Sole Trustee or Co-Trustees?

All trusts have trustees. Trustees are the managers, the fiduciary, the person in control. When a revocable trust is created, the creator of the trust is the most often also a trustee. That makes sense because if the creator is still alive and has the capacity to make financial decisions she is going to want to be in charge of her own financial affairs and property. In the case of couples who create revocable trusts together, they both would be trustees, co-trustees, while they are both alive and with capacity. 

Successor Trustees are the individuals who are named in the trust as the person(s) to take over when the creator of the trust is either deceased or incapacitated. For parents with adult children, often the children are named as successor trustees. A frequent question then arises, should I name my children as Co-Trustees?

Naming a sole successor trustee with one or several more successor is usually the best course of action. This allows for the most efficient means of handling the trust administration. A sole trustee can make decisions without the need for additional input, write checks, sign documents, and only needs a single attorney to represent her. The duty of the trustee is to act in the best interest of the beneficiaries and carry out the wishes of the decedent. If she does not do a good job or breaches her duty to the beneficiaries, they can then have the trustee removed. Depending on the language in the trust itself, this can be done with or without the oversight of the court.

Naming two or more co-trustees can work, but there is more opportunity for increased administrative cost and infighting. The thinking behind naming co-trustees is the old saying, “Two heads are better than one.” This is often true, having two people involved, will probably lessen the likelihood either of those named will be able to treat the other trustee unfairly. In fact, by default, both co-trustees have the same power, obligations, and duties. The problems with co-trustees often arise just for this reason though. The named co-trustees are often siblings, who may or may not think alike, or even like each other. When this happens, they will often see separate counsel and insist on doing things their way. The infighting stalls the normal operation of the administration and makes everything take longer and cost more. This ultimately ends up coming out of the beneficiaries’ pockets (despite the fact that often the trustees are also the beneficiaries).

We regularly represent a large number of trustees (and co-trustees) to conduct trust administrations for their deceased loved ones, so we know exactly how the planning side will impact the administration side.

Contact Tresp Law, APC today to discuss the advantages and pitfalls of naming co-trustees with our Estate Planning attorneys today.

What is Ancillary Probate?

Do you own property outside of California? If so, your final affairs may be a bit more complicated than you anticipated.

California Probate Courts have jurisdiction over all property held in California. If the property owner dies in California with a Will or no Estate Plan the property will be transferred through a formal probate administration in the Probate Court. If the owner has a Trust and the property is properly funded, the property will be transferred through an informal trust administration likely without court supervision. Unfortunately, the California Probate Court does not have jurisdiction to transfer property in other states or foreign countries. Each state has its own procedure for transferring property when the owner dies.

If the owner of the out-of-state property properly funds a Trust, it is possible that other states may have provisions in its probate code or title succession law that allows for the trust to control the transfer, much like it does in California. This is the best-case scenario. Some states may not have provisions for transfer by trust, or the owner may have neglected to properly fund their trust with the out-of-state property. In these circumstances, an ancillary administration may be required. It is always beneficial to speak with an attorney in the foreign jurisdiction to confirm the California trust will be able to effectuate the non-probate transfer.

Ancillary probate is simply probate in a state other than where the decedent lived and died. Depending on the state, there may be an abbreviated proceeding needed, or there may need to be a full parallel proceeding. It is always recommended to contact an attorney in the ancillary administration state to ensure all local rules and procedures are followed. Coordination between the ancillary attorney and your local attorney will be needed to ensure debts are only paid once.

As always, the best way to avoid the need for any probate (whether domestic or ancillary) is to create a revocable living trust.

Contact Tresp Law, APC today to set up an appointment with one of our Estate Planning attorneys to talk about how you can avoid probate entirely.

What is Fiduciary Accounting?

If you are a Trustee, Executor, Administrator, Conservator, or Guardian you are performing the role of a “fiduciary.” Fiduciaries act on behalf of someone else (typically heirs of a decedent, beneficiaries of a Trust, a minor child, or an incapacitated adult). As a fiduciary, your legal and ethical duty is to make financial decisions that are in the best interests of the estate and the beneficiaries over your own interests.  

One of your duties as a fiduciary is to present a detailed accounting of all financial transactions that occurred under your watch. The accounting should include income earned (interest, dividends, rental income, etc.), assets purchased and sold (including capital gains and losses), improvements to property, bills, and debts paid, professionals hired, distributions to beneficiaries, the list goes on. The purpose of the accounting is to allow the court or the beneficiaries to review and approve your actions as a fiduciary.

The formatting of a fiduciary accounting must follow the rules set forth in the Probate Code and all efforts must be made to balance it. Unbalanced accountings are frowned upon by the court and the beneficiaries, as they appear to indicate missing information or a lack of care in preparing the accounting.  

For a typical probate or trust administration, accounting to the beneficiaries may be a one-time event around the time of the distribution of the estate. For complex ongoing trusts and court-supervised matters, accountings can be an annual or biennial task. 

Because the formatting and other reporting requirements are set by the Probate Code, the actual preparation of a fiduciary accounting is very different from a typical financial report that might be prepared by a CPA, accounting firm, or QuickBooks printout. Few CPA firms are experienced in preparing fiduciary accountings, and because they can easily take 20-40 hours to prepare depending on their complexity, a CPA-produced fiduciary accounting can be an expensive endeavor. Additionally, if the accounting needs to be prepared during tax season, many CPAs are simply unable to dedicate the resources needed for such a task. Attorneys and paralegals experienced in trust and probate administration can be just as, if not more effective as a CPA, yet much more efficient and therefore more affordable. Saving costs for the estate or trust ultimately results in more money to distribute to the beneficiaries or to hold for the minor or incapacitated adult’s future needs or care. Either way, you, as fiduciary have fulfilled a primary duty: you have made the best financial decision on behalf of the estate over which you are responsible.

Contact Tresp Law, APC today to schedule an appointment with an Estate Planning Attorney.

A Late Radio Host and His Estate Planning Predicament

Larry King is notorious for having been married 7 times, but now there is controversy about his last wife Shawn King as it relates to his Estate Plan. He apparently had a secret Will created after the couple filed for divorce in 2019.

Find more about Mr. King’s situation here.

Larry’s predicament is not unique, and if you find yourself in the same situation, an estate planning attorney should be consulted, in addition to a family law attorney.

In California, once a divorce is finalized, all provisions in Wills for distribution of property and conferring of powers on a former spouse are revoked under Probate Code 6122. In addition, all non-probate transfers to a former spouse are also revoked under Probate Code 5040. But what about the state of limbo between the filing of the divorce and the finalization? This is where Mr. King found himself.

There are restrictions under the California Family Code that limit each party’s ability to make transfers, sell or encumber assets, and change beneficiary designations (non-probate transfers). These restrictions are detailed in Section 2040.

However, Family Code Section 2040 does not prevent someone from creating a new will or trust. On its face, there should be nothing wrong with Mr. King creating a new will during his divorce proceeding. The real question now will be, which assets are going to be governed by that new Will. If everything is held in a joint Trust with Mrs. King, those assets will be distributed according to the provisions of that document despite the new Will because their divorce was not finalized. If there are assets outside of the trust that are in Mr. King’s name alone, those will be governed by the new Will.

Like mentioned earlier, this case is not limited to Mr. King. In fact, it should be a reminder that it can happen to anyone of any worth. Call Tresp Law, APC today to schedule your consultation and begin planning for your future. We now offer face-to-face consultations utilizing video conferencing technologies such as FaceTime, Duo, and Zoom.