Plan on It
EPISODE 13
Estate Planning FAQs: Part 3
In this episode of Plan On It, Estate Planning Attorney Chris Botti and co-host Sean O’Connor delve into listener-submitted questions about estate planning. They clarify the roles of trustees and executors, explore the costs associated with trust administration, and discuss the importance of transparency and communication with beneficiaries. Chris explains the steps a trustee should take when a trustor passes away and the legal implications of divorce on existing trusts. The episode also covers the necessity of updating trusts in light of new laws and how to handle situations when a trustee is unreachable. This episode is packed with actionable insights for anyone involved in estate planning, ensuring listeners are well-equipped to manage their responsibilities and protect their assets.
Episode Details
A trustee and an executor perform similar financial roles. In a trust, the manager of the trust assets is called a trustee. In a will, this role is known as the executor. Both are responsible for handling the financial aspects of either the will or the trust, and ideally, the same person should fulfill both roles.
Trust administration costs are not mandatory but often occur when a successor trustee feels overwhelmed and seeks professional help. Unlike wills that require probate, trust administration is more flexible, allowing trustees to decide if they need assistance. Many choose to hire an attorney for guidance through the process, using trust assets to cover these costs, which are typically far less than probate expenses.
The trustee should first review the trust to understand their responsibilities. California law requires trust administration to be transparent, meaning beneficiaries must be informed about the trust and receive a copy. Trustees must actively manage the trust and communicate with beneficiaries, possibly seeking professional guidance to fulfill their duties effectively.
While a trust from 2005 remains valid, changes in law or personal circumstances might necessitate updates. The most significant legal change since then is the estate tax exemption, now at $15 million. If unsure, consulting the lawyer who drafted the trust is advisable to determine if amendments are necessary to align with current laws.
If the initial trustee declines or resigns, the alternate trustee can assume the role by documenting the resignation and their acceptance of the position. This documentation allows the alternate trustee to act on behalf of the trust officially.
If a successor trustee cannot be located, the trust typically includes provisions allowing beneficiaries or alternate trustees to step in, possibly requiring a court petition. It’s crucial that trustees are aware of their role to prevent such issues, and plans should include mechanisms for transferring trustee duties if necessary.
A trust does not automatically become invalid during a divorce, but asset transfers are frozen. Couples typically need to revoke a joint trust to prevent a soon-to-be ex-spouse from inheriting assets or making medical decisions. If the other party is uncooperative, one can unilaterally revoke their trust and establish a new plan.
A trust remains active until all its assets have been distributed, which can extend beyond the grantor’s death for various reasons, such as managing funds for minor children. The trust effectively ends when the last asset is distributed, and no formal court filing is required to close it.
