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Trusts

Thursday, October 12, 2017

Are you at risk of getting sued, if you agree to act as a Fiduciary (Executors, Trustees and Agents under Power of Attorney)?


Trust and estate litigation is on the rise. The conflict can arise due to beneficiaries who feel they were entitled to more money or Trustees, who are supposed to act as fiduciaries with care, loyalty and impartiality, but often don’t.

Unfortunately, you cannot plan for every contingency. You hope that the Trustee that you picked will act as a proper fiduciary, will not steal the beneficiary’s money and will act in accordance with the Trust’s provisions. You also hope that beneficiaries will honor the wishes of the Grantor, even when the Trust provides for unequal distributions.


Read more . . .


Tuesday, September 26, 2017

You have a Trust? When DO beneficiaries find out about money left to them ?


Clients often establish Trusts for the purpose of deferring distributions to beneficiaries. These Trusts are usually established to protect assets from risks such as mismanagement, imprudent spending, creditors and divorce.

But when do Trust beneficiaries have to receive information about the Trust and the assets? This question is different from the one about when the beneficiaries should start receiving trust distributions. A grandfather may establish a Trust with $1 million for the benefit of his two young grandchildren, name his accountant as the Trustee, and provide that grandchildren will receive the money outright once they turn 30. Do the grandchildren have a right to know about this money before they turn 30? 

A parent may not want the child to find out about the money for many different reasons.


Read more . . .


Tuesday, April 18, 2017

Is an Irrevocable Trust really that Irrevocable?

The word “Irrevocable” usually implies no ability to change. Most people believe that the Trustee is required to adhere to the wishes of the Trust’s creator, even though the times and circumstances have changed. Nonetheless, that is no longer true in the case of New York State.

There are two circumstances where an Irrevocable Trust may be changed or revoked.

The first circumstance exists when the Grantor of the Trust is still alive, wants to make a change and ALL the beneficiaries of the Trust agree with the proposed change.


Read more . . .


Friday, August 26, 2016

Why would you want a Nevada Trust?


New York has a very strong policy against self-settled trusts. A self-settled trust is one where the Grantor transfers assets to an irrevocable trust but remains one of the Trust’s beneficiaries. While these transfers are legal, New York believes that they are “void as against creditors”. As a result, if the Grantor remains a beneficiary of this type of Trust in New York, his assets are not protected against creditors.

Nevada, however, together with approximately 12 other states, permits these types of trusts and protects the assets against creditors.
Read more . . .


Thursday, August 18, 2016

Joint Revocable Trusts vs. Parallel Documents (cost saving vs. peace of mind)


Joint Revocable Trust: Lots of spouses opt to create a joint revocable trust. It makes a lot of sense to do so for many people: First, a lot of assets are owned jointly, so it can be an extra hassle to separate them. Second, the kids are common, so the bequest of assets after death will be common. Third, there is little chance of divorce, so there is no need to separate the assets. Last, there estate is below the federal tax threshold, so the actual ownership may not matter.


Read more . . .


Wednesday, August 10, 2016

Rich and Famous Planning: Sumner Redstone – an estate plan that is embarrassment for the man, the family and the company?


Mr. Redstone’s fortune is estimated at $5 billion. He could afford the best legal plan in the world. Yet, despite the assets and despite the multitude of involved lawyers, his estate planning and his last years are turning out to be a mess.

Mr.


Read more . . .


Thursday, July 7, 2016

ABLE accounts


The newly enacted ABLE accounts permit people with disabilities to save money without jeopardizing their government benefits. Account holders can have up to $100,000 in these accounts without jeopardizing their SSI (Supplemental Security Income) benefits. Medicaid benefits do not get jeopardized regardless of the amount of money held in these accounts.

These accounts enable disabled individuals to hold money in their name without a need for a Supplemental Needs Trust. This can be very beneficial for people with limited assets.


Read more . . .


Wednesday, June 29, 2016

You may want to think twice before leaving an outright distribution and gift


There are many things that can go wrong with an outright distribution:

  1. Judgment creditor can seize a beneficiary’s inheritance

  2. Bankruptcy court can seize a beneficiary’s inheritance

  3. An incapacitated beneficiary can squander an inheritance before anyone can step in to help him.

  4. A divorce court can award some of the beneficiary’s inheritance to an ex-spouse

  5. If the beneficiary doesn’t plan properly himself, his spouse’s family can receive your money

A lifetime discretionary trust, set up either during your life or through a Will, can mitigate against some of these risks. Some of the benefits of a lifetime discretionary trust include:

  1. Protection from beneficiary’s liabilities

  2. Protection from beneficiary’s divorce

  3. Protection during beneficiary’s incapacity

  4. Protection from beneficiary’s profligacy 

Talk to an estate planning attorney to see if setting up a lifetime discretionary trust may be beneficial for your family.

Disclaimer: This article only offers general information.  Each situation is unique.
Read more . . .


Thursday, August 6, 2015

How much do Corporate Trustees charge?

Family Trustees: Very often, the Trustee of a Trust is a family member. There are many reasons to create a Trust, but most often all transactions are kept within a family. In those circumstances, the family member Trustee will often get paid nothing, or a nominal amount. The work is done out of love and affection.

Corporate Trustees: In other circumstances, however, there are no family members to act as Trustees. Alternatively, the entire point of the Trust may be to take the asset management and distribution out of the family’s discretion. In those circumstances, a corporate trustee may be the only solution.  

Minimum Balance: This solution, however, is not appropriate for every trust. Certain banks and some financial management companies provide Trustee services. Most banks, however, have a minimum balance below which they are not willing to manage the Trust. Chase, reportedly, has a $2MM dollar minimum trust balance. Other institutions may get involve with lower amounts (such as $500,000 trusts).

Fees: Annual trust management fees can range between 1-2% of the trust balance assets (this fee will cover administration, record keeping, and disbursements). In addition, the institution may charge a separate fee for the asset management services.

 

The information in this blog was adapted from

http://online.barrons.com/news/articles/SB51367578116875004693704580486391945783842

 

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


Sunday, June 28, 2015

International Estate Planning

I frequently see clients with global ties. New York community is home to many multinational technology, finance, consulting, and other companies.  Frequently, skilled employees of these businesses have family ties overseas, or have worked for their companies in other countries. Workers often bring their families with them, to live and to study and to work in New York. Families like this, which are increasingly common in today’s world, require careful estate planning services, often from an international team of experts.

Hypothetical Family:

Imagine our hypothetical family owns a half-million dollar apartment in Moscow, a half-million dollar house in Queens and a half-million dollars worth of stocks in US brokerage accounts.  The family has lived in the US for two years.  All family members are dual Russian-US citizens.  Every summer the family goes back to Moscow for a month for the children to visit their grandparents, but spends the rest of the year in New York.  The family may one day return to the Russia or live in a third country, depending on where the company sends them next.

The Local Component

Because the family is living in New York, it is extremely important that the parents work with an estate planning attorney licensed to practice law in New York.  If either or both parents became disabled or die, a New York power of attorney (in the event of disability) or a well-drafted trust (in the event of disability or death) would help ensure the family is properly cared for.   Many families with this level of assets also plan ahead to avoid the difficulties of probate, typically through the use of a living trust.  Perhaps most importantly, the family should name guardians for their children in the event of their deaths, as a New York judge would ultimately decide who should serve as guardians.  Without instructions from parents, a judge may pick someone the parents would not have chosen.

So far, the family’s discussion with a New York attorney is similar to the discussion any typical New York family might have with their attorney.  However, the family’s ties to Russia add a layer of complexity.

Russian Estate Plans

Only a lawyer licensed to practice law in Russia is qualified to give advice about an estate plan in that country.  The ideal time for a family to create an estate plan for its overseas property is at the same time as when dealing with US property.

If the US and Russian lawyer are working on their respective pieces of the estate plan at the same time, the family would be wise to ask the two lawyers to coordinate.  Some potential reasons:

-Probate is aggravating, expensive, and time consuming enough in one country.  It would be unfortunate if the family ultimately had to go through the process in two countries, due to a lack of planning.  A conservative estimate would be $6,000 in legal fees per probate estate, per country. 

-Local counsel in Russia can properly advise on the formalities of Russian will execution.

 -If the family has overseas relatives, there is a chance it will inherit further overseas property    after drafting its estate plan.  This could exacerbate foreign estate tax and probate problems.     Planning ahead with Russian counsel would be wise.

EXECUTORSHIP/TRUSTEESHIP

The successor trustee of a living trust ensures that its terms are carried out after the death or disability of the settlor (the person who created the trust).  Typically this means distributing funds, maintaining accounts, ensuring children are financially cared for, etc.  Similarly, the executor of a will closes out the estate in probate, if probate is necessary.

In New York, an executor may be anyone who has attained the age of 18 years, is a resident of the United States, is not of unsound mind, is not an adjudged disabled person and has not been convicted of a felony. So for the family in question, it is important the executor appointed in any Will be a US resident, not a relative in Russia.

For different reasons, all successor trustees of a living trust should ideally be US residents.  Under IRS regulations, allowing a non-US resident to serve as trustee will cause the trust to be classified as a “foreign trust” and incur much more burdensome tax reporting obligations. 

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


Friday, June 19, 2015

Improving the Life of a Disabled Loved One: First Party vs. Third Party Supplemental Needs Trust

If you have a loved one with a disability, their life can be significantly improved with additional funds (think of non-generic medicine, vacation, additional home care, specially outfitted car, etc).   Supplemental Needs Trusts are set up for people with disabilities. The purpose of this type of a Trust is to supplement, not to supplant the government benefits to which the beneficiary may be entitled. If drafted properly, the assets and income of these trusts are treated as “exempt” by the agencies providing means tested benefits.  

There are two main types of Supplemental Needs Trusts.

First Party Supplemental Needs Trust holds the property of the person with disability (usually the funds come from an inheritance or a personal injury settlement). There are very specific criteria about the creation and administration of this type of a Trust. The assets must come from a beneficiary who is under the age of 65. The beneficiary must be disabled, as defined in the Social Security Law. The Trust must be established by a parent, grandparent, legal guardian or court order. Finally, the Trust must contain a ‘payback’ provision: upon the beneficiary’s death, all remaining assets must be used to repay the state Medicaid program for any assistance provided.

 

Third Party Supplemental Needs Trust holds the property of a ‘third party’ – a parent, a grandparent, a relative or a friend of the disabled beneficiary. There are fewer restrictions about the creation of this Trust. The beneficiary must be disabled. However, there is no ‘payback’ requirement: upon the beneficiary’s death the remaining assets may be distributed to another person. In addition, just like with the First Party Supplemental Needs Trust, the drafting language must remain very precise. Many Supplemental Needs Trusts have been disqualified, and the assets were considered available to the beneficiary, because of the imprecise language used by the attorneys. See my previous post about a trust that was not considered a proper Special Needs Trust by a court. http://sverdlovlaw.com/lawyer/2015/04/07/Children/The-importance-of-Using-the-Proper-Language-When-Setting-up-a-Special-Needs-Trust_bl18479.htm

 

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.

 


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