Consequences of a Trustee Committing Fraud

Being the beneficiary of a trust, you are not always kept abreast of all the day-to-day responsibilities of the trustee. You do just that — trust the trustee. The trustee is given the responsibility to handle the assets in the trust, usually without much supervision. What happens if the trustee commits improprieties or even fraud when handling the trust?

When a trust is formed, the intent of the grantor, or creator, is that the contents of the trust be taken care of and appropriated per their request. The intents of the grantor should be directly reflected by the terms of the trust. The priority of the trustee is to adhere to the terms of the trust for the benefit of the beneficiaries. The trustee’s interests are secondary to the beneficiaries interests.

The trustee is a guardian of the contents of  the trust. The contents of the trust will be dispersed to the beneficiaries upon the death or deaths of the holders of the trust.

Duties of the Trustee

  • The assets of the trust must not be commingled with the trustees own assets.
  • Keep accurate records showing payments and income activity within the trust.
  • Costs to administer the trust should be justifiable
  • Do not use Federal Tax returns to account for trust payments and income as the tax filing requirements differ from the recordkeeping requirements for the trust.
  • If legitimate records are not kept by the trustee, chances are the courts will decide against the trustee.

How a Trustee Can Fail

A trustee may be unable to manage the trust effectively for a number of reasons, including not performing the duties required to maintain the trust. They may not property account for distributions or assets. It may not be intentional, just ineffective and inefficient.

On the other hand, a trustee may also behave with their own best interests at heart. This can sometimes happen if the trustee is also a beneficiary.

In another situation, a trustee may withdraw funds from the trust for themselves. The trustee possibly is having financial difficulties and takes money from the trust with the intention of paying the fund back, but never does.

The absolute worst situation would be for the trustee to intentionally take money from the trust not intending to ever return it.

What Happens if you Suspect Fraud?

If you are a beneficiary and you suspect the trustee is committing fraud or mishandling the funds of the trust, first ask for the accounting records of the trust. The trustee is obligated to keep accurate records. If the trustee cannot provide this to you, or does not give a legal reason why they cannot do so, it is time to look to the courts for help.

Is there a statute of limitations If the fraud has been happening for years and is just now being discovered? Not necessarily, especially if the fraud was intentionally committed. In addition if there was not fraud but it can be shown that the trustee used the money for their own benefit, the court could mandate that the trustee return the money.

Legal Terms Used in Creating a Will

Having a will prepared is one of the best ‘adulting’ things you can do for your family. But you are not sure where to begin and haven’t a clue what all the legal jargon means. That should not deter you from the task. Selecting a qualified attorney who can explain all the details will allow you to make intelligent decisions on behalf of yourself and your family.

You can get a jump on the meeting with you attorney by browsing through the basic definitions of terms that will be used in the preparation of your will.

Beneficiary

A beneficiary is someone specified in any legal document such as a will, trust, insurance policy, bank accounts that will benefit (inherit) property or money upon the death of the owner of the document

Bequeath

Means ‘to give’. To bequeath someone is to leave property to something when someone dies.

Bequest

Giving an item as a gift (not real estate) at the time of death.

Bond

A type of policy that insures the inheritors in case there are issues with the admins or executors of the estate.

Custodian

If one of the inheritors are a minor, a custodian is named to handle the property, in accordance with the Uniform Transfers to Minors Act.

Devise

Real estate given at death. A Devisee is the person who inherits the real estate property by virtue of a will.

Executor

The individual selected to handle the affairs of the deceased person. This person is appointed after the will’s creator dies by the probate court.

Estate Tax/Gift Tax

The federal government and some states impose taxes on very large estates either while the individual is alive or after their death.

Grantor

The creator of a trust.

Heir

If there is not a will in place, this person inherits the property under laws specified in their particular state..

Inheritance Tax

There are only a few states where a tax is levied on individuals who inherit property. Even then, in most states, close family members do not have to pay this tax. The federal government does not charge an inheritance tax.

Real Property

Houses, land and anything attached permanently to the land

Revocable Trust

The owner or maker of this type of trust can make changes at any time during the individual’s lifetime.

Tangible Property

Things that can be physically touched – as opposed to ‘intangible’ items such as stock certificates.

Testator

The originator and singer of the will.

Trustee

An individual selected to have authority (legally) to oversee the trust’s assets.

Do not be intimidated by the legalese use by many attorneys. If you do not completely understand a term or concept, ask for further explanations. It is important that you comprehend all the legal implications of creating a will and what happens when it has be be executed. Your wishes need to be clearly conveyed so that when the time comes, your family is taken care of exactly as you have instructed. Having a properly prepared will can offer piece of mind and answer a lot of the ‘what ifs’ we often contemplate.

The Difference Between a Will & Trust

The majority of people have heard the terms “will” and “trust” being used in conversation. However, sometimes people do not realize there are actual differences between these two terms. Both are useful when creating a complete estate plan and can serve many purposes. In the article here, we have explained how these are not the same, and tips for writing your very own trust. At attorney can help you get started establishing a trust if you are unsure where to begin.

The Main Difference

The single factor that differentiates a trust from a will, is that a will comes into effect after you pass on, while a trust becomes effective as soon as it is created. Those who write a will are typically including who shall receive their property after passing, along with naming a representative to handle their wishes. On the other hand, when a trust is established it can be used to transfer property before the person passes away, at the time of passing or afterwards.

Which Avoids Probate

During probate, the court evaluates the validity of a will, and permits the executor to handle the estate based on the decedent’s preferences. A trust does not have to be overseen by the courts, which can save substantial amount of time and money. Probate can take a few months up to a year, or even longer. It is possible for a will to be tied up in court if there was an error in the probate paperwork, or a family member files a dispute. A trust also remains private, while a will can become part of public record due to being part of a court process.

Tips for Creating a Trust

Before writing a trust, there are a few tasks you should complete. As this is likely one of the most important pieces of documentation you will create in your lifetime, do ensure it reflects your true wishes. A brief list of tasks to perform when getting starting establish a trust can include:

  1. Making a list of all your assets, belongings & treasures
  2. Gathering paperwork regarding your assets (including titles, deeds, life insurance policies, stock certificates, etc.)
  3. Choosing beneficiaries to receive a part of your legacy
  4. Appointing a successor trustee (a person who will handle finances & distribute assets after you pass away)
  5. Appointing a guardian for minor children

How an Attorney Can Help

A wills lawyer St. Peters, Missouri residents trust can offer advice and guidance as you write your trust. Having the support of a legal professional can help you feel more at ease about this very important process. It may seem easy enough to create a document listing your desires, but many people find it is more challenging than they originally thought.

 

Thank you to our friends and contributors from Legacy Law Center for their insight into estate planning, wills, and trusts.

Two Approaches for Estate and Trust Litigation

There are a couple approaches that can be used in attempt to resolve estate or trust disputes. At Yee Law Group, PC, we have found that these approaches can be very helpful, especially during such a sensitive time filled with emotions and grief. After a loved one passes away, they leave behind a legacy. This legacy that can be carried on for generations to come may include property, belongings, special treasures and even monetary amounts. Disputes over how a trust is handled or to be distributed is very common. Even if the loved one who passed on was very detailed and thorough in their trust, an unhappy beneficiary or relative may request the trust to be contested anyways. When a trust is contested, this means the person believes the estate is somehow not accurate or lacks validity.

In this article, we cover a couple approaches to litigation that can help resolve an estate or trust related disagreement.

#1 The Traditional Approach

Generally, finding solutions over disputes regarding an estate or trust often means going through litigation. When a disagreement arises, it commonly is due to the party not trusting the appointed executor, not fully comprehending the estate administration process, are unsure about their rights or duties, or do not have faith that their interests are protected. During the litigation process, an attorney is often hard at work to help their client gather supportive evidence, attend hearings and provide witness testimonies. Unfortunately, it is not uncommon for each side of the litigation to grow in hostility, resentments and perhaps even an outright destruction of an amicable relationship. An attorney at Yee Law Group, PC can handle the litigation proceedings with tact, diligence and compassion.

#2 Mediation

During mediation, there is an unbiased and neutral third party (mediator), who meets with the opposing parties regarding the disagreement. The intention is for the mediator to help these parties reach a resolution that they are both happy with. An attorney at Yee Law Group, PC can even be of help when trying to find a middle ground between each side. It can take up to one, or multiple meetings before a solution is found. The mediator is trained to help each side find a common ground and work through their opposition. Attorneys are not required to assist in the mediation process, but it can help to have a legal professional on your side working for you behind the scenes. Sometimes, a judge actually requires the two parties to attend mediation before litigation may begin. If for any reason a settlement is not reached during mediation, then litigation is to continue. If one or both parties are unwilling to cooperate, then mediation will likely fail fairly quickly.

At Yee Law Group, PC, we believe in protecting the rights of people and helping them find peace during an estate dispute. Not only is this time particularly fragile due to healing from the loved one’s passing, but now there must be the added stress of a legal battle. Let us help you get through this turbulent time.

Revising a Will

It is very important to make sure your will is kept updated. Life changes frequently, which can affect who you choose to have as your heirs and beneficiaries. If you are not updating your will as life events change, it may not accurately reflect your wishes in your new circumstances. The following situations are events in which it may be wise to discuss updating your will with a will lawyer Roseville, CA trusts:

Marriage: After you get married, you and your new spouse should create new wills. It is common in many states for there to be laws which give a percentage of your estate to your surviving spouse at your death, if you have not created a will. However, if you want your spouse to receive more or less than the state will provide them, you will need to create a will to state that. Additionally, putting your new spouse on your will could change the percentage of an asset or of your whole estate that someone else was originally written to receive. You should adjust your will to reflect the percentages you wish for each beneficiary to receive.

Divorce: While some states automatically revoke any property or assets left to your spouse once you become divorced, others do not. To ensure your property and assets are left to the correct people, you need to update your will upon divorce. You will need to update your will to state if you want to leave anything to your former spouse or what the distribution of your property will now be.

Having a Baby: In many states, once you have a child, they will be given part of your property when you die. However, if you do not want your property to be divided according to state laws, you will need to update your will. If you have a new baby, you will need to change your will to include what gifts your new baby will receive. Most importantly, if you have a new baby, you will need to state in your will who will become your child’s guardian if anything should happen to you.

New Stepchildren: Unless you legally adopt step children, they are not automatically entitled to receive any of your property when you die. If you would like your stepchildren to inherit your assets, you will need to revise your will to include them.

Changing Beneficiaries: Sometimes things happen in life that change the way you feel about how you’d like your property to be divided after you die. It is important to update your will to reflect your new wishes.

Moving out of State: States have different laws pertaining to what each spouse owns. States can be either a common law property state or a community property state, so it is important to know what your current state is versus the state you will be moving to. If your new state is different than what your current state is, you will need to adjust your will to reflect your new property ownership status.

How to Change a Will

The easiest way to change your will is to create a new will and state that you are revoking any previous wills. If you are wanting to add something to your will or make a simple change, all you will need to do is add a codicil, also known as an amendment, to your will.

 


Thank you to our friend and contributors at Yee Law Group, PC for their insight into wills and estate planning.

Is Probate Really the Nightmare It’s Made Out to Be?

The death of a loved one is often a heavy emotional experience to contend with. The last thing anyone wants to deal with is complications in dispersing assets to heirs.

The mention of probate often brings forth negative connotations. Many people create their estate plans out of fear that their family will be required to endure the probate process. Is it really as bad as it seems? Are there actual benefits to probate? Although probate can, at times, be a real pain, it is also there for a reason. Regardless of probate, it is important to note that an estate plan is the most effective way to ensure that your heirs obtain their inheritance in the way you intended. If you have a loved one who has recently passed, an attorney can help you understand each step to the probate process.

What is Probate?

When a person passes away, their property is disbursed to beneficiaries identified in the will. When there is a will in place, it is used as a roadmap to the final wishes of the deceased. Probate is the process of proving a will in court. In some cases this must occur prior to assets being officially handed over to beneficiaries. Probate validates the will by going over assets, properties and debts prior to disbursement. The executor of the estate or an attorney will usually file with the probate court and notices are posted. Common items in a will that must go through probate include:

  • Real Estate Property
  • Boats
  • Vehicles
  • Artwork
  • Insurance Policies
  • 401k accounts

Common Misconceptions

Probate often gets a bad rap because it can slow down the process. Many people are misinformed about the probate process. It’s important to seek the guidance of an estate-planning attorney for further clarity surrounding probate, as there are a number of misconceptions people have:

  • A will can be tied up in probate for years. Probate times frames can vary depending upon where you live. It’s important to note that much of the time, probate should take no longer than a year.
  • Many people believe that if a will goes through probate, the state or federal government will take everything, especially if there is no will in place. Although the process can vary by state, enduring probate is required when a person passes away without a will. Without a will, the state will choose who stands to inherit your assets. However in most cases, assets are left to your spouse and children.
  • Fear that once your assets go through probate there will be nothing left for beneficiaries. In most cases, the cost of probate is only a very small percentage of the estate.

With an attorney by your side with experience in this area of practice, your loved ones may be able to breeze through probate, especially if you left behind an estate plan for them to reference.

Benefits to Probate

Although the thought of probate can fill many people with dread, there are a number of reasons why it is a necessary part of the process. Probate is part of a system of checks and balances to ensure that heirs obtain the inheritance that they are entitled to. Benefits to probate include:

  • Shortens the amount of time creditors have to attempt to collect from an estate.
  • Probate will review the guardianship plan for minor children. The court will almost always go with the guardian of your choosing unless for some reason they are found to be unsuitable.
  • If a person dies without a will in place, probate can protect their assets and ensure they are disbursed to their rightful heirs.

A probate lawyer Folsom, CA trusts can be of particular use when tackling the probate process. They can educate you surrounding probate and help you develop an estate plan that is sustainable.

 


Thank you to our friend and contributors at Yee Law Group, PC for their insight into probate and estate planning.

Choose the Right Trustee to Prevent Trust Litigation

When creating a trust, it is important to consider who shall be the most suitable trustee that can carry on last wishes with respect and accuracy. Choosing a reliable trustee can help lessen the chances of a trust going through litigation after a person passes on. The period of time following a cherished family member’s passing can be a very sensitive and tender time for loved ones. The last thing surviving family will want to happen is to have the added stress of litigation to deal with.

A New Jersey trust lawyer understands the ins and out of the legal system and can offer sound advice when it comes to finalizing and updating your trust. Clients also often turn to us for representation if a loved one’s trust does end up in litigation. Here in this article, we have listed some tips on how to pick the right person to be the appointed trustee for your legacy.

#1 – Someone With Experience & Common Sense

The person you appoint does not have to be someone who is an expert on all things trusts, wills and estates. However, you do need someone who will know when it is time to ask for help in the event they stumble into a question or concern after you are gone. Someone who has a basic sense of business and whom you trust to make decisions that will be in your best interest, is the way to go. A person that lacks common sense may make easy mistakes without even knowing it, or not be able to realize when they should seek assistance from a professional.

#2 Consider Age & Health

Do think about this person’s age, and how old they will be around the time you estimate you will pass on. The trustee must outlive you. Choosing someone younger that will likely have the mental capacity to handle things when the time comes, is the best option. It is smart to choose a backup trustee if for some reason your first choice is unable to fulfill their duties. You can write down a specific name for the alternative trustee, or approve your initial trustee to assign the new executor of the trust.

#3 After Choosing a Trustee, Update Your Trust

Once you have completed your trust, the work is unfortunately not over. Every so often you will want to update your trust based on any major changes in your life, including divorce, change in friendships, new family members, financial status, etc. If you do not update your trust, it may not reflect what your ultimate wishes would have been at the time right before your passing. Editing it from time to time when needed, can help prevent part of your legacy going into the hands of those you no longer associate with.

 


Thank you to our friends and contributors at Klenk Law for their insight into estate planning and trusts.

Long Term Care Insurance and Your Estate Plan

Long term care insurance helps pay for the cost of care at assisted living and skilled nursing facilities.  The cost of this care has skyrocketed in recent years. You may or may not know how long terms care insurance works, but conceptually it’s the same as any insurance.  You pay a premium to cover you in the event of some occurrence, in this case needing long term care.

What many of my clients are unaware of is how their estate plan works with long term care insurance.  This article explains the connection between them.

Two cornerstones of any estate plan should be a healthcare power of attorney and financial power of attorney.  A power of attorney lawyer St. Peters, Missouri can assist you in putting these documents together, as they are vital.  That’s because powers of attorney allow people to make important decisions for you if you cannot make them yourself.  

With long term care, your healthcare power of attorney typically can place you into a skilled nursing facility if you do not have capacity to do so yourself.  They also can speak with the carrier to let them know you need to use the insurance benefits for care.

Finally, your financial power of attorney can utilize your income and assets to pay for this care, or even to plan for this occurrence years before with benefits planning.

An example of this would be Medicaid planning and may involve gifting money or creating an irrevocable trust to remove some or most of your assets from your name so that you may more easily qualify for Medicaid benefits (to pay for the skilled nursing care) down the road.

Wills and trusts often have nothing to do with long term care insurance.  The exception would be where you have created a revocable living trust, you are the trustee and you have become incapacitated and go no longer serve as trustee.  In that case, your successor trustee(s) can access trust assets to help pay for long term care.

As you can see above, the common theme with long term care and estate planning is that you have named fiduciaries to follow through with either utilizing your existing long term care insurance when you need it or helping you plan for long term care in the absence of (or occasionally the exhaustion of long term care coverage).  In either event, it’s clearly another important reason that having an estate plan is vital to you and your family.

 

Thanks to our friends and contributors from Legacy Law Center for their insight into long term care insurance and your estate plan.

 

Factors to Consider Prior to Disinheriting a Child

In the United States, you are not able to disinherit your spouse unless your spouse has agreed to it in a prenuptial agreement or a postnuptial agreement. However, in every state, except for Louisiana, you are able to disinherit your children under some circumstances.

Louisiana law states that you are not able to disinherit a child that is under 23 year old, or any children no matter how old that are permanently unable to take care of themselves or manage their finances at the time of the decedent’s death, due to a physical infirmity or mental incapacity.

Movies and television shows have glorified the notion of disinheritance. A child under threat of, or having been cut off from their inheritance is a common plot used in entertainment. However, in real life, the act of disinheriting a loved one should be taken extremely seriously and thought about carefully.

Disinheritance is a financial and emotional decision. It could start when a grandparent or parent decides to end financial support to an adult child or grandchild. It could also be caused by a child or grandchild receiving a lifetime of financial support which caused a disadvantage to others.

There are a few things to consider when deciding to disinherit a child or relative:

 

  • A trust can be used to control the inheritance.
    If the reason you are considering disinheriting your child or loved one is because you believe they will spend all of your money quickly or will decide not to work anymore, you can leave them an inheritance that comes with requirements. This can be done by creating a lifetime trust for the benefit of the heir and then provide the trustee instructions on when and how the heir can receive distributions. These requirements could include not using drugs and alcohol, graduating from college, or working a full-time job. However, these requirements cannot include requirements that are against public policy, for instance, practicing a religion or divorcing their spouse.
  • If you choose to disinherit your child or relative, you can give your child, spouse, or another relative a power of appointment.
    By giving someone the power of appointment, you are allowing them to “re-inherit” the person you chose to disinherit. You would need to give the beneficiary of the lifetime trust a power of appointment that can be used for the process of re-inheriting the person you had chosen to disinherit.
  • Make it clear in your will or trust that you will be disinheriting someone.
    It could make sense to some to completely leave out someone from your will if you choose to disinherit them, however, you should specifically state in your will that you are disinheriting them. By having it written out clearly, it will discourage a will contest.
  • Make sure to be aware of your beneficiary designations and to update them if it is needed.
    Since disinheriting someone is often an emotional decision, the beneficiary designation for IRAs and 401(k)s are often overlooked. If you end up deciding to disinherit your child or relative, it is important to ensure your assets are properly titled and your beneficiary designations are updated.

 

 

Estate Planning for Newly Blended Families

Now that you’ve remarried, and your spouse has children, it’s probably occurred to you that it’s time to create or update your estate plan. This is an important thing to do, as an estate planning lawyer might tell you. By making your final wishes clear well in advance of your passing, you can help ease the confusion and pain of those you leave behind. We encourage you to speak with an estate planning lawyer to learn the many ways we can be of assistance.

 

Inheritance Laws and Step-Children

 

It may surprise you to learn that unless you legally adopt your step-children, they do not automatically inherit anything from you if you pass away without leaving behind a will or trust. However, your biological and adopted children do have certain rights in the absence of estate planning arrangements. If this concerns you because you want to share your legacy with your step-children, it’s a good reason to meet with an estate planning lawyer. We can help you take care of those you love.

 

Leaving Assets to Your Step-Children

 

You can leave as little or as much of your assets to your step-children as you wish, as long as you specify your wishes in a will or trust. This is something that an estate planning lawyer, like an estate attorney Cherry Hill, NJ residents look to, will be very happy to assist you with and can make the process very easy for you. Your estate planning lawyer may suggest that when designating which child should receive which items or cash, that you name each person in the will be their name. By avoiding broad terms like “my children” or “my heirs” it eliminates the possibility of confusion in wondering if you meant biological children, or biological children as well as step-children.

 

Establishing a Trust That Includes Your Step-Children

 

When you meet with an estate planning lawyer, you’ll have the opportunity to learn about tools in addition to wills such as a trust. For some people, it is ideal to create a trust in addition to a will. For others, a simple will answers their needs while still others only create a trust. Each person’s needs are different, as the details of their particular circumstances are unique. Your estate planning lawyer will provide you guidance that reflects your best interests.

 

There are several kinds of trusts that you can create, and each has its advantages and disadvantages. For some, the disadvantages are negligible, but it’s important to understand your options. Many lawyers offer a free consultation to those wishing to create a lasting legacy for their beneficiaries. Call us to request an appointment with a skilled estate planning lawyer who can explain your options to you so that you can make an informed decision. With a trust established, your step-children can benefit in any of the following ways that you choose:

 

  •         A trust will enable your step-children to inherit your specified assets without having to undergo the probate process which is an additional cost and requires time to complete.
  •         If you appoint your step-child as the beneficiary of one or more of your financial accounts, such as a life insurance policy, they can inherit those assets and avoid probate.
  •         A special needs trust for your step-child will allow them to continue to receive any government disability benefits they are already receiving.

 

Get a Free Consultation

 

Call a law office today to request a free consultation with an estate planning lawyer.

 

Thanks to our friends and contributors from Klenk Law for their insight into estate planning.