Passing on wealth has been a tricky business since the days of ancient Egypt and Greece. Without realizing the inner workings of wealth, most people have little knowledge of this vast and fascinating subject. Before determining the fate of the heirs, here are some checkpoints to ensure that property, cash (and even gold!) are handled correctly and get into the hands of the right people.
Easy to obtain and create, the living trust offers a way to pass on wealth without the hassle of going through probate court. With a couple of witnesses, the simplest forms, available at stationery stores or on the Internet, solve the two most common problems:
1. To whom the assets pass.
2. Identification of these goods.
However, because most people have not been educated in the art of passing on wealth, they believe that your Living Trust takes effect upon your death. This is not necessarily true. The Settlors, those who establish the Trust, should take the time to identify and transfer to the Trust what they plan to pass on to their heirs. This avoids confusion, and even agony. The loved one can be well provided for, only IF the assets have been managed properly.
Neglect
If a person has a living trust, signs it, and then puts it on the shelf without doing anything else, they may have wasted time and money. Even a living trust needs care and proper administration.
If a person has a Living Trust, has the following been handled?
1. If a Beneficiary is not satisfied and wants to sue the Trustee for more assets, does the Living Trust have a “No Contest Clause”? This means that if any Beneficiary sues, causing a dissipation of the Trust’s resources, the Beneficiary automatically loses his inheritance.
2. What happens if the original Settlors, who established the Trust and later became the initial Trustees, are unable to perform their functions? How should the trust funds be managed and exactly when does the designated successor trustee take office?
3. Is there a provision for amendments? That is, can the Settlor(s) change the terms of the Trust during the term?
A. If there is an amendment to the original Living Trust, what is the procedure?
b. Do the Beneficiaries have to be informed about the changes?
vs. Should the successor trustee be informed of the changes?
4. Have funds been allocated as trust funds?
A. Has a separate checking account been placed in the name of the Trust? If not, the Trust was never funded and there is no Trust.
b. Has the identified property, such as the residential home, been transferred to the county to be in the trust? If not, then the property is not part of the Living Trust.
5. Is there sufficient documentation in the Living Trust for the Successor Trustee to open a checking account in the name of the Trust?
Accounting
As the initial Trustee of the Living Trust, all assets remain under the control of the Settlor, who may spend the funds without discrimination; these initial trustees, however, are still required to maintain records for the living trust. Whoever the Successor Trustee is becomes responsible for producing those records after the Settlors pass, as well as keeping accounting records on how the Trust funds are handled. The Beneficiaries have the right to know what happened to the funds that the Settlors said belong to them. (Evangelho v. Presoto (1998) 67 Cal.App. 4th 615, 79 Cal.Rptr.2d 146.)
The need to account to the Beneficiaries of trust funds keeps the Successor Trustee honest. Any Trustee who does not share accounting and have full communication with Beneficiaries is suspicious and only adds to family stress.
give away the goods
Additionally, as the initial Trustee of the Living Trust, assets cannot be arbitrarily given away if they have been designated as part of the Trust. This means that the Settlors cannot give the residential property to the nurse who is taking care of them while everyone else is waiting for the funeral. The Beneficiaries can sue and recover the property. Not only that, but caregivers cannot, by law, accept gifts.
Assets
ID
The disputes that can arise over assets are sometimes more terrible than the worst nightmare. It is necessary to catalog what belongs to the Trust to ensure that it remains in the Trust and is managed properly. If an item is not in the Trust, that is, it is not listed and described as belonging to the Trust, then it is subject to a free-for-all, as the Beneficiaries can argue over it. The Successor Trustee named in the Trust documents is not responsible for the item. For example, if a washer and dryer are not named as part of the Trust’s original assets, known as a “corpus,” and two Beneficiaries want them, they must decide without involving the Trustee.
Assets held in trust
If expensive jewelry is listed and each item is photographed or described as belonging to the Trust, then the Trustee has the option to collect it at its current value and pay the cash to the Beneficiaries or deliver the jewelry to the Beneficiary who will hold it. as indicated in the Trust documents.
The same applies to the stock account, or any other investment. Once in the Trust, the Successor Trustee decides how it will be run. When you are not in the Trust, lengthy procedures to get you into the Trust can occur.
residential property
The biggest asset is usually residential property. If the Settlors, acting as Trustees, have not transferred the asset at the County Recorder’s Office to the name of the Living Trust, then it does not belong to the Trust and must be transferred by the Successor Trustee before it can be sold. This transfer process could be long and expensive or relatively simple.
Distribution
A living trust is designed to be divided among the beneficiaries after the death of the settlors. If they are in a nursing home and cannot function, their care expenses come out of the assets of the Living Trust and Contingent Beneficiaries, those who receive assets at the Settlor’s death, may receive nothing.
When all goes well, the assets have been transferred and correctly identified in the Living Trust, and the Settlors die close together without depleting the assets of the Trust. The Successor Trustee then delivers the assets either by collecting them, such as by selling the property and disbursing the proceeds, or by delivering the assets to the persons named in the Trust documents.
Unfortunately, most people are not educated on the forms of a trust, and in most cases nothing has been identified or transferred, resulting in a delay in distribution and a burden on the successor trustee, who It is usually a close relative.
Communication
unfinished business
When parents die, family matters are often emotionally charged with unresolved needs and competition for assets or dominance can occur. The state of affairs of a living trust can cause grievances. This goes from, “Mom said she should get the…” to “You can’t do that, I won’t get my…”. The lack of confidence in the Trust can become the main problem.
Consultant
Before the assets become the responsibility of the Successor Trustee, who generally knows nothing about the financial condition of the Trust, the Settlors should consult with professionals on how to handle the administrative needs of the Trust and meet with their Successor to proceed. about important details.
When a family is dysfunctional, it is best to address communication issues first. For the harassed, uninitiated, and overwhelmed trustee, consult with professionals before attempting to confuse trust documents and answer questions from family members. That time and money will be well spent, especially if complex financial issues need to be resolved. It is important for the Trustee to clarify accounting, legal and tax matters before communicating with family members about the details of the Trust.
wealth creation
Living trusts and all revocable trusts are not built to last. Long-term wealth creation methods and procedures do not apply when planning to pass assets on to unqualified heirs only. Unless one’s children are professionally oriented in financial matters, any wealth the Settlors have accumulated during their lifetime will likely be lost to the next generation. This is well planned by those who want to ensure that the family does not accumulate any power, as evidenced by the following:
“People fool themselves. They don’t have the buying power they used to. A lot of people alive today don’t know what the buying power of success was before we decided to use excessive income taxes to punish success.” and heritage”. and gift taxes to force each generation to start from scratch.” (Emphasis added.)
T. Coleman Andrews, IRS Commissioner, 1953 to 1955 (“Why Income Tax Is Bad, Interview With T. Coleman Andrews, Former Internal Revenue Commissioner,” US News and World Report, May 25, 1956)
Irrevocable Trusts
Where wealth can be accumulated, if properly managed, is when it is turned over to professional third parties to act as Trustees for untrained Beneficiaries, who lack financial experience and have no long-term goals.
However, only those who are educated enough in Trust protocols should have a Trust of this nature. One can get the information through a serious internet search using keywords on inheritance, irrevocable trusts and common law trusts. The latter requires more sophisticated knowledge and is often the subject of fraudulent trusts, those set up incorrectly by the uninitiated.
Knowing that the goal of all Trusts is to pass wealth to Beneficiaries, it is easy to judge well-established Trusts from those that are not. If someone claims that a person can be the Trustee of their own Irrevocable Trust, that person is either lying or dangerously ignorant. Additionally, all common law trusts are irrevocable and require an unrelated trustee.
Summary
Passing on wealth is an art form. Doing so casually causes the dissipation of wealth. The need to maintain personal control does not allow for an accumulation of wealth in the family, and each generation must start anew to build wealth.
The Settlor may assign the assets of the Living Trust to an Irrevocable Trust upon death by naming the Trustees in the Living Trust documents. It depends on what is needed and how the plans for the heirs are developed.