| Passing on wealth has been tricky business since the | | | | Trustee decides how it is to be handled. When it is |
| time of ancient Egypt and Greece. Unaware of the | | | | not in the Trust, lengthy procedures to get it into |
| inner workings of wealth, most people have little | | | | the Trust can occur. |
| knowledge of this vast and fascinating subject. | | | | Residential Property |
| Before determining the fate of heirs, here are some | | | | The biggest asset is usually residential property. If |
| checkpoints to ensure property, cash (and even | | | | the Trustors, acting as Trustees, have not |
| gold!) are handled properly and get into the hands of | | | | transferred the asset at the County Recorder’s |
| the right people. | | | | Office into the name of the Living Trust, then it does |
| Easy to get and create, the Living Trust offers a | | | | not belong to the Trust and the Successor Trustee |
| way to pass on wealth without the complications of | | | | needs to transfer it before it can be sold. This |
| going through Probate Court. With a couple of | | | | transfer process could be lengthy and expensive or |
| witnesses, the simplest forms, available at stationery | | | | relatively simple. |
| stores or from the Internet, solve the two most | | | | Distribution |
| common problems: | | | | A Living Trust is designed to be parceled out to the |
| 1. To whom the assets pass. | | | | Beneficiaries after the death of the Trustors. If they |
| 2. Identification of these assets. | | | | are in a nursing home and unable to function, the |
| Because most people have not been educated in the | | | | expenses for their care come out of the Living Trust |
| art of passing on wealth, though, they believe their | | | | assets and the Contingent Beneficiaries, those who |
| Living Trust just goes into effect upon their passing. | | | | receive assets upon the death of the Trustor(s), |
| This is not, necessarily, true. The Trustors, those | | | | may not get anything. |
| setting up the Trust, need to take the time to | | | | When all goes well, assets have been properly |
| identify and transfer into the Trust what they plan to | | | | transferred and identified in the Living Trust, and the |
| pass to their heirs. This avoids confusion, and even | | | | Trustors die fairly close together without exhausting |
| agony. Loved one can be well provided for, only IF | | | | Trust assets. The Successor Trustee then delivers |
| the assets have been properly handled properly. | | | | the assets by either cashing them out, such as selling |
| Neglect | | | | the property, and disbursing the proceeds, or gives |
| If a person has a Living Trust, signed it, then put it | | | | the assets to those named in the Trust documents. |
| on the shelf without doing anything else, he or she | | | | Unfortunately, most people are not educated about |
| may have wasted time and money. Even a Living | | | | the ways of a Trust, and more often than not, |
| Trust needs attention and proper administration. | | | | nothing has been identified and transferred, leaving a |
| If a person has a Living Trust has the following been | | | | delay in distribution, and a burden on the Successor |
| handled? | | | | Trustee, who is usually a close family member. |
| 1. If a Beneficiary is dissatisfied and wants to | | | | |
| sue the Trustee for more of the assets, does the | | | | Communication |
| Living Trust have in it a “No Contest | | | | Unfinished business |
| Clause?” This means that should any Beneficiary | | | | When parents die, family matters are often |
| sue, causing a dissipation of the Trust resources, the | | | | emotionally charged with unresolved needs, and |
| Beneficiary automatically loses his or her inheritance. | | | | competition for assets or dominance may occur. The |
| 2. What happens if the original Trustors, those | | | | state of affairs of a Living Trust can cause grief. This |
| who set up the Trust, and then became the initial | | | | ranges from, “Mom said I should get the . . .” |
| Trustees, are unable to perform their duties? How | | | | to “You can’t do that, I will not get my . . |
| should the Trust funds be handled, and exactly when | | | | .” The lack of trust in the Trust can become the |
| does the named Successor Trustee take over? | | | | major issue. |
| 3. Is there a provision for amendments? That is, | | | | Consultants |
| can the Trustor(s) change the terms of the Trust | | | | Before the assets become the responsibility of the |
| during the lifetime?a. If there are any | | | | Successor Trustee, who is usually completely in the |
| amendments to the original Living Trust, what is the | | | | dark about the financial status of the Trust, the |
| procedure?b. Should the Beneficiaries be told | | | | Trustors should consult with professionals about how |
| about the changes?c. Should the Successor | | | | to handle the administrative needs of the Trust, and |
| Trustee be told about the changes? | | | | meet with their Successor to go over important |
| 4. Have funds been earmarked as Trust | | | | details. |
| funds? a. Has a separate checking account been | | | | When a family is dysfunctional, it is best to get the |
| put in the Trust’s name? If not, the Trust was | | | | communication matters handled first. For the |
| never funded and there is no Trust.b. Has | | | | badgered, uninitiated and overwhelmed Trustee, |
| identified property, such as the residential home, | | | | consult with professionals before trying to muddle |
| been transferred at the county to be in the Trust? If | | | | through Trust documents and answer the family |
| not, then the property is not part of the Living Trust. | | | | members’ questions. Such time and money will |
| 5. Is there enough documentation in the Living | | | | be well spent, especially if complex financial matters |
| Trust so the Successor Trustee can open a checking | | | | need sorting out. It is important the Trustee gets the |
| account in the name of the Trust? | | | | accounting, legal and tax matters straight before |
| Accounting | | | | communicating with family members about the Trust |
| As the initial Trustee(s) of the Living Trust all the | | | | details. |
| assets remain under the control of the Trustor(s), | | | | Wealth Building |
| who can spend the funds without discrimination; | | | | The Living Trust and all revocable Trusts are not built |
| these initial Trustees, though, still need to keep | | | | to last. Long-range wealth-building methods and |
| records for the Living Trust. Whoever is Successor | | | | procedures are not applied when planning solely to |
| Trustee becomes responsible to produce those | | | | pass on assets to untrained heirs. Unless one’s |
| records after the Trustor(s) pass, as well as keep | | | | children are oriented professionally about financial |
| accounting records for how Trust funds are handled. | | | | matters, whatever wealth the Trustors accumulated |
| The Beneficiaries have a right to know what | | | | during their lifetime is likely to be lost by the next |
| happened to the funds the Trustors said belong to | | | | generation. This is well planned by those who want |
| them. (Evangelho v. Presoto (1998) 67 Cal.App. 4th | | | | to ensure the family does not gather any power as |
| 615 , 79 Cal.Rptr.2d 146.) | | | | shown by the following: |
| The need to account to the Beneficiaries for Trust | | | | "People are kidding themselves. They don't have the |
| funds, keeps the Successor Trustee honest. Any | | | | buying power they used to have. A lot of the people |
| Trustee who will not share the accounting and have | | | | living today don't know what the buying power of |
| full communication with the Beneficiaries is suspect | | | | success was before we decided to use excessive |
| and only adds to the family stress. | | | | income taxes to punish success and estate and gift |
| Giving Away the Goods | | | | taxes to force every generation to start from |
| Further, as the initial Trustee of the Living Trust, | | | | scratch." (Emphasis added.) . . . |
| assets cannot arbitrarily be given away if they have | | | | T. Coleman Andrews, IRS Commissioner, 1953 to |
| been earmarked as part of the Trust. This means | | | | 1955 |
| the Trustors cannot give the residential property to | | | | (“Why The Income Tax is Bad, Interview with T. |
| the nurse who is taking care of them while everyone | | | | Coleman Andrews, Former Commissioner of Internal |
| else awaits the funeral. The Beneficiaries can sue, and | | | | Revenue,” U.S. News and World Report, May 25, |
| get the property back. Not only that, but caregivers | | | | 1956) |
| cannot, by law, accept any gifts. | | | | Irrevocable Trusts |
| Assets | | | | Where wealth can be amassed, if properly managed, |
| Identification | | | | is when it is given to professional third parties to act |
| Disputes that can happen over assets are sometimes | | | | as Trustees for the untrained Beneficiaries, who lack |
| more awful than the worst nightmare. Cataloging | | | | financial experience and have no long-range goals. |
| what belongs in Trust is necessary to ensure it stays | | | | Only those who are sufficiently educated, though, in |
| in the Trust and is properly handled. If an item is not | | | | Trust protocols should have a Trust of this nature. |
| in the Trust, that is, not listed and described as | | | | One can get the information through a serious search |
| belonging to the Trust, then it is subject to a | | | | on the Internet using keywords about Inheritance, |
| free-for-all, since the Beneficiaries can then argue | | | | Irrevocable Trusts, and Common-Law Trusts. The |
| over it. The Successor Trustee named in the Trust | | | | last requires the more sophisticated knowledge, and |
| documents is not responsible for the item. For | | | | is often the subject of scam Trusts—those set |
| example, if a washer and dryer are not named as | | | | up improperly by the uninitiated. |
| part of the original Trust assets, known as | | | | By knowing the objective of all Trusts is to pass |
| “corpus,” and two Beneficiaries want them, | | | | wealth to Beneficiaries, it is easy to judge the |
| they need to decide without involving the Trustee. | | | | correctly set up Trusts from those which are not. If |
| | | | anyone states a person can be the Trustee of his or |
| Assets Held in Trust | | | | own Irrevocable Trust, that person is either lying or |
| If expensive jewelry is listed and each item | | | | dangerously ignorant. Further, all Common-Law Trusts |
| photographed or described as belonging to the Trust, | | | | are Irrevocable and require a nonrelated Trustee. |
| then the Trustee has the choice of cashing it in for | | | | Summary |
| current value and paying the cash to the Beneficiaries | | | | Passing on wealth is an art form. Doing it casually |
| or giving the jewelry to the Beneficiary who is to | | | | causes dissipation of wealth. Needing to keep |
| have it, as stated in the Trust documents. | | | | personal control does not allow a build-up of wealth in |
| The same applies to the stock account, or any other | | | | the family, and each generation must then start over |
| investment. Once in the Trust, the Successor | | | | to generate wealth. |