Articles Posted in Trustee

One of the most well-known New York estate planning stories (and mysteries) of recent years is that of Huguette Clark. The extremely reclusive heiress recently passed away, leaving hundreds of millions of dollars with many wondering where exactly the money will end up. Of course, in most cases an inheritance will go to surviving close family members, dear friends, or well-known charitable causes. However, Ms. Clark had very few surviving family members, and it is now being reported that she only one “real” friend, a French woman named Suzanne Pierre.

Ms. Pierre had become somewhat of a liaison between Ms. Clark and the rest of the world. It was alleged that Ms. Pierre was one of the few people who was privy to the heiress’s estate planning documents. In fact, according to the New York Observer, Pierre once helped anonymously sell some of Ms. Clark’s impressive art collection. She was also the recipient of a $10 million gift of a rare painting from the estranged heiress. Before Ms. Clark’s passing some predicted that Ms. Pierre would actually be named heir to much of Ms. Clark’s fortune. However, that possibility vanished when Ms. Pierre herself passed away a few months before Ms. Clark moved on.

One of Ms. Pierre’s own most valuable assets, her Park Avenue apartment, was recently sold during the disposition of her estate. City records indicate that the unit sold for just under $2 million. The sale comes as many in the real estate world speculate on the prospects of Ms. Clark’s own, massive Park Avenue apartment. The 42-room unit is expected to fetch somewhere around $70 million. Many are calling the unit the most sought-after apartment in the entire city and “the listing of the young century.”

Estate planning usually doesn’t come to mind when one thinks about award winning Hollywood movies. Most popular films are about great adventures, tragedies, and disasters. Planning for one’s long term financial and medical well-being, on the contrary, is all about prudently working to avoid major crisis or drama. However, a film that many movie buffs believe has the inside track to win this year’s Academy Award for Best Film actually involves estate planning, with a trust and a trustee at the center of the action. This weekend the movie won the Golden Globe Award for Best Dramatic Film.

“The Descendants” tells the tale of a man who is dealing with the impending death of his wife who suffered a traumatic injury and is on life support. The film’s protagonist, played by George Clooney, is the victim’s husband. As his wife slips away he is forced to deal with the consequences of handling her estate. She had come from a very wealthy family, and the couple (along with their two children) had lived on acreage of land in Hawaii that was held in trust.

Clooney, as the husband, is the trustee of his wife’s multi-generational estate worth billions. The other trust heirs (his cousins) want to sell the land to generate income to meet their personal needs. However, Clooney remain unsure of the best long-term decision. He knows that the original intent of the family was to preserve the land for succeeding generations.

Estate planning is about setting ones affairs in order for the benefit of friends and family. In that way, the holiday season is a natural time to discuss these matters, because it is now when many families are getting together and celebrating. Particularly for families that do not live close together, this time of the year may be the only one when everyone is all in one place. For those in our area, it may be an ideal time for adult children to sit with parents and siblings to talk about creating or updating their New York estate plan.

Of course, one need not spend time delving into the specific details of a plan over turkey dinner, but simply mentioning the topic lightly can be important. As a recent article in The Gazette suggested, if parents do not seem willing to get into the details during the holiday, adult children should simply explain that they’d like to discuss the subject at a later time. However, if parents seem receptive, it is helpful to ask them some basic questions. For example, some parents may already have wills drafted. If so, it is important for other family members to know where it is located and how to access it. If a will is used, children should ask who has been named executor. The same is true when more advanced tools like trusts are used, where successor trustees have to be named. Our New York estate planning attorneys know these seemingly simple choices come loaded with problems. Discussing them ahead of time, when everyone is together, is often a good approach. For example, choosing one child over another for either of these duties may create hard feelings.

Beyond subtle prompting to get certain estate planning affairs clear, the holidays may also be a good time for parents to share exactly how certain sentimental objects will be distributed. Of course, the holiday gathering may be inappropriate if it is known that certain decisions will cause family discord. However, it is never a good idea for family members to learn who is set to receive certain objects only after a loved one has passed, particularly items with emotional attachments. Because everyone is together the holidays may be the ideal time for grandparents to clearly explain what steps they’ve taken and to answer any questions that family members may have. The input that the elders receive from family members may also prove helpful in case something has been left out of planning. At times adult children can remind parents of certain assets or family issues that should be incorporated in estate planning documents that had originally been left out.

Last week Advisor One discussed an estate planning issue that is underappreciated by some community members: the need for an educated trustee. Our New York estate planning attorneys commonly use trusts to help local residents avoid probate and save on estate taxes upon their death. When a trust is used a trustee has to be designated, which is an individual or entity that will carry out various responsibilities upon the death of the one who created the trust, the Grantor. The trustee is obligated to complete a range of legal and practical duties at that time. Without proper education and guidance they run the risk of failing in their obligations and causing a variety of problems for the family involved.

Upon the death of the Grantor, for example, the trustee must delve into the Grantor’s personal and financial situation. That includes creating a list of all of the individual’s assets, including personal property, real estate, stock, and other items. The fair market value of the property must be assessed so as to establish a new tax basis for possible future appreciation purposes. An assessment must be made to determine if estate taxes are at issue before equitable distribution of property to beneficiaries per the agreement’s terms. Many other duties must also be fulfilled. Outstanding debts have to be paid, life insurance claims filed, retirement accounts handled, tax returns filed, and other accounting documents properly crafted. While the settling of a trust is easier than the probate process, it still demands prudent action by those involved.

The complexities of the position make it necessary that trustees be educated about their role, and it makes it important for the Grantor to give careful thought to trustee selection. The article notes of participants at a recent trustee education seminar that “grantors were trying to determine which made most sense for them: a personal trustee, a corporate one, or a personal trust company.” The article went on to explain how it was often difficult for families to identify a personal trustee that possessed the technical skills and relationship with the Grantor needed to best fill the role.

Local residents usually take the time to craft a New York estate plan because they wish to prepare for disability, save estate taxes, and avoid the probate process. In most cases these goals are best met through the use of a living trust. The trend over the past several decades is for middle class families to craft trusts instead of wills for their inheritance planning. As our New York elder law estate planning attorney Bonnie Kraham explained in an article published this week in the Times Herald-Record, unlike wills, trusts are private documents that do not need to be filed with the Surrogate’s Court. No costly, stressful, time-consuming probate process needs to be undertaken upon one’s death when a trust is used.

Instead of court involvement, a trust is usually administered by a successor trustee. Upon the death of the original trustee (the individual who created the trust), the successor trustee must inform the beneficiaries of the situation, gather and invest the grantor’s assets, notify creditors, pay taxes, and distribute assets per the trust provisions.

Attorney Kraham notes that the trustee who administers the trust has a variety of other obligations. They must remain loyal to all beneficiaries, including the contingent beneficiaries–acting impartially between them at all times. Also, the trustee must ensure that trust property produces income. Therefore it is incumbent upon the trustee not to keep large amounts in non-interest bearing accounts or allow a home to sit vacant. At the same time, all investments must be prudent, and a sound overall investment strategy must be employed. This typically requires diversification which balances both income production and investment safety. Other trustee duties include the filing of tax returns, distribution of trust income, handling of expenses, and the maintenance of proper records.

A trust is a centerpiece of many New York elder law estate plans. Trusts are usually superior to wills for transferring assets at death. Trusts are preferred because they can be used to avoid probate, reduce estate taxes, protect children from earlier marriages, and more. Essentially these entities remove assets from a personal estate and place it in a trust so that more wealth can be given to beneficiaries.

Transferring assets to a trust means that a trustee must be designated to manage the entity and its assets. Therefore, selecting an appropriate trustee is an important aspect of the New York estate planning process. A Yahoo Finance article this week discussed the role of the trustee and the need to give careful thought to trustee selection. Those who create a trust usually chose between an individual trustee (often a friend or family member), a professional trustee (like a bank, lawyer, or trust company), or a combination of both.

Trustees have a fiduciary duty to the beneficiaries of a trust, and so it is vital to select a trustee who can fulfill that duty. Trusts require the trustee to appropriately balance the needs of a current beneficiary while preserving capital for future beneficiaries. In addition, trustees must be able to file annual fiduciary returns. While friends and family members will usually try to act in the best interests of beneficiaries, they are often inexperienced with trust management. Difficulties often arise when family issues conflict with the best interests of the beneficiaries. Also, a trust may be held in limbo if an individual trustee dies or becomes incapacitated in some way.

by Michael Ettinger, Esq.

piggybank.gifRecently, a couple came in to see me. They were people of means, having accumulated an estate in excess of two million dollars. Sadly, the husband, a fine gentleman, had contracted an incurable form of cancer. They knew it was time for a review of their estate planning documents.

The couple had two sons, both in their fifties. One was an established professional, the other a successful entrepreneur.

by Michael Ettinger, Esq.singlewoman.gif

Previously we wrote about the lawyer as co-trustee in the second marriage setting. The main concern there was to protect the share and the interests of the deceased spouse and their family. This was a situation ideally suited for the lawyer as trustee due to inadequate protection if one of the surviving spouse’s children acts as co-trustee, and the inevitable conflict that arises if one of the deceased spouse’s children acts as co-trustee.

For singles and couples without children, the lawyer as co-trustee fulfills an entirely different function. In the couples setting, we are really referring to the issues that arise after the first spouse dies. From an estate planning point of view, couples without children ultimately have the same issues as singles.

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