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Estate Planning for Vacation Homes

Posted on September 3, 2021 by Tyler Barrett

Many families enjoy going to their vacation homes. Sharing time and creating memories is the hallmark of such properties, and often there is a desire to preserve the home’s ownership within the family system for generations to come. Yet, even seemingly harmonious families can experience discord and exasperation when parents are no longer alive mediate conflicts. Creating a plan around your family vacation home can avoid later disputes and a potentially forced sale of a beloved property.

The Value of a Family Vacation Home

Statistics show that over eighty percent of vacation homes, cottages, and cabins are without mortgage debts and may sometimes represent a substantial asset within an owner’s estate. Some estate beneficiaries may prefer to access the cash value of their inheritance because they are putting children through college or have other financial needs to meet. Additionally, stepchildren or spouses who have weak emotional ties to the property’s memories may see no value in the property at all outside of its cash value.

Protect Your Vacation Home from Family Conflict

To avoid turmoil and preserve the property within the family system for continued generations, begin with a family conversation to gauge beneficiaries’ interest level. It may be devastating to learn that without you spearheading the family gatherings at the property, many of your children may not have the interest or the ability to use or maintain the home. If one or more inheritors choose to maintain the property and others do not, crafting your will or trust to balance assets of equal value to offset property ownership will help to prevent future conflict.

The key is to manage the expectations of all listed beneficiaries to avoid misunderstandings and miscommunication. Everyone wants to feel they are receiving some level of benefit based on their circumstances and expectations. Once you understand their interest levels in the property, begin the conversation about property taxes, unexpected repairs, maintenance, and mortgage responsibility, if applicable. Typically, your children will prefer to keep their financial discussions private so speak to them individually. Group settings rarely lead to positive outcomes regarding finances.

Create a Living Trust for Your Vacation Home

If you choose to support the vacation property with additional assets, it is best to create a living trust. It is likely the most beneficial to have the property itself pass in the trust as well. By doing so, the vacation property maintains protection against creditors and a more effortless manner to facilitate the costs of the home. Understand the change of income tax benefit as holding the property within a self-paying taxable trust may enable this deduction to continue. Before transferring your family vacation home to your heirs or placing it in a trust, ask these key questions:

Do all heirs have an interest in owning the property?
How often will each heirs’ families use said property, and are there vacation date conflicts?
Do all heirs have the resources to assume the financial commitment of ownership?
Do all heirs have a good and working relationship one to the other?
Do all heirs feel that conflict resolution, particularly around the amount of use of the property and ability to cover costs, is possible?

Prepping for shared ownership may entail placing the property into a limited liability company (LLC) or family limited partnership (FLP). These entity structures serve as a convenient method to pay bills and maintain assets for future expenses. Additionally, these structures can protect the family’s other assets from liability exposure. An LLC, FLP, or living trust also eliminates the need for ancillary probate if your vacation home is in another state from where your primary residence is.

Using the Gifting Strategy for Your Vacation Home

You can pass your vacation home to your heirs as a lifetime gift, as part of your estate plan after your death, or as a future interest gift. A future interest gift (usually a Qualified Personal Residence Trust) works well when gifting real property like a vacation home. This approach provides unlimited use of the property for some time, lowers the amount a transfer would use regarding gift tax exemption, and eases concerns about your family member’s ability to cover the cost of the initial ownership.

A family vacation home creates wonderful times spent together, and the desire to keep it for generations is essential to some but not all family members. Assess your own goals for your inheritors and whether they have the desire and ability to handle the property, and then meet with an elder law attorney to execute your estate plan, including your vacation home. The effort you put into your plan now can preserve your vacation home within your family system and in the memories of future generations.

Please contact our Norman, Oklahoma office at 405-928-4075.

National Home Remodeling Month: Can I Remodel My Own Estate Planning Documents?

Posted on May 24, 2021 by Tyler Barrett

Do you know that, according to the National Association of Home Builders, May is National Home Remodeling Month? Many people associate spring with cleaning out the old, brushing off the dirt accumulated from the long winter, and starting projects around the house that have been neglected for far too long.

Perhaps, however, your home is fine as is and you need a remodeling project for something other than your home. Estate planning is one area that often goes unexamined and neglected. Is it time to remodel your estate plan? If so, is that something that you can (or should) do on your own?

Small Estate Planning Updates

Upon reviewing your estate planning documents, you may notice a number of seemingly small issues that need to be addressed, but you may wonder whether you need an attorney to assist you. You may want to make one or more of the following changes:

You want to change your name or the name of your spouse or a beneficiary
You want to appoint different decision makers (trustees, agents, executors, etc.) in your estate plan
You want to remove beneficiaries
You want to add new beneficiaries
You want to change how much each beneficiary will inherit under your estate plan

A quick examination of each of these changes, and the consequences of attempting to alter your documents accordingly, may help you determine whether you need the help of a professional.

You Have Changed Your Name

If you have changed your last name because of a marriage or simply because you prefer another name, and the content of your estate planning documents does not need to be changed (for example, your trusted decision makers and the distribution of your property to your loved ones remain the same), all that may be required is that you keep copies of any legal paperwork reflecting the name change together with your estate planning documents. The legal paperwork, such as a marriage certificate or an affidavit of name change, will allow your trusted decision makers to show a bank or title company that the maker of the estate planning documents and the person renamed by the marriage certificate or affidavit are the same individual.

That said, if your new name is a result of remarriage, both you and your new spouse may dislike seeing your old last name all over your estate planning documents. In that case, you should consider asking your attorney to either help you draft official amendments to your existing documents or execute entirely new documents. Also, if your name changed as a result of remarriage, you may need to replace the name of your former spouse with the name of your new spouse in your documents.

Note, however, that, if a trust you established for estate planning purposes has your old name in the trust title and you have transferred accounts and property to that trust, you should get help from an attorney to ensure that the trust name is properly amended along with the retitling of the accounts and property in the trust. Some individuals choose to leave their trust name the same to avoid having to retitle any accounts and property after changing their name. However, that can create confusion. That is why it is best to consult an attorney in this situation.

A Beneficiary’s Name Changes

What if a beneficiary’s name changes either because of marriage or preference? Should you update your estate planning documents?

As in the discussion above, it is not necessarily critical that you update your documents if your beneficiary can prove that the beneficiary is the same person who is named in your documents. A court order, a marriage certificate, or a birth certificate can establish the name change and should not create too much trouble for your beneficiary.

Avoid writing on your estate planning documents. Crossing out someone’s name and writing in the new name has resulted in confusion and even litigation when the intent of the edited document was unclear. Courts throughout the country have had to weigh in on these types of ad hoc edits to estate planning documents to determine who made the edits, what the intent was, and whether they are valid. Although it may seem harmless and straightforward at the time, unforeseen consequences can often arise when you attempt to edit such legal documents yourself.

Adding or Removing a Beneficiary

Perhaps a new child has been born to the family or a beneficiary has passed away. Do you need to address the event in your planning documents? It depends. Many estate planning documents are drafted to anticipate future additions to the family, such as children and grandchildren, as well as future beneficiary deaths.

The language of your estate planning documents may assume that you want all of your children to receive an equal share of your accounts and property and that your grandchildren should inherit their deceased parent’s share. However, not all estate planning documents are drafted that way. In fact, you may need to add or remove a beneficiary by name for your intent to be properly carried out. Never attempt to add or remove beneficiaries from your estate planning documents on your own. Serious legal consequences can result from making such changes without legal advice. In some cases, people to whom you intend to leave property could inadvertently be cut off from receiving an inheritance. And in other cases, your property could end up with those whom you never intended to benefit from your estate.

For example, suppose a couple decided to leave a small share of their estate to each of their children’s spouses and therefore added the spouses’ names to the list of children in their estate planning documents. Then suppose that a blood-related child died and the child’s spouse remarried. Upon the parents’ deaths, the former in-law becomes a beneficiary of the family trust and, under applicable state law, could have certain rights regarding the administration of the trust. The former in-law could have the right to demand a copy of the trust documents and any financial accountings and could even have the right to sue the trustees if the former in-law felt that they were not moving fast enough to distribute the individual’s share of the trust. And once that share was paid out, the former in-law might use it in a way that the parents never intended: to benefit a new spouse or a child from another marriage, creating seriously negative results from an innocent and well-meaning attempt to provide for an in-law.

Appointing New Trusted Decision Makers

At other times, you may review your documents and realize that you no longer want the person you originally named as trustee, executor, or agent to make important decisions about your property if you become incapacitated or die. Again, it may be tempting to simply draw a line through the names of the persons you want to remove and add the names of your new preferred decision makers. But first you should understand that certain legal documents may not be amended so easily. In fact, under certain circumstances, writing on a legal estate planning document can void the document altogether.

With such important changes, you should have the documents redrafted and executed with the same formalities that were used with your original documents, making sure to follow the applicable state law. For example, your state may require multiple unrelated witnesses to the signing of a new will, even if the new will contains only a one-sentence change. The same is true for a codicil, or amendment, to your will. Similar formalities, such as having your signature notarized, may also be required with other documents—for example, a power of attorney or a trust amendment or restatement.

Changing Distribution Shares

Sometimes, you may be tempted to change the distribution provisions of your will or trust by adjusting the percentage or fraction shares of your estate. You should never attempt to do this on your own. If you wish to adjust the distribution provisions of your will or trust, always consult your attorney. You should consider this type of amendment very carefully and execute it with strict formalities and documentation. This type of change to your estate planning documents is fraught with the risk that a beneficiary who will receive less under the amendment will challenge it and use any argument available to have the changes invalidated. An experienced estate planning attorney will know the necessary steps to take to ensure that your documents will be honored by your beneficiaries, and the courts, after you are gone.

As you can see, there are many potential pitfalls that you can stumble into if you attempt to remodel your estate plan without the help of a trained and experienced attorney. In many cases, these small changes don’t have to be expensive. Your attorney will be able to fix some of these small issues very quickly and inexpensively by drafting an amendment to your estate planning documents. Other changes may require more work because the issues are considerably more complex than you first realized. In either case, you can rest assured that, with a legal professional guiding you through the process, you will not be leaving your loved ones with a legal mess to sort out after you are gone.

If you are not sure whether you will need an attorney to help you remodel your estate plan, call us. We are happy to consult with you and help you determine what changes, if any, you may need to make. Call us today at (405) 928-4075.

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Reviewing Your Accounts and Property upon the Death of a Loved One

Posted on February 19, 2021 by Tyler Barrett

How your accounts are owned makes a big difference in estate planning. The main objective is usually to ensure that no accounts and property are in only your name when you die. Otherwise, they will be subject to probate, a costly, public, and time-consuming court process that many people prefer to avoid. Therefore, it is important that you review your accounts and beneficiary designations to be sure that the death of your loved one has not compromised your previously established plan.

Accounts with beneficiary designations, such as life insurance policies, retirement accounts, and annuities, will be distributed at your death, without probate court involvement, to the beneficiaries you have named. However, if you named only one beneficiary (the primary beneficiary) and that person predeceases you, the account will be distributed at your death according to the default rules in the policy or account agreement unless you update the primary beneficiary designation or have named a backup (contingent beneficiary). These default rules may give the balance of the account or policy to your spouse, your heirs (as defined by applicable state law), or your estate (which will require your loved ones to go through probate).

Similarly, some accounts allow you to name a beneficiary via a pay-on-death designation (cash accounts) or a transfer-on-death registration (investment, brokerage, or stock accounts). These forms of beneficiary designation allow you to retain ownership but provide a way for the account to be transferred at your death to the named beneficiary outside the probate process. It is important that you know which accounts have these types of beneficiary designation: if your pay-on-death or transfer-on-death beneficiary predeceases you and you have no contingent beneficiary, you need to update the designations or face the account being subject to probate.

In some cases, to avoid probate, you may have added another person to an account or a property’s title so that it is owned jointly with rights of survivorship. This form of ownership means that at the death of the first owner, the surviving owner automatically owns the entire account or property without going through probate. If you are relying on this method to avoid probate and your co-owner is deceased, we need to discuss other planning options because you now own the entire account or property individually, which, without further planning, means that it will have to go through probate at your death. The same rule applies to any property you may own with your spouse as tenants by the entirety. If your spouse is deceased, you are now the sole owner and will need to consider other planning options for the property if you intend to avoid probate.

If your estate plan includes a revocable living trust (RLT), you should have transferred ownership of most of your accounts and property (with some exceptions, such as retirement accounts) from yourself as an individual to the RLT. Review your accounts and property and make sure that your RLT is the owner of the accounts and property discussed above.

If you inherited accounts and property from your deceased loved one or recently discovered or acquired new accounts or property, you must address these new items in your estate plan. Depending on the nature and size of these new items, you may need to consider modifying your existing estate plan or adding an additional planning tool, such as a special trust. If you are able to name a beneficiary for the account, be sure to do this as soon as possible.

Have you completed your estate plan?

If you began the estate planning process but did not finish it, or if you have discovered accounts or property that now need to be planned for, act now. Without an estate plan in place, the court will make all of your decisions for you. The court will decide

who will receive your money and property at your death,
how much each person will receive, and
when each person will be entitled to receive the money and property (adults will likely receive their entire share right away).

We can guide you through the process.

Our team of experienced attorneys is here to help you review your accounts and property to ensure that you and your loved ones are protected. Give us a call today to schedule a virtual or in-person consultation. We can discuss the types of accounts and property you own, what will happen to them when you pass away, and how you can leave a lasting legacy.

If you have any questions, please contact our Norman, Oklahoma office at 405-928-4075.

Have a Plan for the Unexpected

Posted on February 12, 2021 by Tyler Barrett

The continued rise of the coronavirus has left many both confused and unprepared. There are numerous reports of shortages of antibacterial hand sanitizer, disinfecting wipes, and even toilet paper. While we can’t predict when something like COVID-19 might strike, we can take steps to prepare for an unexpected crisis to help reduce the stress on ourselves and our family members.

Designate a family member who will check on elderly relatives. Make sure everyone knows who will responsible for checking in with an elderly loved one each day. Also set up a process for notifying other family members of an elderly loved one’s condition – this may including sending an email, text messaging, or phone calls. The method is not as important as agreeing to a process and sticking to it so all family members stay informed.

Seek medical advice in the event of a health care crisis. There has been a great deal of reporting about COVID-19, and some of it has been inconsistent. Reach out to your trusted medical team to understand what you and your loved ones should be doing in this, or any, health care crisis.

Make sure someone knows how to get your bills paid if you are unable to. This type of power can be provided to an agent under a financial power of attorney. Powers of attorney can include numerous powers so it is critical to talk with legal counsel before signing any type of legal document that gives someone else authority over your finances.

Be sure there is an accurate list of medical prescriptions readily available in your home. If you become ill, it is important that someone knows the medicines you take and the dosage. Keep this in your home where others can find it, and make sure the list is dated, noting any time it is updated. Many of us assume that our doctor has an updated prescription list, but if you are seeing multiple specialists, that may not be true.

Designate someone you trust to make medical decisions for you if you are unable to. This should not be a form that is downloaded from the internet. Deciding what type of treatment you want, where you want to live, and what should happen if you have a terminal illness are serious topics that should be considered carefully, then translated into a proper legal document.

Planning for an unexpected health care or financial crisis can help relieve a great deal of stress for you and your family. We would welcome the opportunity to help you come up with a plan that works for you. If you have questions or would like to discuss your estate planning options, please contact our Norman, Oklahoma office at 405-928-4075.

Having a Will is a Must

Posted on February 5, 2021 by Tyler Barrett

Though crafting your will can make you face some uncomfortable topics, like mortality, it does not compare to the difficulty your loved ones will face trying to handle the logistics problems in the absence of your will. Your last will and testament is a set of legal instructions that communicates your wishes regarding your dependents and how to dispose of your property when you die. If you have people who you love and care for, then creating a will for your peace of mind and their protection is the right thing to do.

Do You Have a Will?

Curiously, while many people have experienced the death of their parent and the fallout that occurs if the parent had no will, the number of Americans making wills is dropping. Recently, a study by Caring.com identifies that in 2020, 25 percent fewer people have a will than in 2017. Surprisingly, older and middle-aged adults make up a substantial part of this group even though 30 percent of the people in the study believe you should have a will by the age of 35.

What Assets Are Protected by a Will?

Many Americans feel they do not have enough assets to deem a will necessary, but unless you are destitute, you probably own a lot more than you think. Property ownership includes things like an individual as well as jointly owned bank accounts, stocks and bonds, retirement accounts, real estate, jewelry, vehicles, your online digital footprint, and even pets, are all part of your estate. You do not have to be wealthy, or even close to it, to benefit from having a will. Your will also protects your family and loved ones at a time when their focus should be on grieving your loss, not administering to legal issues because you did not have a will.

What Happens If I Don’t Have a Will?

Wills are subject to state law. When you die without a will, it is known as dying intestate, and the determination of the distribution of your assets becomes the responsibility of a probate court. The probate court appoints an administrator who will act as your executor, identifying legal claims against your estate, paying off outstanding debts, and locating your legal heirs. Locating heirs only occurs in the case where your property is worth more than your outstanding debts.

If you have an existing will we would be happy to review it to make sure it still reflects your wishes. If you don’t have a will we would be happy to help you create one that makes sense for your situation. Taking these steps now will bring you peace of mind, save your estate money, and protect your family and loved ones. If you have questions or would like to discuss your estate planning options, please contact our Norman, Oklahoma office at 405-928-4075.

Tag on a personal property memorandum to your will or trust

Posted on January 29, 2021 by Tyler Barrett

Family members often end up arguing over mom or dad’s favorite items. Arguments can take place over all things like a coffee mug, a piece of jewelry or a painting. These types of arguments can be eliminated by filling out a personal property memorandum and keeping it with your will or trust.

A personal property memorandum is designed to cover who should receive items owned that don’t have an official title record. Personal property includes furniture, jewelry, art, and other collections, as well as household items like china and silverware. Personal property memoranda may not include real estate or business interests, money and bank accounts, stocks or bonds, copyrights, and IOUs.

When writing your memorandum, it is best to keep things simple. Personal property memoranda generally resemble a list of items with the attached names of the inheritors. It can be handwritten or typed but should always be signed and dated.

All items should contain sufficient detail so that argument and confusion can be avoided. Complete contact information including address, phone, email, and a backup contact if possible should be included. Do not include items that you have already explicitly left in your will or trust.

The beauty of a separate list of personal items and their planned distribution is that if you later decide to change who receives what, you simply update your current list, or replace the list altogether. You can destroy an old record or maintain signature and dates on each of your personal property memoranda so that it is easy to identify your most current set of wishes.

A personal property memorandum for your tangible personal effects is a simple way to address how you want your personal property to be distributed. We would be happy to help you create a legal personal property memorandum along with any other estate planning documents you may need.

Five Mistakes Successor Trustees Make (and How to Prevent Them)

Posted on January 22, 2021 by Tyler Barrett

When establishing a trust, you must give serious thought to who you choose as your successor trustee—the person who will manage, invest, and hand out the trust’s accounts and property once you are no longer able to do so. This individual ideally should be

someone you trust implicitly;
someone who is organized, responsible, transparent, and meticulous; and
someone who can remain steadfast to your wishes in the face of family disagreements and other disputes regarding the trust.

Even the most capable, well-intentioned successor trustees can make mistakes when managing affairs, however. Here are five surprisingly common mistakes along with steps to take to prevent them from happening.

Faulty Record-Keeping

To ensure that a trust fulfills its purpose without being contested, the trustee must keep accurate, detailed records of income and distributions. Your trustee must also be prepared to report these figures regularly to the beneficiaries and heirs. If these records are incomplete or inaccurate, the door is open for someone to challenge the trustee, potentially leading to lengthy and costly court battles.

To prevent this mistake: Hire an accountant to assist the successor trustee in record-keeping, and make sure the successor trustee and the accountant meet before the successor trustee takes over.

Misunderstanding the Fiduciary Role

Many trustees mistakenly assume their job involves acting in the best interests of the person who set up the trust. In reality, their job is to act in the interests of the beneficiaries of the trust. The trustee may be legally liable for failure to protect the beneficiaries against bad investment advice concerning the trust.

To prevent this mistake: Detail the fiduciary role of the successor trustee in the trust document and be certain that the successor trustee understands the role.

Not Collaborating with Your Financial Team

The successor trustee’s failure to effectively communicate with key members of your financial team while administering your trust can lead to inaccuracies, misunderstandings, and significant, preventable, financial losses.

To prevent this mistake: Make sure your successor trustee is properly introduced to, and connected with, your attorney, certified public accountant, financial planner, and anyone else involved with your estate planning.

Failure to Discuss Compensation

If your appointed successor trustee is a close friend or family member, the topic of financial compensation may be glossed over or forgotten. This oversight can result in a lack of morale or even resentment if managing the trust becomes too difficult or time consuming for the trustee.

To prevent this mistake: Bring up the topic of compensation yourself when you establish the arrangement, be as generous as you deem necessary, and put the compensation terms in writing.

Failure to Remain Objective

Many people choose a close family member as a trustee. This strategy can be appropriate, especially when privacy matters. However, disputes about money can happen even in the tightest-knit families, and it can be difficult for a relative to remain neutral when resolving those fights. The end result could be decisions that family members perceive to be unfair or that are inconsistent with your intentions.

To prevent this mistake: Make certain the person you choose can remain neutral and faithful to the terms of the trust, even under duress. If there is any doubt, consider hiring a corporate trustee with no emotional connection to the family or your accounts and property.

Selecting a successor trustee is one of the most important decisions you will make during your estate planning process. For insightful counsel on this issue, contact us today to schedule a private appointment. We are available for in-person or virtual appointments, whichever you prefer.

Who Should Be Your Successor Trustee?

Posted on January 15, 2021 by Tyler Barrett

If you have a revocable living trust, you probably named yourself as the initial trustee so you can continue to manage your financial affairs. Eventually someone else will need to step in when you are no longer able to act due to incapacity or after your death, however. Your successor trustee plays an important role in the effective implementation of your estate plan.

Key Takeaways

Because successor trustees have a lot of responsibility, they should be chosen carefully.
Successor trustees can be an adult child, family member, trusted friend, or a corporate or professional trustee.

Responsibilities of a Successor Trustee

At incapacity. If you become incapacitated, your successor trustee will step in and take full control of your trust for you, making financial decisions, selling or refinancing property, and completing other tasks related to your trust’s accounts and property. Your successor may also be involved in paying bills and helping to ensure you get any care you may need. Since your trustee can only manage accounts and property that the trust owns, it is important that you fully fund your trust, i.e., transfer or retitle your accounts and property into your trust.

After death. After you die, your successor trustee acts similar to an executor of an estate. The successor trustee takes an inventory of your accounts and property, pays your final bills, sells property if necessary, has your final tax returns prepared, and distributes your accounts and property according to the instructions in your trust. Like incapacity, the successor trustee is limited to managing accounts and property that are owned by the trust, so fully funding your trust is crucial.

Your successor trustee typically acts without court supervision, which is why your affairs can be handled privately and efficiently—and probably one of the reasons you have a living trust in the first place. But this also means it will be up to your successor trustee to get things started and keep them moving along.

An Important Consideration

Your successor trustee can do anything you could with your trust accounts and property, as long as it does not conflict with the instructions in your trust document and does not breach the successor trustee’s fiduciary duty.

It is not necessary for the successor trustee to know exactly what to do and when, because an attorney, certified public accountant, or other advisor can help guide your successor trustee, but it is important that you name someone who is responsible, conscientious, and willing to seek professional guidance when it is warranted.

Who Can Be a Successor Trustee

A successor trustee can be an adult child, family member, trusted friend, or professional or corporate trustee (bank trust department or trust company). If you choose an individual, you should name multiple back-ups in case your first choice is unable or unwilling to act.

What You Need to Know

Your successor trustee should be someone you know and trust, whose judgment you respect, and who will also respect your wishes.

When choosing a successor, keep in mind the type and amount of accounts and property in your trust and the complexity of the provisions in your trust document. For example, if you plan to keep accounts and property in your trust for your beneficiaries after you die, your successor trustee will have more responsibilities for a longer period of time than if your accounts and property will be distributed all at once upon your death.

Consider the qualifications of your candidates, including personalities, financial or business experience, and time available due to family or career demands. Being a trustee can take a substantial amount of time and requires a certain amount of business sense.
Be sure to ask the people you are considering if they would want this responsibility. Do not just assume they want to take on this role.
Trustees should be paid for their work; your trust document should provide for fair and reasonable compensation.

Rest assured, we can help you select, educate, and advise your successor trustees. You are not alone. If you have any questions or concerns, please feel free to schedule an appointment with us.

The Importance of a Successor Trustee

Posted on January 8, 2021 by Tyler Barrett

An estate plan that includes a revocable living trust is an excellent way to protect yourself and your loved ones upon your passing or in the event you are unable to manage your own affairs. As opposed to other estate planning options, a revocable living trust gives you the ability to keep control of and enjoy your accounts and property during your lifetime and to maintain privacy in how the accounts and property are managed, and may save your loved ones the time and financial burden of going through probate. To ensure that your estate plan works as it should when you are no longer capable of managing your own affairs, it is important that your backup trustee (otherwise known as your successor trustee) understands the successor trustee’s role, duties, and responsibilities, and where to go if help is needed.

When does a successor trustee take over?

If you have a revocable living trust, you are most likely familiar with the idea of a trustee. A trustee is an individual or entity in charge of managing, investing, and handing out money and property to the appropriate people. You (and possibly your spouse, if you are married) will most likely act as the initial trustee of your revocable trust while you are able. However, there will likely come a time when you are no longer able to act as trustee, in which case, the person you have named as your successor trustee will need to step in.

When you are unable to make your own decisions. Before your passing, there may come a time when you are no longer able to make decisions or handle the day-to-day tasks associated with managing, investing, or handing out the trust’s accounts and property. This is sometimes referred to as incapacity. When incapacity occurs, the loss of control can be scary. If you have named a reliable successor trustee, however, this individual or entity will be able to step in and make sure that the trust’s accounts and property continue to be managed, invested, and used for your wellbeing during your life, without court involvement. Just because you are not serving as trustee does not mean that you stop being a beneficiary.

At your death. When you pass away, you obviously will no longer be the person managing, investing, and handing out the trust’s money and property. When this happens, your named successor trustee will step in to manage, invest, and use the trust’s money and property for the benefit of those you have chosen (your beneficiaries). Although you will no longer be the trustee, if you have properly documented your wishes in your trust, they will be carried out by the trustee, without court involvement.

Whenever you choose. There could come a time when you no longer want to be the one managing the trust’s accounts and property. In this instance, you could choose to resign as the initial trustee, allowing your successor to step in and pick up where you left off. Or you could allow your successor trustee to act with you as a co-trustee. Because you are still alive, the successor trustee will be managing, investing, and using the trust’s accounts and property for your benefit and anyone you have named in your trust to benefit from the trust accounts or property. Even if you have named a professional company as your successor trustee, allowing them to act while you are still alive and mentally aware can be a great way for you to see how the successor trustee handles the responsibility. So long as you are still mentally able to, and the trust allows for it, you can fire your successor trustee if they do not perform their duties well and appoint someone else.

What are a successor trustee’s duties and responsibilities?

Although your successor trustee will have control over the trust’s accounts and property, the successor trustee also has legal duties and responsibilities that must be adhered to. In general, your successor trustee has a fiduciary duty to administer the trust solely in the interest of the beneficiaries and to deal with them impartially. As a “fiduciary” they are held to a higher standard of care. Additionally, the successor trustee cannot use any of the trust’s accounts or property for the trustee’s own benefit or for any purpose not expressly listed in the trust. Also, unless specifically authorized by the trust document, the successor trustee cannot enter into any transaction that would create a conflict of interest between the successor trustee and the trust or trust beneficiaries.

How can you prepare your successor trustee?

Make sure estate planning documents are up-to-date. Creating an estate plan is a great first step in making sure your wishes are carried out. However, it is crucial that you keep your estate plan up-to-date. Because your successor trustee will have to rely on the trust’s written terms, you do not want to give your successor trustee faulty or outdated instructions.

Revocable Living Trust

When reviewing your trust, make sure that the individual or entity you have selected as your successor trustee is still the one you want and that the individual or entity can still act on your behalf. It is also a good idea to make sure that a backup trustee is named for your successor trustee in case something happens. Lastly, review the beneficiaries of your trust and what they are to receive. Are the amounts and timing of property distributions still what you want? A beneficiary’s circumstances can change quickly and it is important that your wishes be carried out as intended.

Financial Power of Attorney

It is important to review your financial power of attorney to make sure that the person named to handle accounts and property owned by you individually is still able to act. In some instances your successor trustee and agent under a financial power of attorney may be the same person, but if not, you will want to make sure that these two individuals can work well together should something unexpected happen in the future.

Healthcare Documents

Although healthcare documents (such as a medical power of attorney, advance directive or living will, and Health Insurance Portability and Accountability Act (HIPAA) authorization form) primarily focus on medical matters, they may impact the financial matters handled by the successor trustee. If you are expecting medical bills to be paid from accounts owned by the trust, it is important that your successor trustee have access under a HIPAA authorization form to receive your medical information and talk to the professionals if any questions arise during the payment process. Additionally, you should review the other healthcare documents to make sure that they accurately reflect your wishes and to ensure that you have done a thorough review of all your estate planning documents.

Discuss your estate plan with your successor trustee. The next step in preparing your successor trustee is to discuss your estate plan with your successor trustee. Whether your successor trustee is a family member, close friend, or professional trustee, open and honest communication is necessary. You can tailor this conversation to meet your needs and your comfort level.

If you want to keep a majority of the details private until your death, you can start the conversation by letting your loved one or corporate trustee know that you have chosen him or her to serve as the successor trustee of your trust, where to find the necessary documents, and which advisors (estate planning attorney, certified public accountant, financial advisor, or insurance agent) to contact upon assuming the role. This will avoid having your named successor trustee be surprised by the new role and will help guide them with some steps to take.

If you would like to disclose a little more information, you could give your successor trustee a general overview of your estate plan and discuss who will receive the accounts and property without disclosing the exact amounts. The focus of this discussion is to communicate the goals of your estate plan and alert your successor trustee to any special circumstances that may need to be addressed.

Lastly, if you have decided that you want your successor trustee to have full access to all information and to be ready to step in at a moment’s notice, you could sit down with your successor trustee and go through each of your documents. Depending on your comfort level, this may be a great time to get the rest of your loved ones involved. We are happy to sit in on these meetings to facilitate and answer any questions that may arise.

We Are Here to Help

You have already taken the first step by including a revocable living trust in your estate plan. Because we never know what the future holds, now is the best time to start having discussions with your successor trustee about your wishes and intentions. We are available for in-person or virtual meetings to help facilitate these discussions. Give us a call today so we can help you and your loved ones prepare for the next phase of the estate planning process.

Think Twice Before Do-It-Yourself Estate Planning

Posted on January 1, 2021 by Tyler Barrett

We hear this question often: “Can’t I just grab a will off the internet, do a transfer-on-death deed for my land, put my kids on my bank account, and be done with my estate plan?”

It’s just not a good idea. For the plan to work as you would want it to, it should account for plenty of complications. A good plan should protect your spouse and your children from loss of valuable government benefits, if anybody is or becomes disabled. The plan should avoid the delay and expense of probate court. The plan should protect money from children’s creditors or divorce or remarriage. It should be crafted to serve family harmony and to avoid disputes between children as joint owners.

Even a relatively simple situation is made up of many moving parts. Internet documents and joint-ownership devices just won’t do the job.

Also, assembling the moving parts so they work smoothly is just the first step. Your estate plan needs maintenance too, just like your car has a “check engine” light. Major family events like serious illness or death, marriage, birth, or financial reversals are alerts that you should tune up your plan to reflect those changes. Your plan shouldn’t be “one and done.”

It takes expertise to coordinate the various strategies available. Don’t risk a result that will cause your family problems and unnecessary expense. Call us to create a plan that harmonizes the moving parts, so the gears will work together and you will leave the legacy you intended.