As an estate planner, you help your clients to achieve extremely important goals including, among other things, to nominate guardians for minors; avoid probate; minimize gift, estate and generation skipping transfer taxes; protect their children and other beneficiaries’ inheritance from creditors and predators; and nominate agents, trustees and executors who will manage their estate and make decisions for them upon incapacity or death. It can be a very fulfilling and rewarding process for both you and your clients during which time they necessarily share some of their most private information – marriage and family history, income, assets, debts, goals and make trust design decisions based upon the tax laws and your counseling which may affect generations to come. Pages upon pages constitute the trust and ancillary documents, some of which are immediately active and others that remain dormant until certain triggering events occur, such as disability or death. Once the clients sign and notarize, you may not communicate with them much thereafter or you may, on some planned basis, if you offer your clients a maintenance program.
Thereafter, a grantor dies and it’s time for some of the provisions on those pages become operative. A surviving spouse, child, beneficiary, successor trustee, advisor or friend of the deceased locates your name and calls you. The family is mourning and experiencing chaos, confusion and worry. They want to know if you will be able to continue to help the family during this difficult and uncertain time. Your answer may depend on various factors such as:
- Whether you have experience with trust administration.
- If the estate is taxable and will require an IRS Form 706 filing (or if one will be filed to elect portability).
- If there are multiple trusts such as a living trust, irrevocable life insurance trust, grantor retained annuity trust, qualified personal residence trust or gifting trust.
- Whether there were prior significant gifts or if a GSTT analysis will be required.
- If the assets will be relatively simple to transfer, such as a home and investment and retirement accounts, or if they are more complicated, such as shopping centers, family limited partnerships, promissory notes or unique assets.
- If there is an accountant, financial advisor or other advisor who is familiar with the family and the deceased’s assets and will be able to significantly help you through the process.
For myself, my initial trust administration occurred when a client died and her children, whom I had come to know fairly well, assumed that I would administer the trust that my firm had prepared. Due to some farmland already being in escrow, they needed either an administrative trust or the land allocated to sub-trusts so that there would be a signatory for the closing. Because I had a background in real estate financing, I felt comfortable assisting. I had not planned to complete the rest of the trust administration; however, after the sale of the land, it made sense for my firm to continue. I really enjoyed the process because trust administration involves various areas of law which are not necessarily related, but may need to be interrelated. It also meant something to me to be there for my client’s family who trusted me as their advisor during a very difficult time.
Five benefits of practicing trust administration include:
- You can see first-hand how important it is that each provision be well-thought out and clear because ambiguous or inconsistent provisions can be challenging, create risks for the successor trustee or may require court approval. Dealing with these confusing provisions can make you a more aware and better drafter.
- It can be challenging and add diversity to your practice because trust administration involves income, estate, gift, GST taxes; real property transfer laws, plus an understanding of your state’s revenue and taxation laws; assignments of business interests; and/or sales of assets.
- Once the trustee gathers all of the assets and determines date-of-death values, there can be a surprising amount of thought and planning required when deciding on asset allocations.
- You will have the opportunity to work closely with other advisors, including accountants and financial advisors which can provide valuable lessons and it can be enjoyable to coordinate efforts with a team.
- There are often estate planning opportunities that arise during a trust administration. For example, the surviving spouse may need to update his or her successor trustee nominations or may want to change the distributions of his or her share of the assets from outright beneficiary distributions to lifetime trusts. Or, the successor trustee or a beneficiary may need an estate plan or trust restatement.
Although each trust administration is unique, there are steps and processes that apply to each administration. These include, among other things: identifying who is your client, who are the deceased grantor’s heirs and beneficiaries and your scope of services; working with the deceased grantor’s accountant, financial advisor and other advisors; informing your successor trustee client of his, her or its fiduciary duties and helping to avoid breaches of such duties; providing required government and other notices and filings in a timely manner; conducting an inventory of all assets and obtaining values; and helping with tax and other planning when allocating assets to sub-trusts.
If you’re an estate planning attorney, or a CPA, financial advisor or trust officer, join us and trust administration specialist, attorney Kristin L. Yokomoto, J.D., LL.M. (Taxation), on Wednesday, March 22nd, 2017 at 9am Pacific Time (12pm Eastern Time) for a valuable, information-packed 60 minute teleconference entitled, “Trust Administration Made Easier!”. During this teleconference, Kristin will speak about the best practices and pitfalls involved with trust administration. >>MORE INFO
ABOUT THE SPEAKER
Kristin L. Yokomoto, J.D., LL.M. (Taxation) helps families and business owners to preserve their assets through tax, generational wealth and business planning. She is a partner at Albrecht & Barney in Irvine, California where she focuses on estate planning, business succession planning, trust administration and probate. She has also focused on venture capital financings, mergers and acquisitions and securities laws at Buchalter Nemer in San Francisco and Los Angeles. Kristin is the Secretary and a member of the Board of Directors of STEP-Orange County. She is a member of the STEP Mental Capacity Special Interest Group Committee and the Orange County Bar Association Professionalism and Ethics Committee. Kristin is also a member of WealthCounsel, ElderCounsel and the Orange County Bar Association Trusts and Estates and Elder Law Sections. She graduated from the University of California, Santa Barbara with a B.A. in Economics, the University of Arizona with an M.B.A., the University of Arizona School of Law with a J.D., where she was a member of the Arizona Law Review, the San Diego School of Law with an LL.M. in Taxation in 2000 and the Chapman University School of Law with an LL.M. in Taxation in 2009. She enjoys writing and teaching on estate planning, trust administration and risk management issues.
OTHER ARTICLES IN THIS ISSUE
- PRACTICE-BUILDING: The 10 Biggest Mistakes Estate Planning Attorneys Make – – Running Their Business! by Philip J. Kavesh, J.D., LL.M. (Taxation), CFP®, ChFC, California State Bar Certified Specialist in Estate Planning, Trust & Probate Law
- ADVANCED PLANNING: “Oshins’ Motions: Seven Estate Planning Motions for Consideration” by Steven J. Oshins Esq., AEP (Distinguished)
- TAX PLANNING: “Robert Keebler Podcast on the Death Tax Repeal Act of 2017” by Robert S. Keebler, CPA/PFS, MST, AEP (Distinguished), CGMA