The Complete Guide to Trust and Estate Management What You Need to Know About Being a Trustee or an Executor Explained Simply

By Gerald Shaw

The massive change in your life after a spouse leaves can be overwhelming, both emotionally and financially. With a divorce rate holding steady at 36 percent per capita, according to the National Center for Health Statistics, and the wide range of individuals stricken by their spouse's early death, the dilemma of having to handle your own finances and relearn the single lifestyle can be a heavy blow. With this book, you will learn not only how to pick up the pieces and once again live alone, but how to successfully organize your finances, run your life, and keep yourself afloat.

The first step in rebuilding and returning to the lifestyle you have not lived in years is to analyze how you saved and ran your finances during marriage. You will learn how to sort through your existing finances and how to redefine what kind of financial risk you present whether you are a saver or a spender, and how you can use this knowledge. You will learn when, and if, you should seek professional help in outlining your financial options and putting everything in order and how to do so.

Every situation in which you find yourself alone again will affect your finances differently and so, a chapter has been provided that details how each different form of divorce and the death of a spouse directly affects you and your financial standing. You will learn how to reassess your assets and liabilities and what will have carried over from your spouse. The process of assessing your finances and looking at cash flow statements will be provided alongside a detailed walkthrough of the process involved in deciding how your future finances will be managed.

The complex process of filing and filling out the necessary paperwork will be broken down into easy steps for every situation you might find yourself in, including the reallocation of powers of attorney, wills, and insurance coverage. You will learn how to reassess your career and how to restart your savings successfully, regardless of what happened. The reduction of debt and the management of existing investments are discussed in depth along with the detailed interviews and professional opinions of financial and legal experts in the field who provide tips and strategies for anyone trying to rebuild when single again.

Finally, you will be shown how your restructuring can and will affect your children and why you should start planning as quickly as possible for their needs. If you have recently gone through a divorce or suffered the loss of your spouse, it can be a rough experience trying to rebuild your life, but this book will help you through the most meticulous and nerve wracking aspects step-by-step.

• Language: English
• Publisher: Atlantic Publishing Group, Inc.
• Release date: Nov 15, 2010
• ISBN: 9781601386786

Book preview

LAW035000

LAW / Estates & Trusts

$24.95

FAM017000

FAMILY & RELATIONSHIPS / Eldercare

L43

Shaw

LAW086000

LAW / Taxation

Wha

The C

One of the most critical decisions a person will make when crafting a will or establishing a trust t Y

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Being chosen for one of these jobs is an honor, but it is not something you should go into unprepared. Estate attorneys estimate that being an executor involves 12 to 18 months of extensive planning with the IRS, courts, and o Kno

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the estate’s heirs.

w About Being a T

The Complete Guide to Trust and Estate Management will help you understand the complex process of carrying out a person’s final wishes. As the executor, you will be responsible for settling the deceased person’s estate, and as the trustee, you will be responsible for holding and administering the o T

trust’s assets in the best interest of the beneficiary. This book’s simple and easy-to-understand language makes it accessible to everyone.

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You will learn the many duties and responsibilities of an executor, includ-rus

t and Es

ing distributing property to the beneficiaries, collecting and arranging for t

the payment of debts, appraising the assets, and acting in the best inter-ee or an Ex

ests of the deceased. After reading this book, you will know how to initiate probate, preserve the value

of the estate, and file state

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death and federal estate tax

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returns, as well the other nu-

e Management:

merous duties in managing

or Explained Simply

a trust or estate. With The

Complete Guide to Trust and

Estate Management, you can

be assured that you will be

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entrusted to you.

Atlantic Publishing Group, Inc.

ISBN 978-1-60138-201-652495

Your complete resource for small business, management, finance, online, and real estate books.

We have a book for that.™

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By Gerald Shaw

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The Complete Guide to

TRUST AND ESTATE

MANAGEMENT:

What You Need to Know About Being a Trustee

or an Executor Explained Simply

By Gerald Shaw

With Foreword By Linda C. Ashar, Attorney at Law AGTrustEstateMgmt.indb 1

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The CompleTe Guide To TrusT and esTaTe manaGemenT: WhaT You need To KnoW abouT beinG a TrusTee or an exeCuTor explained simplY

Copyright © 2010 Atlantic Publishing Group, Inc.

1405 SW 6th Avenue • Ocala, Florida 34471 • Phone [phone] • Fax [phone]

Web site: www.atlantic-pub.com • E-mail: [e-mail] SAN Number: 268-1250

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for permission should be sent to Atlantic Publishing Group, Inc., 1405

SW 6th Avenue, Ocala, Florida 34471.

Library of Congress Cataloging-in-Publication Data Shaw, Gerald, 1953-The complete guide to trust and estate management : what you need to know about being a trustee or an executor explained simply / by Gerald Shaw.

p. cm.

Includes bibliographical references and index.

ISBN-13: 978-1-60138-201-6 (alk. paper)

ISBN-10: 1-60138-201-4 (alk. paper)

1. Trusts and trustees--United States--Popular works. 2. Trusts and trustees--Taxation--United States--Popular works. 3. Executors and administrators--United States--Popular works. 4.

Inheritance and transfer tax--Law and legislation--United States--Popular works. I. Title.

KF730.Z9S49 2010

346.7305’6--dc22

2008032591

LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: The publisher and the author make no representations or warranties with respect to the accuracy or completeness of the contents of this work and specifically disclaim all warranties, including without limitation warranties of fitness for a particular purpose. No warranty may be created or extended by sales or promotional materials. The advice and strategies contained herein may not be suitable for every situation. This work is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If professional assistance is required, the services of a competent professional should be sought. Neither the publisher nor the author shall be liable for damages arising herefrom. The fact that an organization or Web site is referred to in this work as a citation and/or a potential source of further information does not mean that the author or the publisher endorses the information the organization or Web site may provide or recommendations it may make. Further, readers should be aware that Internet Web sites listed in this work may have changed or disappeared between when this work was written and when it is read.

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We recently lost our beloved pet Bear, who was not only our best and dearest friend but also the

Vice President of Sunshine here at Atlantic Publishing. He did not receive a salary but worked tirelessly 24 hours a day to please his parents.

Bear was a rescue dog that turned around and showered myself, my wife, Sherri, his grand-parents Jean, Bob, and Nancy, and every person and animal he met (maybe not rabbits) with friendship and love. He made a lot of people smile every day.

We wanted you to know that a portion of the profits of this book will be donated to The Humane Society of the United States. –Douglas & Sherri Brown

The human-animal bond is as old as our work to help companion animals and human history. We cherish our animal wildlife. You will be funding our educational, companions for their unconditional legislative, investigative and outreach projects affection and acceptance. We feel a thrill in the U.S. and across the globe.

when we glimpse wild creatures in their natural habitat or in our own backyard.

Or perhaps you'd like to make a memorial

donation in honor of a pet, friend or Unfortunately, the human-animal bond relative? You can through our Kindred Spirits has at times been weakened. Humans have program. And if you'd like to contribute in exploited some animal species to the point a more structured way, our Planned Giving of extinction.

Office has suggestions about estate planning, annuities, and even gifts of stock that avoid The Humane Society of the United States capital gains taxes.

makes a difference in the lives of animals here at home and worldwide. The HSUS Maybe you have land that you would like to is dedicated to creating a world where our preserve as a lasting habitat for wildlife. Our relationship with animals is guided by Wildlife Land Trust can help you. Perhaps compassion. We seek a truly humane society the land you want to share is a backyard—

in which animals are respected for their that's enough. Our Urban Wildlife Sanctuary intrinsic value, and where the human-animal Program will show you how to create a bond is strong.

habitat for your wild neighbors.

Want to help animals? We have plenty of So you see, it's easy to help animals. And suggestions. Adopt a pet from a local shelter, The HSUS is here to help.

join The Humane Society and be a part of

2100 L Street NW • Washington, DC 20037 • 202-452-1100

www.hsus.org

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TRADEMARK STATEMENT

DEDICATION

All trademarks, trade names, or logos mentioned or used are the property of their respective owners and are used only to directly describe the products being provided. Every effort has been made to properly capitalize, punctuate, identify and attribute trademarks and trade names to their respective owners, including the use of ® and ™ wherever possible and practical. Atlantic Publishing Group, Inc. is not a partner, affiliate, or licensee with the holders of said trademarks.

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DEDICATION

This book is dedicated to my aunt, Jean Cusick, for being there when I needed her.

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6

The Complete Guide to Trust and Estate Management TABLE OF CONTENTS

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TABLE OF CONTENTS

Foreword

13

Introduction

17

Chapter 1: The Role of Personal

Representative/Trustee

23

Handling the Estate ...............................................................23

Standards and Decision-Making ..........................................28

The Probate Process ...............................................................34

Fees ............ ..............................................................................39

Chapter 2: The Personal Representative 45

The Selection ...........................................................................45

Competence and Experience ................................................49

Running a Deceased Person’s Business ..............................52

Do You Want to Be a Personal Representative? .................55

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8

The Complete Guide to Trust and Estate Management Chapter 3: The Trustee

57

What is a Trust? ......................................................................57

Benefits of a Trust ...................................................................63

How is a Trustee Selected? ....................................................68

Chapter 4: The Emotional Side

75

The Grieving Process .............................................................75

Thinking and Decisions Are Affected .................................80

Conflicts About Disbursements ...........................................82

Chapter 5: The Estate Dream Team

85

Attorneys . ...............................................................................85

Insurance Agents ....................................................................87

Financial Advisers ..................................................................89

Accountants ............................................................................92

Professional Appraisers .........................................................93

Real Estate Agents ..................................................................94

Banks or Trust Companies ....................................................94

Co-Personal Representatives ................................................95

Guardians ...............................................................................97

The Family of the Deceased Person .....................................97

Chapter 6: Preparing for a Death

99

Power of Attorney, Important Documents .........................100

Adding Value to the Estate ...................................................102

Avoiding Probate and Other Actions to Take ....................104

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Table of Contents

9

Chapter 7: Preparations After Death

107

Immediate Concerns ..............................................................107

A Valid Will .............................................................................110

Preparing the Will for Probate ..............................................111

Chapter 8: Probate

115

Probate Process .......................................................................116

Select and Meet the Attorney ...............................................120

Initial Steps ..............................................................................123

Other Probate Factors ............................................................124

Chapter 9: Administering the Estate

127

How to Handle Funds ...........................................................127

Preparing Inventory...............................................................131

Tangible and Intangible Property ........................................132

Chapter 10: Tax Considerations

135

Deceased Person’s Income-Tax Return ...............................135

Estate Taxes .............................................................................138

Request for Discharge from Personal Liability ..................143

Insolvent Estate ......................................................................143

Estate Income Taxes ...............................................................145

Charitable Contributions ......................................................147

Administration Expenses ......................................................147

Funeral and Medical Expenses ............................................148

Tax Payments ..........................................................................148

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10

The Complete Guide to Trust and Estate Management Gift Taxes ...............................................................................148

Chapter 11: Final Filing Requirements

155

Final Return for Deceased Person .......................................156

Other Tax Information ...........................................................161

Chapter 12: The Trust Instrument

163

Review the Trust Document .................................................163

Transfer of Assets ...................................................................166

Compensation .........................................................................172

Chapter 13: Administering Trusts

175

What to Do First .....................................................................175

Distributing Assets .................................................................179

Trustee as a Business ..............................................................182

Managing Real Estate and Business ....................................185

Chapter 14: Trust Investing

197

Investment Policy Statement ................................................197

Managing Investments ..........................................................202

Which Investments? ...............................................................206

Chapter 15: Termination of a

Trustee’s Responsibilities

217

When a Trustee is Relieved of Duties ..................................217

The Trustee’s Responsibilities ..............................................221

Tax Consequences and Accounting .....................................222

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Table of Contents

11

Chapter 16: A Sampling of Trusts

227

Revocable and Irrevocable Trusts ........................................227

Irrevocable Life Insurance Trusts .........................................231

Testamentary Trusts ...............................................................232

Marital Deduction Trusts ......................................................232

Children’s Trusts ....................................................................234

Special Needs Trust ................................................................234

Charitable Remainder Trusts ................................................235

Asset Protection Trust ............................................................237

Constructive Trust ..................................................................238

Spendthrift Trust ....................................................................238

Tax Bypass Trust .....................................................................238

Totten Trust .............................................................................239

Conclusion

241

Appendix A: Sample Forms

243

Glossary

273

Bibliography

281

Author Biography

283

Index

285

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12

The Complete Guide to Trust and Estate Management AGTrustEstateMgmt.indb 12

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FOREWORD

The business of death is never easy and certainly not simple in our modern world. All manner of details require attention, even when the deceased leaves few assets behind. Many of these details are required by law and involve a maze of court and other bureaucratic procedures, which vary from state to state.

The personal representative has a fiduciary duty to ensure all the responsibilities entrusted to his or her care are properly and timely executed. When involved in the probate court, the personal representative also becomes an officer of the court. This important duty is further compounded by the stress that death inevitably brings, for the personal representative is nearly always someone who was close to the deceased. Handling an estate can span a variety of experiences for the personal representative, from the routine to the slightly bizarre.

A recent example is the estate of Clifford Lassmann in Waukesha County, Wisconsin. Lassmann died on August 18, 2007, at age 67, AGTrustEstateMgmt.indb 13

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14

The Complete Guide to Trust and Estate Management when he was trampled by a horse boarded at his Sundrift Stables.

In his will, he bequeathed all to his best friend Jackie Vogel, who was also named as the estate’s personal representative.

Lassmann did not leave anything to his two adult daughters, although one daughter would inherit if Vogel failed to survive him by 30 days. This daughter sued the estate and Vogel, contesting ownership of Lassmann’s Morgan gelding, Sundrift City Slicker aka Iggy. The daughter claimed ownership of Iggy. Vogel produced an updated transfer agreement purporting to show that the daughter signed Iggy over to her father before Lassmann died. The change in ownership was never registered with the American Morgan Horse Association Registry.

Vogel was seeking to sell Iggy on behalf of the estate. Lassmann’s daughter wanted the horse. The argument went into court mediation. During these proceedings, Iggy died. The court eventually decided in favor of the daughter, awarding Iggy’s ashes, his tail, and $50,000 in proceeds from other assets of the estate to Lassmann’s daughter.

As the Lassmann estate shows, the personal representative may have to juggle personal interests with formal fiduciary duties.

Protecting the estate’s interests may require court proceedings, appraisals, and verification of documents. Thus, the personal representative’s job is a multi-dimensional process, often requiring a balancing of complex legal and family interests with those of the deceased, especially where a will or trust is involved.

It is because there are such competing interests, especially within families, that a personal representative is required by law to rep-AGTrustEstateMgmt.indb 14

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Foreword

15

resent the estate — that is, the interest of the deceased. In a very real sense, it is the final act the personal representative performs for a friend or loved one.

Such matters as arranging for burial or cremation, ensuring the deceased’s affairs are properly handled according to his or her wishes (if possible), fielding creditors, finding beneficiaries, getting appraisals, finding and counting assets, keeping records, sorting personal property, filing tax returns, satisfying legal requirements as they relate to next of kin and the government, and a myriad of other tasks are the responsibility of the person who is appointed as the personal representative of the deceased person’s estate. This may be someone who is named by the deceased in his or her will as executor or appointed by the court as administrator of the estate. In some cases, there may be so few assets that a formal court process is not required, but the deceased’s affairs will still require final resolution by a personal representative.

Understanding the scope of the personal representative’s duties is only the first step. Stop there and the task will only loom large and daunting. It need not. The Complete Guide to Trust and Estate Management provides a complete guideline to demystify this important job, providing not just the what, but the how and why to navigate the process of managing the business of an estate easily and wisely.

—Linda C. Ashar, Attorney at Law

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16

The Complete Guide to Trust and Estate Management About Linda C. Ashar

Linda C. Ashar is a lawyer, educator, horse breeder, freelance writer, and artist. Her law practice encompasses more than 29 years before the Ohio and Federal Bars. She is a senior shareholder in the firm of Wickens, Herzer, Panza, Cook & Batista Co. in Avon, Ohio. In addition to her juris doctor in law, she has a master’s of art in special education and bachelor’s of art in English.

She is professional writer and has authored 101 Ways to Score Higher on Your LSAT: What You Need to Know About the Law School Admission Test Explained Simply (Atlantic Publishing Group, Inc.

2008), poetry, and several magazine and journal articles.

She is an Adjunct Professor at DeVry University and a frequent speaker at law seminars.

She and her lawyer-husband, Mike, operate Thornapple Farms in Vermilion, Ohio, where they breed Morgan Horses, including rare Lippitt Morgan bloodstock, Connemara Ponies, and Irish Kerry Bog Ponies, a critically endangered breed. Ashar serves on several nonprofit boards and is co-founder of Elysian Fields: The Justin Morgan Association for Retired Equines and the American Kerry Bog Pony Society.

Her interpretive art has been showcased by Mac Worthington Gallery in Columbus, Ohio; she paints by private commission, with subjects including equines, portraits, and landscapes. You can reach her at [e-mail] or [e-mail].

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INTRODUCTION

Before I became the personal representative for an estate (also referred to as executor or administrator, depending on the legal procedure involved), I had no idea what the job of handling an estate entailed. My mother was well prepared for her death.

She had consulted with an attorney and knew that in her state —

Florida — the estate is automatically divided among the children equally. She had two children who pretty much knew what to expect. Therefore, she had little to plan. Her finances were all in order. Her property was paid for and would be transferred easily when the time came. There were no conflicts within the family.

My brother and I were expecting the inevitable.

Although dealing with the death of a loved one is deeply sadden-ing, it was heartening to have something to remember our mother by and to know we were fortunate to inherit what we did. We went through the normal bereavement process, which just about everyone must face at some time in life. Still, despite the grieving period and emotions involved, we eventually needed to dis-AGTrustEstateMgmt.indb 17

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18

The Complete Guide to Trust and Estate Management tribute the property and assets formally. It was not a problem, I thought. It was, frankly, the last thing on my mind. Dealing with my mother’s death was the center of everything. Changing the names on the property title would be something routine.

I remember calling the county clerk’s office and explaining the situation: My mother has passed away, and we have to change the name on papers so that tax statements can go to the right person. State law says my brother and I each get half of the estate, and there is no conflict. So, just send over the paperwork, and we will sign it. I was naïve enough to believe I could do everything over the phone in a few minutes and have it verified in a few days.

Then I heard the person on the other end of the line mention

probate, a word that sounded familiar, yet foreign. The property would have to go through the probate court, she explained. I would need to see an attorney who specializes in probate. It was not something I could do myself, she told me. (Well, I could, but any amateurish mistake could tie up the property for years until the legal matters were straightened out properly. Just one more thing I had to worry about.)

Though I would learn that probate is a relatively simple process to understand, I was fortunate to have extended family to turn to for help. My aunt’s attorney put me in touch with a lawyer who specialized in estate matters and who explained the details clearly, making the entire process as painless as possible.

Probate is a legal procedure through which the deceased person’s assets are passed to his or her beneficiaries under court supervision according to state law. The court’s role is to ensure that the AGTrustEstateMgmt.indb 18

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Introduction

19

assets are administered properly, that all beneficiaries receive a share of the estate, and that all creditors of the estate are paid.

If the deceased person had a will, the court ensures that the terms and conditions of his or her wishes are carried out. If there is no will, the court follows state law governing distribution of intestate estates. I was once again

Reviews for The Complete Guide to Trust and Estate Management What You Need to Know About Being a Trustee or an Executor Explained Simply

[iwatson_39 · Rating: 5 out of 5 stars]

Although this book is geared toward the reader being a trustee or executor I feel it is an equally important read for anyone assigning these positions as well. Knowing what the person chosen will have to do will allow you to choose the right person to carry out the duties.Death is inevitable and preparing for it is a must, whether you are young or old. Often young people don't realize they need to prepare for death and not leave it until they are old. It's not an easy thing to think about but it must be done. Understanding the process is of utmost importance.Gerald Shaw covers everything: roles, documents, probate, administering the estate, tax considerations, administering trusts, investing the trusts, and termination of the trustees duties. As well, he gives examples of trusts: revocable/irrevocable, testamentary, charitable remainder, spendthrift, totten, and many others.I believe this book fulfills two purposes. One is to encourage us to make the most vital decision in our lives and the other is to choose the right person to carry out our wishes. I believe this book should be given by the person appointing a trustee or executor to the person they feel would be best for them before the commitment is made. And, I also believe the person that was asked will be much more cognizant of what is expected of them before he or she agrees to the position. This is an extremely important book and I encourage everyone to consider reading it.