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Removing a Trustee?

Beneficiaries of a large trust are unable to move the trust to a different trust company because the agreement they signed with the current trustee requires all 94 beneficiaries to consent to the change of trustee.  The beneficiaries are displeased because the bank has had poor investment returns.  The beneficiaries have sued the bank.

Several lessons can be learned:

1.  Trust documents should allow for the removal of a trustee by a majority of the beneficiaries.
2.  If the trust allows for separate shares for each beneficiary, that beneficiary should be permitted to select his own corporate trustee.
3.  In Ohio, poor investment performance is not grounds for removing a trustee in a lawsuit which makes lessons 1 and 2 more important.

Children and Money

Jon and Eileen Gallo (yes, of those Gallos) offer advice on raising financially responsible children.   Seven characteristics shared by parents include:

  • Being optimistic about changing money behaviors
  • Valuing financial savvy and financial intelligence
  • Thinking about the meaning of money in their lives
  • Educating their children financially.
  • Recognizing that their money deeds have a strong impact on their kids.
  • Feeling that children should hear “no” and “enough” in terms of money education
  • Wanting children to work for a sense of satisfaction as opposed to money.
For more, check out their book, “Silver Spoon Kids”  which is indispensable to upper income families.

Executors Are Personally Liable for Income Taxes of Decedent

In a recent case, executors of an estate were held personally liable for the unpaid tax lien on their parents’ house.  The planning tips from this matter are:

1.  Make sure your parents pay their income taxes,
2.  Feel free to decline to serve as executor,
3.  Pay income tax obligations before paying other debts, and
4.  If selling an asset, do not reinvest the proceeds in a risky asset so that there will not be any liquid funds if the IRS comes looking for payment of its lien.

Working with Blended Families

USA Today wrote about the complexity of planning for blended families with a dizzying number of familial situations.  What the article did not mention is that a trust could be used to address all of the concerns of the individuals.  Simply, a trust can be used to retain assets for a second spouse while ensuring that assets are ultimately distributed to children from a prior marriage.  Similarly, trusts can be more flexible in making differing allocations among beneficiaries.

Interesting statistic form the article.  Of people who live past 85, one half will experience Alzheimer’s disease.

Declining to Serve as Guardian?

When declining to serve as guardian of a friend’s child, it is best to answer in terms of the increased family size of the restrictions placed by current housing.  Do not follow the example in an old Carol Burnett Show skit where a couple decided to act obnoxious and asocial with atrocious dinner manners so they would not be asked.  The other couple asked eventually because “you act just like we do.”

Gift Opportunity

This bears repeating.  2012 is great year to make a large gift due to the $5 million unified credit.  It is unlikely that the credit will ever be larger and it is possible that it will be much smaller if the scheduled reduction to $1 million remains intact.

Organ Donation – Keeping Options

The WSJ ran a squeamish article about the organ donation process.  The best advice seems to be to foresake checking a box on the driver’s license and allow family members decide if and when to donate organs.  Family members will be in a position to ensure that proper brain death procedures have been followed and that anesthesia has been administered.

Timing Social Security

In trying to maximize lifetime Social Security benefits, it is best to delay taking distributions as long as possible.  However, if ill health is a factor, grab them as soon as possible.

Digital Data (Again)

When estate taxes do not apply to most people, the hot topic in estate planning apparently becomes accessing post-mortem digital data. I have revised my wills to authorize executors to access on-line accounts.  A corollary is to have a note with the will which lists the passwords and desired disposition of the account and data.

nb.  The recommended language in the article is the type of drafting that people pejoratively refer to as “legalese.”

Trusts Are Still Needed

Even with the current estate tax environment, trusts are still necessary.  My reasons for recommending them are to protect youthful heirs and to simplify the administration process.  The forthcoming decrease of the estate tax exemption amount to $1 million is a third reason.

Sports Blog Post

Paul Daugherty of the Cincinnati Enquirer allowed me to write his blog today.  I consider it the Moby Dick of blog posts (in terms of length, not quality).

What to do with Collections?

Collections are difficult to plan for because their value can be mostly emotional.  People should decide the value of their collection, decide whether it should be kept intact, and choose which family member(s) should receive it or whether it should sold or donated.  None of this applies to Beanie Babies, which should be thrown away.

Never Mind

The prior post about a possible law requiring that inherited IRAs must be distributed within 5 years of date of death is now moot because lobbyists have urged Senate Dems to remove the provision from a highway funding bill.  Skipping the question of why an IRA payout provision is in a highway funding bill, apparently everything has a price, except integrity and strong leadership are priceless.

Accelerated IRA Distributions

The Senate has proposed mandating that withdrawals from inherited IRAs be made within 5 years of the death of  the IRA owner.  The purpose of the legislation is to accelerate income tax revenues.  I agree with this proposal.  IRAs receive preferential income tax treatment because they are intended for retirement.  They were not created to distribute wealth from generation to generation in an income tax advantageous manner.

Facebook and Virtual Data After Death

In what is becoming a common story, questions arise as to what happens to an individual’s virtual data after his death.  Some states are passing laws to authorize executors to access the on-line data of a decedent.   In the meantime, wills should authorize the executor to access data including passwords.

Pet Trusts

Clients can overlook providing for their pets upon their deaths.  Pet trusts are a viable means of ensuring the post-mortem  care of pets.  Ohio has a statute which provides for the creation of pet trusts.  Kentucky does not have a specific statute but the objective of providing care for pets can be accomplished via other means.

Parents’ Personal Belongings

few tips about dealing with the personal items of parents.  Having seen families fight over furniture and jewelry, I agree with “go slow” and “be diplomatic.”  I would also add “remember it is just stuff” and “your relationship with your siblings is more important than any item.”

Adopting a Girlfriend or Mistress?

This is a bit tawdry.  A man who is being sued in a wrongful death case previously created a trust to benefit his 2 minor children.  He has now adopted his 42 year old girlfriend so she can be a beneficiary of 1/3 of the trust.  Assuming they remain a couple, she may use the trust assets to support herself and him even if he is forced to pay a large damage award in the lawsuit.  My trust documents are designed to prevent this because they provide that an adoptee must be younger than 18 to be considered a beneficiary.

Powers of Attorney

Because powers of attorney are so powerful, and eyed suspiciously by financial institutions, it is better to have an attorney prepare one than use a standard off the shelf form.

Funeral Planning

I typically see a funeral bill of $10,000 for my clients.  Here are  a few quick tips to reduce funeral costs – shop around, remember that the funeral home exists to make money, and that a reasonable casket can be purchased for $400 – $600.

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All Posts By Jay Brinker

I am an attorney located in Cincinnati, Ohio who practices in the areas of estate planning, probate, asset protection, and small business advice. I make a difficult and bewildering process as simple as possible. Most importantly, I provide "more for less" for my clients.