trust litigation or trust administration.

Your friend or parent has asked you to be the successor trustee of his trust. Is there anything you should ask before accepting such a responsibility? Yes, yes, yes. You may think that being asked to handle someone's estate is not that hard but sometimes being a trustee can be aggravating, frustrating, time-consuming, and even lead to litigation.
Money Magazine has a good article about the warning signs that, if present, may make you want to think twice about accepting a trusteeship. Here are some of the red flags:

1. You are being left in the dark. Before you agree to be a trustee and administer a trust, you should know the facts. Review the trust and see what is involved. If the trustor is asking you to be his successor trustee but won't provide a copy of the trust, you may not want to take on such a task without being informed.

2. Someone who is an heir is being disinherited. Disinheriting someone who is a natural beneficiary such as a child can cause hard feelings and increase the likelihood of litigation which you will have to defend as the trustee. Inequitable distributions are likewise more likely to cause problems than if the beneficiaries are all treated equally, such as where three children of the Trustor split the estate equally.

3. There is already tension in the family. Managing a trust where the family members don't get along anyway can be difficult. One of the ways this can happen is where there is an A/B trust or bypass trust which can pit the children of a Trustor against a surviving spouse who is not their mother.

4. You are being asked to manage a relative's inheritance in trust. Most of the time, the successor trustee will be distributing the assets outright to the beneficiaries. Sometimes however, a trustor provides that the money be held in trust until a particular beneficiary is a certain age. The trustor may make another child the trustee and therefore in charge of investing and managing the assets in trust until the beneficiary is of the age to receive the entire estate. Putting one child in control of another child's inheritance can be a difficult situation.

If after being informed of what trust administration would involve, you decide to agree to be a trustee, one way to make your job easier is to get the assistance of an experienced estate planning lawyer who handles trust administration. At Scott C. Soady, A Professional Corporation, trust administration is a large part of our practice.

As the successor trustee of a trust, executor of a will, or the administrator of an intestate estate (ie. no will or trust), one of your duties will be to pay all taxes due the federal government and the state of California.

Personal Income Tax Returns Once someone has died, a personal income tax return will have to be prepared and filed for the year of the decedent’s death. Income received by the decedent from January 1 until the date of death will have to be reported. If the estate receives income however, after the date of death, that will be reported on the estate tax return. Deductions for medical expenses of the decedent can be taken for one year after the date of death, to take into consideration expenses of a last illness. All other deductions, such as for mortgage interest, property taxes, etc. must have been expenses incurred prior to the date of death.

Fiduciary Tax Return The estate income tax return, call a fiduciary tax return, is filed annually as long as the estate is open. Dividends, interest, capital gains, and rents are all reported on this return. Deductions can be taken for mortgage interest the estate pays on real property and legal and administrative fees. This return, unlike the personal return, can be filed on a fiscal year basis. The duty to file a fiduciary return exists as long as the trustee, executor, or administrator is administering the estate. The final fiduciary return can be filed when the estate is in a position to be closed and final distributions made to beneficiaries.

Estate Taxes If a person dies in 2011 with over $5 million in assets, an estate tax return also has to be filed within 9 months of the date of death. Extensions for 6 months can be obtained. If there are gifts to qualified charities, those can be deducted as can debts of the decedent such as funeral expenses, last illness medical expense, and legal fees. The current federal estate tax exemption is $5 million which will last until 2013. Congress can act before that date to keep the exemption at the current rate or to change the exemption Keep in mind that it is the federal estate tax exemption in the year of death that governs.

Other Taxes Another type of tax that will have to be paid by the trustee, executor, or administrator of an estate is property taxes if the estate owns real property. A gift tax may also be necessary if the decedent made gifts in excess of the gift allowance for the year of death.

To help you with tax issues, the attorneys at the Law Office of Scott C. Soady, A Professional Corporation will work with the decedent’s CPA or the trustee, executor, or administrator’s CPA. We also have CPA’s we can refer you to for assistance with tax issues. It is an extremely important that all tax issues are handled competently and efficiently since there may be substantial penalties and interest that may be incurred if not handled correctly.

A family member has died and you have to open a probate estate (if he died with a will or with no estate plan) or administer the decedent’s trust (if he had created a revocable living trust). In what county do you open the estate?

The county where an estate is handled is the county where the decedent was domiciled. Domicile is the permanent residence of an individual. In most cases, it is clear where the decedent was domiciled but in a few instances it may not be so clear.

If a decedent died in a hospital while on vacation, from accident, surgery, or illness, his domicile is still where he lived permanently, so if that is San Diego county, then the San Diego Probate Court would be where the will is admitted to probate or San Diego would be where the trust is administered. On the other hand, what if the decedent decided to move to another county to live with relatives or to live in an assisted living facility? Then domicile has to be determined by looking at such factors as where the decedent owned property; where was the residence of the decedent; where did the decedent receive mail, where was the decedent registered to vote; in what state was the decedent’s driver’s license issued. These factors may lead a court to conclude that the intent of the decedent was to change his domicile to another county.

Another situation in which domicile can be an issue is when the decedent was in the military. People in the military may be stationed or deployed at one location and maintain a residence elsewhere. The general rule is that the county of domicile is where the decedent resided, whether at the time of enlistment or where his family lives and owns the family home at the time he died.

For questions about where to file for probate or administer a living trust, call the estate planning lawyers at Scott C. Soady, A Professional Corporation for a free consultation.

If you are the Successor Trustee of a trust, you have a job with a lot of responsibility. You need to give notice to the trust beneficiaries, inventory and appraise the the trust assets, possibly create sub-trusts, prepare an accounting, file taxes, and make distributions. Administering a trust can be complicated and confusing for the lay person. It involves attention to detail and adherence to certain requirements of the Probate Court.

Here are some issues that may make you rethink doing trust administration by yourself:

1. The beneficiaries request an accounting. Beneficiaries are entitled to an accounting of the trust assets. They can agree to waive an accounting but should any of the beneficiaries request one, it is your obligation as the trustee to provide one. A complicated accounting often involves hiring an accountant to assist you and it may be a good idea to retain an attorney as well.

2. The trust has unusual assets which need to be appraised. Some trusts consist of just real property, cash accounts,securities, personal property, and retirement assets. There are other types of assets which are not as easy to value, such as mineral rights, gas or oil royalties, ranch or farm property, businesses, shopping centers or other commerical real estate, professional practices, and high end artwork and jewelry. An experienced estate planning attorney will have access to various types of appraisers and assist you in making sure all of the trust assets are properly valued.

3. Litigation. If litigation is instituted by a trust beneficiary or by a disinherited heir or even a creditor, it may be time to get an attorney to assist you. Not all estate planning lawyers litigate trust issues so you want to find an attorney that is familar with the probate court and routinely does litigation so that they are familiar with taking depositions and going to trial, if it becomes necessary.

If you are overwhelmed with your duties as successotr trustee and need help in getting through the trust administration process, contact us at Scott C. Soady, A Professional Corporation. Trust administration is one of our specialties and we also handle trust litigation. Contact us for a complimentary and confidential consultation about your trust administration matter.

A fiduciary is an individual who acts in a position of trust such as acting as a guardian of estates,conservator of estates, personal representative of estates, or as an agent under powers of attorney.

A fiduciary as a trustee of a trust has the responsibility of administering the trust as set forth in the trust document, including safeguarding the trust assets, investing assets, accounting to the beneficiaries, and distributing assets as the trust document provides.

A fiduciary can also act as a conservator of an estate of the conservatee, where they are responsible for protecting and managing the conservatee's asset, receiving income, paying bills, and filing tax returns. The duties of a fiduciary acting under a power of attorney are similar. All are positions which require a high degree of honesty and integrity,

Last week in Federal Court in San Diego, a private professional fiduciary pled guilty to wire fraud and money laundering, admitting that she misused her position as a court-appointed professional trustee to steal trust funds from conservatorships, family trusts, and estates. It is estimated that she bilked as much as $2.5 million from accounts between 2006 and January, 2011.

To avoid being a victim of abuse by another who is acting as a fiduciary, make sure you choose an individual who is honest and trustworthy and if you select a private professional fiduciary, make sure that individual is a member of the Professonal Fiduciary Association of California and is licensed with no disciplinary actions filed with the California Professional Fiduciary Bureau. This did not help the victims of the fiduciary recently indicted, however, as she was a member of the Professional Fiduciary Association of California and had no disciplinary record.
Report suspicious activity on the part of a professional fiduciary to the Dept. of Consumer Affairs. For assistance determining is there is abuse with a private individual acting as a trustee or in other fiduciary role, contact us at Scott C. Soady, A Professional Corporation for a complimentary consultation.

Acting as a trustee is a very important job and choosing your trustee can be a difficult decision. In addition to this person handling your estate upon your death, you also have to think about the possibility that this individual may have to take over the management of your affairs if you become incapacitated.

Many people choose an adult child or other family member to be the successor trustee of their trust. But there may be some valid reasons to choose an independent third party to act as your trustee during your lifetime or after your death. Some people do not have children or close relatives or friends they can name to serve as the trustee of their trust. Some people have children or relatives but they do not want to burden their family members with the job. Maybe their children live in another state or have busy lives with their jobs and family. Some people may not want to name any of their children for fear it will jeopardize the relationship between siblings. So what are some other options for your choice of a trustee?

1. Corporate Fiduciaries. Corporate fiduciaries can be banks, trust companies, or trust departments. They are insured and closely monitored by federal and state regulators. The down side may be that some of these corporate fiduciaries have a minimum value of an estate which they will accept. Their fees may be higher than other types of fiduciaries and some beneficiaries feel the service is impersonal.

2. Other Professionals such as Attorneys or CPAs. In past years it was more common to see the family attorney or CPA named as the successor trustee of a trust. Today, although many could certainly serve, most feel that the job of a trustee goes beyond just the legal or the financial aspects and decline to act as a trustee.

3. Private Professional Fiduciaries. Private professional fiduciaries in California have specific training and take an exam to become licensed. Many have years of experience before they become fiduciaries working in a trust department or managing trust funds. Their fees are usually lower than banks and you will receive personal service. It is their full time job to take care of you and your estate.

The estate planning attorneys at Scott C. Soady, A Professional Corporation can recommend private professional fiduciaries we work with and in whom we have confidence. Before choosing a private professional fiduciary, interview several and decide on the one you feel would best fit with you, your family, and your estate.

At Scott C. Soady, A Professional Corporation, many of our cases are trust administration. When an individual has died with a trust, the successor trustee has to inventory all of the assets and value them before they are distributed to the named beneficiaries. Asset valuation can take some time to accomplish and may require specialized appraisers to assist. The date usually used for valuation purposes is the date of death.

A distinction needs to be made between assets which are trust assets and assets which may not be trust assets but nevertheless were owned by the decedent and therefore also need to be valued .How are the various types of assets valued?

Real property is valued by a real estate appraiser who provides a written report describing the property, its value on the date of death, and providing comparable sales which were used to determine value. Commercial property such as apartments, office buildings, farms, and ranches are appraised by real estate agents or appraisers who specialize in that type of property. Crops, animals, and equipment are valued separately from the real property.

Businesses, practices, partnerships, and corporations have to be valued taking into consideration the fair market value of the entity as a whole and also the value of the decedent’s interest. There are special appraisers who handle this type of assets and accountants may also be involved.

Cash on hand at the date of death is obviously easy to value, however coins and bills that have a value other than their face value are often appraised by a coin expert who determines their sale value. Bank accounts, checking accounts, money market accounts, and CDs can be valued by obtaining bank statements showing the values at the date of death.

Cars, boats, and airplanes are valued by determining the sale price as of the date of death. Kelly Blue Book figures can be used for vehicles. Mobile homes, boats, motorcycles, and airplanes have similar publication that can be used as references.

Furniture and furnishing can be valued by having the household contents appraised by an appraiser specializing in household contents. If the value of such items is not significant, it may be possible to estimate the value. Any antiques, jewelry, or artwork should be appraised if they have a value in excess of $3,000.

We can assist you with valuing assets after a death and other aspects of trust administration if needed. Contact us for a complimentary appointment.

Being a trustee of a trust is an important job and requires a high degree of honesty, trustworthiness, and ethics. Trustees are fiduciaries and have a number of duties under the California Probate Code. Trustees have the duty of loyalty (Probate Code 16002), the duty to deal impartially with the beneficiaries (Probate Code 16003), and the duty to avoid conflict of interest and not self deal (Probate Code 16004). Any breach of these duties is a breach of a trustee’s fiduciary duties. There are remedies in the Probate Court when there has been a wrongdoing by the trustee and there can also be criminal charges filed against a trustee who does not properly do his job.

For example, a man in northern California who embezzled more than $100,000 from his grandmother’s trust was recently charged withe first degree embezzlement. After becoming the trustee of his grandmother’s trust, he started taking cash from her CD’s and depositing the money in two of his business accounts. Between 2003 and 2006, he allegedly withdraw $108,000, leaving his grandmother with only $6,000 forcing her to move from her home because her grandson had not paid the mortgage. The grandson claimed that he had to withdraw the money to support his wife and 6 kids.

The choice of a trustee is so important. This individual may be handling your trust when you are still alive if you become incapacitated or decide you just want assistance at some point. When you consult with Scott C. Soady, A Professional Corporation about a trust, we can assist you in narrowing the choices for a successor trustee and put safeguards in your trust to reduce the risk of trustees helping themselves to the trust assets. We also handle trust litigation and elder abuse cases where a trustee has taken money from a trust and therefore needs to be removed from the position and compelled to repay the money to the trust. We are happy to help with any of these “trustee” issues.

If you do not have a will, or better yet, a trust, your estate will be distributed according to the laws of “intestacy” set forth in the Probate Code. There may be a difference between how your estate is distributed according to your wishes and how it will be distributed pursuant to the Probate Code. Here are some disadvantages of intestacy you might want to consider:

1. The Court chooses the individual who will distribute your estate. The Court will appoint someone called the administrator to manage your assets and distribute them to your heirs at law. Maybe the person appointed is the person you would have chosen anyway but maybe not. Maybe two or more individuals will apply to the Court to be named administrator causing discord in the family.

2. The process of probate takes a long time. When you die without a will or a trust, the probate process here in San Diego typically can take a year or longer. The administration of a trust usually progresses much faster. If there are issues that need court intervention, the trustee can petition the Court for assistance, but most trust administrations are handled without going to court.

3. The Court may have to choose a guardian for your minor children. If you create a will or trust, you will name the person or persons you want to raise your children. Without an estate plan, the Court will determine who will be the guardian from those individuals who agree to be the guardian. Again more than one family member or friend may petition to be the guardian causing disharmony. The Court will have to make the determination without any input as to who you would have chosen.

4. With probate, rather than administration of a trust, it can be difficult to come up with money to pay debts, funeral expenses, or a family allowance. With a properly drafted revocable trust, these issues are spelled out clearly in the trust so that the individual distributing the trust (the trustee) can quickly take care of these issues.

At Scott C. Soady, A Professional Corporation, we handle both probate and trust administration as well as custom revocable living trusts to fit your needs. Call us for assistance with these or any other estate planning needs.

After the death of a loved one, the individual named in the decedent’s trust who will administer the trust and distribute the trust assets is the successor trustee. A successor trustee has a number of fiduciary duties. Some of these duties are the duty of loyalty, duty to avoid conflicts of interest, and duty to preserve trust assets. These are just a few duties; there are many more however, this blog is not so much about the legal responsibilities and duties of a successor trustee but rather practical information to make trust administration go smoothly and avoid any difficulties with the beneficiaries.

One thing that is so important is to keep impeccable records. Make sure you maintain accurate records and document all transactions. Keep all receipts. Detailed records are imiportant because it may become necessary to prepare an accounting of all the deposits and income going into the trust and all the disbursements and distributions.

Keeping beneficiaries informed is also really important. As a successor trustee, you do have a duty to keep beneficiaries informed, but even for items that are not subject to this duty, it is a good ideal to keep in touch with the beneficiaries, answer any questions they have, and maintain a friendly relationship. Many cases of trust litigation arise because beneficiaries become disgruntled about not being kept informed or not feeling like they are "in the loop."

If necessary, hire experts of advisors to help you. You may find that it is helpful to use the services of an accountant or a financial advisor. You also may want to hire an attorney experienced in trust administration to assist you. This can be helpful when there are many beneficiaries, charitable beneficiaries, or assets that need to be sold or businesses that need to be operated. Know that if you do need to hire advisors, the trust estate will pay for those expenses.

For help with trust administration or trust litigation, give us a call. Some trust administrations are best done by experienced estate planning attorneys to insulate the trustee from potential liability. If you are the successor trustee of a difficult trust administration, the money is well spent to get expert assistance.

Many people ask whether as family members they can be responsible for a loved one's debts. Often debts can rapidly accumulate especially if a decedent has had a long illness.

If the decedent left an estate that is solvent, the estate will pay the expenses of a last illness and any debt. The personal representative (trustee, executor, or administrator) will be the one to pay off the debts from the assets of the estate before any distributions are made to beneficiaries. A solvent estate is one where the value of the assets is more than the debts. The personal representative if the decedent had a trust will be the successor trustee. The personal representative if the decedent had a will is the executor. If the decedent had no will or trust, the personal representative will be the administrator.

If the estate is not solvent, it means there are not sufficient assets to pay all the debts of the decedent. If there are sufficient assets to pay some of the bills, the bills will be paid in a certain order. That order of payment is as follows:

1. Expenses of administration
2. Secured obligations such as mortgages and judgment liens
3. Funeral expenses
4. Expenses of last illness
5. Family allowance
6. Wage claims
7. General debts.

If there are insufficient assets to pay all the bills, the beneficiaries will not get a distribution and they will not be responsible for paying any of the debts unless other circumstances exist. For example, if a beneficiary or some other individual co-signed on a loan with the decedent or was a guarantor, that is a contractual obligation which will make the co-signer or guarantor liable for the debt. Without some contractual obligation however, family members are not liable for their loved one's debts. Even spouses are not liable for a debt that was solely their spouse's.

Probate and trust administration are a large part of our estate planning practice. We assist trustees, administrators, and executors handle all aspects of administration including payment of debts and distributing assets. Call us if you need assistance with these issues or any other estate planning concerns.

When someone dies, either with a will or a trust, the assets owned by the decedent have to be valued to determine the fair market value. The date used for valuation of assets is usually the date of death. Sometimes the document, whether a will or a trust, will provide that another date can be used such as 6 months from the date of death. The important thing is that the date is consistent for all of the assets.

Assets that have to be valued can be real property, personal property, investments, bank accounts, IRAs, pension and retirement plans, stocks, bonds, mineral rights, and business interests. Some of these may not be trust assets but still have to be valued if there is going to be an issue with estate taxes. For example, assets held in joint tenancy may not be subject to probate or trust administration, but they still have to be valued for estate tax purposes.

Property such as real property is valued by obtaining a written appraisal by a licensed experienced professional appraiser. The appraisal should include descriptions and photos of the subject property, comparable sales, and a determination of value. Sometimes real property can also include having to appraise personal property as well such as farm equipment, livestock, crops, etc. or in the case of a professional building, the value of equipment and trade fixtures.

The value of personal property also is determined by an appraisal. For household furnishings, the IRS requires an itemized list of the furniture values. Items of jewelry or art should also be appraised by someone experienced in jewelry appraisals such as a gemologist or an appraiser that works in the art field. Other personal property that may need to be appraised may be automobiles, planes, or collections such as coins or stamps.

A business such as a family run business, a professional corporation, or a limited partnership also has to be appraised. Specialized appraisers may have to be retained to value the fair market value of the business and the decedent's interest in the business.

For stocks and bonds that have to be valued, their value on the date of death can be determined by the average selling price of the stock or bond on the date of death. Mutual funds can also be valued using the bid value or public redemption price of the fund on the date of death.

Bank accounts can be valued as of the date of death by bank statements.

Valuing assets can be a tricky and time consuming task requiring experienced consultants and an experienced estate planning attorney. We can assist with this task at Scott C. Soady, A Professional Corporation.
Call us if we can help.

IRAs can be a substantial asset when someone dies. Inheriting an IRA from a spouse can be a great opportunity to continue tax-deferred investing. Surviving spouses have a unique opportunity that that don’t apply if you inherit an IRA from someone else. A surviving spouse has the ability to roll over an IRA inherited from a spouse into their own new or existing IRA and treat the assets as if they were theirs. The 4 basic options for a surviving spouse are:

1. Roll the inherited IRA over into your own IRA. Rolling the inherited IRA into your own IRA gives you the benefit of having the amount and timing of the required distributions based on your age as the surviving spouse. If for example, your spouse was over the age of 70 ½ but you are not, this option allows you to stretch out the tax deferred benefits until you reach 70 ½. Beneficiaries who are not spouses cannot roll over an inherited IRA or contribute to it.

2. Remain a beneficiary. As a spouse you can choose to keep your name on the IRA. If you transfer the inherited IRA into your own name, the amount of the required distributions will be based on your age as the surviving spouse. This can be a good option if the surviving spouse is younger than 59 ½ but wants to take out funds from the IRA without incurring early withdrawal penalties.

3. Disclaim the IRA assets. Another option is to disclaim the assets. If you do not need the inherited assets, you can refuse to accept them i.e. disclaim them, in which case the IRA would go to the next named beneficiary. If this beneficiary is younger than you, such as a child, the required distributions will be based on his or her life expectancy. If you want to take advantage of this option, the disclaimer must be made within 9 months of the IRA owner's death.

4. Cash out the IRA. It may be tempting to cash out the IRA but don’t do this without first checking with your financial advisor or tax accountant.

It is important that you handle the inheritance of an IRA correctly to avoid paying subsequent penalties and taxes. As part of trust administration after the death of the first spouse, the estate planning lawyers at Law Office of Scott C. Soady, A Professional Corporation can work with CPAs and financial consultants to assist you not only with the distribution of trust assets but also with how to handle inherited IRAs.

A trustee is the person who handles the distributions to the beneficiaries according to the terms of the trust document. Some trusts can go on for years if there are distributions to be made for the benefit of minors or for other reasons. There may be some circumstances where a trustee may wish to resign from his duties as a trustee of a trust before the trust is completely administered. There are basically 4 ways.

1. As Provided in the Instrument. Most trusts by their express provisions allow a current trustee to resign with written notice and an accounting. For example, suppose you are the successor trustee of your parent's trust and find that you must take a job abroad. If the trust names an alternate successor trustee and specifies that a currently serving trustee may resign by giving written notice to the beneficiaries, it is easy for you to resign. Some trusts also provide that when trustees resign, the resigning trustee must account for the transactions and dispursements he made while acting as Trustee.

2. With a Revocable Living Trust With the Consent of the Trustor. Suppose you are the
Co-Trustee of your father's trust and you want to resign. If your father consents, you can resign and your father can appoint another Co-Trustee if he wishes. It is a good idea to put the consent and resignation in writing. There is no requirement that you give notice to the beneficiaries.

3. With an Irrevocable Trust, With the Consent of All Beneficiaries. If you are the Trustee of an Irrevocable Trust, you need the consent of all adult beneficiaries who (1) are receiving income; (2) are entitled to receive income; or (3) are entitled to receive a distribution of principal if the trust were terminated.

4. A Court Order. If there is no provision in the trust and there is no successor Trustee able or willing to serve, you may have to petition the Court to appoint a Trustee. Nominations of the beneficiaries will be given consideration.

For issues with Trust Administration or questions about your duties as the Trustee, contact us at Roy M. Dopppelt & Associates.

Trust administration is the work that has to be done after the death of a Trustor. The person or entity that is named as successor trustee has certain duties and obligations they have to perform to wind up the Trustor’s financial affairs and make distributions to the beneficiaries. If any of the beneficiaries are minors who are receiving distributions at various intervals, the administration of the trust can last years.

Your basic duties as a successor trustee involve the collection, management, investment, and distribution of the trust assets. One of your duties to the beneficiaries is to keep them informed of the trust administration so you need to keep careful records of all the transactions that you perform as trustee. Here is an example of some of the tasks you need to do when you become successor trustee of a trust. Some are time sensitive and lead to consequences if not done in a timely manner.

1. Obtain a taxpayer ID number for the trust.
2. Notify all the heirs and beneficiaries of the Trustor’s death and the existence of the trust. If the beneficiaries request it, a copy of the trust must be provided to them.
3. Open a new account in the name of the trust with you as the Trustee.
4. Inventory and Appraisal. You must prepare an inventory of all of the decedent’s assets and determine their fair market value as of the date of the decedent’s death.
5. Record Keeping. This is very important. You as the Trustee must keep careful record of all the transactions you make on behalf of the trust. Beneficiaries may request that you give a full accounting and report not less often than annually or at the termination of the trust unless a beneficiary waives an accounting in writing.
6. File a federal estate tax return if estate taxes are due. Also file federal and state income tax returns.
7. File for a Parent/Child exemption if appropriate. If real property is inherited by a child from a parent, there is an exemption for reassessment of property taxes.
8. File an affidavit of death in each county where the decedent owned real property.

Depending on the complexity of the trust and whether it is ongoing for a period of time, you may have other tasks and responsibilities such as managing the trust investments, make distributions of income and principal to the beneficiaries in accord with the terms of the trust. Being a trustee is a substantial responsibility and a trustee often seeks legal assistance. At Law Office of Scott C. Soady, A Professional Corporation, we also see successor trustees who have started to administer a trust but found it difficult or time-consuming to handle all of these details and retained our office to finish the administration. Give us a call for assistance with all phases of trust administration.

When planning your trust, most people of course think about how they want their assets distributed, who will be their successor trustee, who will be the guardian of their minor children, and on what terms will their beneficiaries receive certain assets. What many people overlook is the family dynamics, ie. how will the decisions they have made in creating their estate plan affect their children and other family members? Will certain provisions in their trust cause discord leading to difficulties administering the trust and even litigation?

There are definite topics that seem to cause family disharmony. One is the choice of a successor trustee (the individual who will administer your trust after your death, pay the bills, and distribute the assets). Some clients name their oldest child. Others may make all 4 of their children co-trustees. Whatever you decide, it is important not to choice a trustee "because he or she is the oldest", or "he knows more about finances" or "I will name them all so no one feels slighted". You should consider the family dynamics of your family. Will naming them all make it difficult to make unanimous decisions? Sometimes clients will even choose a private professional fiduciary because they want to avoid the family conflict and sibling rivalry they fear may occur if they name a family member.

Another area that can be a big issue after death is the family home. You may want to leave the home to one child because they will not sell it. You may choose another child because they will sell it. When you make provisions in your trust for one child to buy out the others, you should be sure all the terms are spelled out so there is no dispute later. Whatever your choice, again think of the consequences. Disharmony among your children can result in arguments and litigation after your death which just increases the cost of trust administration.

Another potential problem area is where you have loaned one of your children money during your lifetime. Do you want those loan amounts to be deducted from that child's share or the loan forgiven?

Lastly, believe it or not,it is often personal property that causes the most disagreement among family members. If you leave certain items of personal property to designated individuals, how will the other family members feel? If you have divided all the personal propery equally among all your children, what if they disagree?

So when you create your estate plan, think about how your family is going to react when the terms of your trust are implemented. This may require some thought on your part and an experienced estate planning lawyer to carry out your wishes in drafting the plan.

With the advances in reproductive medical technology we are now seeing genetic material including sperm, eggs, stem cells, and even embryos being stored. Such genetic material is stored in a cryobank for later use, but what happens when the individual who stored the material dies? Is a child born posthumously entitled to inherit from its parent? The Courts have ruled that genetic material is property which like any other property can be bought, sold, or transferred so can you leave it to someone in your will?

The case of Brandalynn v Vernoff addressed the question of the rights of a child conceived with the sperm of a dead man. Sperm had been extracted from her father when he died in 1999 and were later used to perform an invitro fertilization on the widow which led to her birth. The courts ruled that the child, although born posthumously, had the rights to inherit from her father. There is a time limit in California. The sperm has to be used to create a child within 2 years from the death of the donor or the child will not have any entitlement to inheritance.

All of these issues should be addressed before you die. You can of course set up a sperm deposit while you are alive, however you should set out in an agreement with the cryobank what should be done with the sperm upon your death.

Your also should discuss with your estate planning attorney how to make your wishes part of your trust agreement. If you would want genetic material taken at the time of death and stored for some purpose, you should spell your wishes out in your advance health care directive giving your agent, trustee, or executor the power to extract such material from you after death. If you have stored these type of genetic material before your death, your trustee or executor needs to be guided as to what should be done with it.

If you would like to consult with one of the estate planning lawyers at Law Office of Scott C. Soady, A Professional Corporation to see how these issues can be addressed in your estate plan, call us for a complimentary consultation.

In the estate planning world we used the term "fiduciary" a lot. Trustees, administrators, executors, and agents under a power of attorney are all "fiduciaries". What does that term mean?

A fiduciary is an individual who undertakes to act for and on behalf of another in a particular matter. A fiduciary has to perform his duties with the utmost of trust and honesty. A fiduciary is expected to be loyal to the person to whom he owes the duty (the "principal"). He must not put his personal interests before the principal and must not profit from his position as a fiduciary unless the principal consents.

The most common circumstances where a fiduciary is involved in estate planning is when a trustee administers a trust. The trustee is a fiduciary who must administer the trust estate for the benefit of the beneficiaries. If an individual dies with a will, the executor of the will is the fiduciary who administers the will and distributes the estate to the beneficiaries. An estate administered for someone without a will is called an administrator, also a fiduciary. All of these individuals have the duty to act with the utmost of loyalty and impartiality.

Other examples of fiduciaries are conservators and agents acting under a power of attorney or a health care directive.These individuals also have the duty to act in good faith and in the best interests of the principal.

The job of being a fiduciary is a serious one. A fiduciary who breaches his fiduciary duties can be held liable on a number of theories including negligence, fraud, financial elder abuse, even criminal prosecution. You should know what is expected of you so that you can properly perform your fiduciary duties.
If you need help, feel free to contact us.

In addition to handling probate, trust administration, and preparation of all types of trusts, we often get inquiries from heirs and beneficiaries with concerns about the way an executor, administrator, or trustee is administering an estate in San Diego. Sometimes beneficiaries cannot get an accounting of the trust assets. Sometimes they have issues with the distribution of assets. In some cases, they may have suspicions that the individual handling the estate is self-dealing or guilty of outright fraud.

The executor, administrator or trustee of an estate has a fiduciary duty to the beneficiaries. This means that they must act with the highest degree of honesty and integrity. They have certain duties under the law that they must fulfill. Among those duties are the duty to collect and protect the assets; duty not to commingle estate assets; and a duty to be impartial. They also are required to communicate with the beneficiaries, provide an accounting of the assets, and distribute the assets according to the testamentary instrument (will or trust) or if there is none, according to the Probate Code.

Law Office of Scott C. Soady, A Professional Corporation represents heirs and beneficiaries as well as executors, administrators, and trustees. If you can concerned about the way an estate is being handled, you have options and remedies. One remedy could be filing a petition in the Probate Court to have the Court address the issue, order an accounting, or remove an executor, trustee, or beneficiary. There are also civil remedies for fraud, breach of fiduciary duty, or constructive trust. If you are over 65 years if age, you may have a action for elder abuse.

Contact us for advice about your options if you are a beneficiary and have concerns about the way a will or trust is being administered or if you are an heir and believe you are entitled to an inheritance.

In trust administration and probate in San Diego County, appraisals of the decedent's real property are an important part of settling an estate. At Law Office of Scott C. Soady, A Professional Corporation, one of the first tasks is to obtain an appraisal of real property as of the date of death. The appraisal, in addition to valuations of the rest of the decedent's estate, form the basis for determining the total value of the estate for purposes of distribution to beneficiaries.

Recently, a bipartisan amendment approved in October by the House Financial Services Committee proposes a new set of rules for obtaining appraisals. The old rules imposed nationwide by mortgage giants Fannie Mae and Freddie Mac, according to realtors and mortgage brokers, produced appraisals often below the agreed-upon price, causing delays and disputes and the necessity for multiple appraisals. The new rules are more likely to encourage independent appraisals, not influenced by loan officers and mortgage brokers. The new amendment has the endorsement of President Obama and the House of Representatives but may face an uphill battle in the Senate.

Appraisals are just one part of trust administration and probate. We use independent appraisers for real property and can help with appraisals of valuable personal property as well. There are numerous tasks that must be done by a successor trustee of a trust or an executor or administrator of a probate estate. Our estate planning lawyers at Law Office of Scott C. Soady, A Professional Corporation can assist you with all aspects of trust administration or probate. Please call or email with questions or to set a complimentary consultation.

Depending on who you talk to about the economy, “things are going to get worse before they get better” or “things are looking up.” There is no question though that the real estate market is down in San Diego. The stock market is also not what it was several years ago. How does this affect a Successor Trustee who is trying to administer an estate and make distributions to beneficiaries?

A Trustee of course has a duty to safeguard the trust assets, invest and manage the assets in some cases, and distribute the assets to the beneficiaries according to the terms of the trust. The beneficiaries naturally want to receive as much as possible and sometimes do not want to wait for the market to turn around. You may find yourself as a Trustee having to decide whether to convert some assets into cash to put into a money market account or CD. You may have no choice but to sell real property even though home sales are down. It is a difficult decision to make as to whether to wait out the problems in the market and it is just one of the many decisions you may have to make as a Trustee.

One thing that makes it easier is if all the Beneficiaries are on the same page as to what should be done. As a Trustee, try to keep all the beneficiaries informed. If the property is on the market, keep them apprised of the sales price, comparable sales in the area, and all offers. Consult with financial advisors, realtors, or others in the know to get their opinions. An experienced estate planning firm such as Law Office of Scott C. Soady, A Professional Corporation can help you administer a trust in a way that will limit your liability as a Trustee and make your responsibilities and duties a bit easier. Contact us for a complimentary consultation.

Sometimes we get calls within a day or two of a loved one’s passing away by family members who wonder what they should do. The first thing that should be done is to handle the bereavement process. Spend time with family and friends and begin the grieving process before anything else.

There are many resources on line and in San Diego for information on the grieving process.
The National Hospice and Palliative Care Organization is the largest nonprofit organization representing hospice and palliative care programs. In San Diego we have the Elizabeth Hospice, San Diego Hospice, and Hospice by the Sea to name just a few. For people dealing with the death of a child there is the Empty Cradle and the Jenna Druck Foundation.

Coping with the loss of a loved one is a process. In addition to the grief and bereavement resources listed here, there are many grief support groups at local churches or through professional counselors. Most support groups also can recommend books and articles on the subject.

We always tell our clients and potential clients that the first thing to do is to begin the healing process. In most cases, contacting us in several weeks will be fine to determine what needs to be done as far as estate and trust issues are concerned. Sometimes there are immediate issues that have to be addressed and the experienced estate planning attorneys at Law Office of Scott C. Soady, A Professional Corporation would be happy to assist with those if necessary. Feel free to contact us by phone or email if you have questions.

Some people need extra time to file a personal tax return or an estate tax return. On your personal income taxes, you can apply for an automatic extension to file but it doesn't extend the time to pay. You will have to pay a .5% per month penalty for late payment.

With the payment of estate taxes, you can also apply to receive a 6 month extension. The extension provided for in IRS Form 4768 is automatic. You will automatically receive an extension to file for 6 months however be aware that an extension of time to file is not an extension of time to pay the taxes. An extension of time to pay is discretionary.

One executor and trustee of an estate found this out the hard way. In a court case entitled Baccei v. United States, a trustee of a revocable living trust hired an accountant to prepare the Federal estate tax return. The accountant filed Form 4768 requesting a 6 month extension of time to file the return. Part of the form contains a section for an explanation as to why the estate needs more time to pay the tax and the number of months requested, up to 12 months. The accountant did not fill out that part of the form. Within 6 months, the accountant filed the return and paid the estate tax. The IRS then assessed a late penalty on the estate tax paid which had been approximately $1 ½ million. The Trustee appealed.

The Court which heard the matter held that the estate had not requested an extension to pay, only to file, and therefore the late penalty was proper. The two extensions found in Form 4768 are separate extensions and have to be separately requested.

Filing and paying tax returns for an estate is one of the jobs of the executor of a will or the trustee of a trust. If you are the executor of an estate or the trustee of a trust, these are part of your fiduciary duties. Our office handles numerous probates and trust administrations in which we assist executors or trustees with these types of duties. If we can be of assistance, please contact us.

Many people in San Diego are in the position of choosing a successor trustee for their living trust or they may be beneficiaries of a trust and wonder if the trustee is managing or distributing their inheritances properly. Generally the trustee must administer the trust according to the terms of the trust and the California Probate Code. Here are some of the duties of a trustee of an irrevocable trust in California.

Duty of Loyalty. The trustee must administer the trust in the best interest of the beneficiaries, not using the power to the detriment of any beneficiary.

Duty of Impartiality. Similarly, the trustee must treat all beneficiaries the same, not favor one over another or if the trustee is also a beneficiary, giving himself or herself favor.

Duty to Avoid Conflicts of Interest. The trustee must avoid situations where the trust's interests and the trustee's interests conflict. These situations may arise when a beneficiary owns property in which the trust also has an interest or when a trustee wants to purchase a trust asset.

Duty to Control and Preserve Trust Property and Make the Trust Assets Productive. The trustee has an obligation to identify the trust assets and preserve them so they are not dissipated or lost. A trustee also has a duty to make sure the assets are invested wisely.

Duty to Report and Account to Beneficiaries. The Trustee must keep the beneficiaries informed about the trust administration. The trustee must also prepare statements regarding the assets and financial transactions of the trust to the beneficiaries upon request and at least annually if not requested.

These are just some of the duties of a trustee in California. For more general information, read our article on trust administration. If you need information about your specific situation, contact us at Law Office of Scott C. Soady, A Professional Corporation for a complimentary consultation. We handle trust administration, representing trustees and beneficiaries throughout San Diego County.

Living trusts save beneficiaries thousands of dollars in probate fees, however, upon the death of the Trustor, there are still steps that need to be taken by the Successor Trustee. These steps are called trust administration and often require some assistance from an experienced attorney. If these actions are not taken or done incorrectly, the Successor Trustee may be held liable to the beneficiaries.

The California Probate Code requires notification by the Successor Trustee to the beneficiaries and heirs of the person who has died. A copy of the will must be filed with the County Clerk. Notices should be sent to the Dept. of Health Services to determine if the person received Medi-Cal benefits as there may be a lien against the estate for reimbursement of those benefits. A similar notice of death should be sent to the Social Security Admiistration, Veterans Administration (if applicable) and the credit bureaus. Creditors may need to be dealt with. The issue of estate taxes needs to be considered.

Trust assets need to be inventoried and valued as of the date of death and decisions made as to how the assets will be distributed to the beneficiaries. Will assets be liquidated to provide cash to the beneficiaries or will the assets themselves be divided up in a manner which fulfills the trust's provisions?

Trust assets consisting of real property need to have the title changed so they can be distributed according to the terms of rhe trust. A Notice of Affidavit of Death needs to be prepared along with new deeds recorded with the County Recorder. If the transfer is from parent to child, a claim for exemption from property tax reassessment should be filed with the County Assessor's office.

As a final step, the administration should be completed with a final accounting of the estate or a waiver of such accounting by the beneficiaries.

These are just some of the steps which are necessary in a trust administration. If you are a Successor Truste and need assistance with trust administration, contact us at Law Office of Scott C. Soady, A Professional Corporation. Your first consultation is always complimentary.

Earlier this month we posted a blog about identity theft during the hollidays. Malls in North County, South Bay, Carlsbad, and Mission Valley are targets for pick pockets and thieves who look to steal purses. But did you know that even deceased persons can be victims of identity theft? The deceased are easy targets because sometimes it takes weeks or months and in some cases years for financial institutions to find out about a death. The identity of a deceased person can be stolen in a variety of ways. Some identity thieves watch the obituaries, look up death certificates, or obtain private information from health care providers, unknowing relatives, or internet genealogy web sites.

Back in 2006 in Kentucky a financial planner used the confidential data of 160 deceased persons to acquire 700 credit cards from financial institutions and scammed nearly $2 million over a three year period

Although the deceased person doesn’t have to be concerned with his or her credit rating, identity theft can cause emotional distress for the family. Identity Theft Resource Center has valuable information about how to protect yourself and your deceased loved one from identity theft. They also have an information sheet with steps to take to decrease the risk of identity theft such as notifying the credit bureaus to put a “deceased” notation in their file, obtaining a copy of the decedent’s credit report, and a list of agencies and companies to notify of the death. Sample letters can be found at the California Office of Privacy Protection.

You can also stop the junk mail by contacting the Direct Marketing Assn. There you can register to take the deceased’s name off mailing lists with their Deceased Do Not Contact List.

If your loved one had a will which needs to be probated or a trust which needs to be administered after death, Law Office of Scott C. Soady, A Professional Corporation handles many of the above steps as part of their representation. Contact us if we can help with trust administration or probate.

There are many different types of trusts which San Diego couples may create as the cornerstone of their estate plan. Prior to 2000 when the exemption for estate taxes was $650,000 many couples had A/B trusts prepared. These were also called Bypass Trusts, Marital Trusts, or Exemption Trusts. These types of trusts call for the initial trust to split into two or more trusts after the death of the first spouse in order to reduce or eliminate the federal estate tax. Today many couples still have this type of trust. Couples with children from prior relationships also may have this type of trust which requires a split or division in trust assets after the first death.

Couples may also have a disclaimer trust which requires the surviving spouse to disclaim assets within nine months of death in order to take advantage of the federal estate tax exemption for couples. There are also so-called option trusts which place a duty on the surviving spouse to value the estate after the first death and only split the trust into sub trusts if necessary to take advantage of the federal estate tax exemption. All of these types of trusts require that after the first death, some steps be taken to comply with California law, preserve the federal estate tax exemption, and change title to assets. This is called trust administration.

If the trust is one which requires a division into two or more sub trusts, the assets in the estate need to be valued as of the date of the first death, then the assets allocated between two or more trusts, and new deeds prepared for real property. If the original trust is not divided at all after the first death or the assets allocated improperly, tax benefits can be lost. Also there may be financial losses to the children of the couple or other beneficiaries. Sometimes in the aftermath of a spouse passing away, these details may understandably be overlooked.

If you need help figuring out what to do after your spouse dies, we can help. The experienced estate planning lawyers at Law Office of Scott C. Soady, A Professional Corporation can review your trust and do whatever trust administration your trust requires. Our initial consultation is complimentary.

Even when a person dies with a will or a trust, there can be disputes that result in a will contest or trust litigation. An individual may feel he or she should have been a beneficiary under a will or a trust. Sometimes a will has been changed and beneficiaries under the original will feel there has some impropriety surrounding the execution of the subsequent will. Sometimes beneficiaries may be dissatisfied with the accounting of the assets in the estate. When these types of issues occur, it may become necessary to seek the assistance of the court to resolve these issues. Common grounds for contesting a will are such things as claims of undue influence, lack of mental capacity, fraud, or an invalid codicil (amendment).

With a trust, individuals who are beneficiaries or think they should be a beneficiary may dispute the trust. Issues can arise such as the validity of the trust or amendments, the administration of the trust, or conduct of the trustee. Sometimes trustees have to be removed for misconduct or impropriety or it may be the case that beneficiaries have to initiate litigation to receive a fair distribution.

Handling a will or trust litigation matter requires special experience. If you have concerns about a will or a trust or believe you should have inherited from one, the experienced estate planning lawyers at Law Office of Scott C. Soady, A Professional Corporation can assist you. Call or e mail us for a complimentary, confidential in-house consultation.

An elderly doctor and his daughter opened a joint bank account, the money in which would go to the surviving account holder if the other one died. This is a case of the right of survivorship and should have been part of a revocable living trust and then would proceed by trust administration. Nine years later, when the doctor was in declining health, his wife asked to be added to the account so that she could pay bills. Based on the signatures of the doctor and his wife, but not the daughter, the bank added the wife to the account. Over a one-month period, the wife then wrote many checks on the account, totaling over $100,000. The biggest check, for $75,000, was written, cashed, and deposited to the wife's own account on the very day her husband died.

The daughter sued the bank, claiming it was liable to her for recognizing a new party to the joint account without the consent of all parties to the account. A state supreme court sided with the bank. First, the documents that comprised the contract between the bank and the account holders included a statement that each owner was the agent of any other owners for purposes of endorsements, deposits, withdrawals, and conducting business for the account. This language was broad enough to give the doctor power to add his wife as a new party to the account without his daughter's knowledge or consent. Second, a statute on joint accounts similarly made each party to an account the agent for other account holders, although the statute was silent on the method for adding a new party to an account. The bank had not breached its contract when it recognized the doctor's wife as a new party to the account based solely on the doctor's signature.

This decision highlights the pitfalls that can accompany joint bank accounts. Allowing each party to a joint account to exercise full authority over the account is flexible and convenient, but the cost of these advantages is loss of control. The exposure to this risk is widespread, as joint account contracts typically have language like that used in this case.

Alternative methods for managing money make it more difficult for any individual to raid accounts to the detriment of co-owners. These include advanced health care powers of attorney, revocable living trusts, and "agency" or "convenience" accounts that resemble general powers of attorney but are confined to specific bank accounts. Seek the advice of legal counsel before deciding which of these options is most appropriate in a specific situation.