A trust is a legal document that a grantor (also known as a trustmaker or settlor) creates. The grantor creates the trust for the benefit and use of a beneficiary. A trustee is a third party who is tasked with maintaining the trust assets and ensuring that they are handled properly. 

“Trust administration” concerns the trustee’s job—namely, distributing and maintaining the trust. In this article, we’ll go through the basics of trust administration. 

What is Trust Administration? 

Trust administration is the last main stage of the trust. It goes into effect when the grantor is incapacitated, dies, or otherwise indicates that he or she wants the trust to be administrated. Trust administration is a process, and it is the trustee’s job to faithfully carry out the wishes of the grantor. 

What Does a Trustee Do? 

Once the grantor dies, the trustee becomes responsible for a myriad of tasks. These tasks include (but are certainly not limited to) providing copies of the trust and notice of the commencement of administration to all beneficiaries/heirs. State statute or the trust document will specify the format to which the copies and notice must adhere. 

The trustee must notify the state of the grantor’s death, request a taxpayer ID from the IRS, file an estate tax return, and handle the process of distributing trust assets and/or proceeds to the proper beneficiaries. The process of trust administration is usually faster, more efficient, and less publicized than court-supervised probate.

However, many trustees are unfamiliar with these procedures. This is why it is important for a trustee to work with a lawyer, CPA, and/or financial advisor to ensure everything is done correctly. This collaboration is yet another important task for the trustee. 

Advantages of a Trust 

Trusts have many advantages; chief among them is avoiding probate court. According to CNN Business, the basic trust plan will cost between $1,600 to $3,000 (though this is just an estimate—costs can vary). In many states, the typical probate cost will be 5%-10% (again, estimated) of the total value of the estate. 

In addition to being faster and more private, trusts are usually more cost-efficient than the probate court process. Depending on the type of trust, trusts can protect your property and assets from lawsuits and creditors. 

Trusts can reduce gift and estate taxes. During trust creation, you can name your trust administrator and put conditions on your posthumous asset distribution. This level of personalization is a major benefit of trusts.  

Disadvantages of a Trust 

As with any legal document, trusts and trust administration have their disadvantages, including the loss of control over assets if you make the trust irrevocable (which means that the trust cannot be changed once the document is finalized). 

If you make the trust revocable (which means that the trust can be changed, even after finalization), that revocability may have tax-related consequences. It might also have negative effects on stamp and estate duty and asset protection. 

Lastly, bad trustees are out there. You might appoint someone that you think is trustworthy, only to find out that that was a miscalculation. Luckily, courts offer remedies to protect you in the event of trustee misconduct.

Trustee Misconduct

It is relatively rare, but it does happen. When a trustee commits misconduct, this is called a “breach of fiduciary duty.” In Florida, there are four main examples of a breach of fiduciary duty: self-dealing, excessive compensation, poor investment choices, and stealing assets. 

The first is self-dealing. For example, a trustee who is selling property or using assets for personal gain is self-dealing by using trust assets to benefit his own wallet.

Secondly, a breach might involve excessive compensation. This occurs when the trustee is paying himself too much. Though trustees are legally permitted to accept payment for their efforts, said payment must be reasonable. 

Third, a breach occurs if a trustee is making inappropriate or poor investment choices. These choices might be the result of impaired judgment, self-dealing, or both. For example, a trustee investing trust assets into his own underperforming, badly-managed business has engaged in both self-dealing and in improper investment.

Fourth, is just plain old theft. A trustee breaches his fiduciary duty (and may be susceptible to criminal penalties) for stealing assets from the trust. Pilfering assets usually requires intentionality. 

The main defense to a breach of fiduciary duty is showing that the trustee was acting within the bounds of the trust document. This process—the allegations and the defense against them—will be handled in a court of law. 

Remedies for Breach of Fiduciary Duty 

The main defense to a breach of fiduciary duty is showing that the trustee was acting within the bounds of the trust document. This process—the allegations and the defense against them—will be handled in a court of law. The court will hear both sides and determine what relief, if any, is required by law. 

There are legal and equitable remedies available to grantors if a trustee breaches his fiduciary duty. These remedies include appointment of a new trustee, damages, a constructive trust, injunctive relief, and even criminal penalties. 

When deciding whether to set up a trust, you should consider all the advantages and disadvantages. Even in the event of misconduct, a court can still offer relief. Talk to an attorney about the best decision for you and your property, and learn more from our website. 

Halloween is the season of pumpkins, ghosts, goblins, and more. You might like your Halloween frights tame and filled with corn mazes and G-rated movies, or you might be a hard-core horror movie and haunted house fan. Either way, there’s no denying that Halloween is one of the best holidays around. 

However, it isn’t the scariest thing in the world. Halloween comes once a year, but the frights and scariness that come with not having an estate plan is year-round. Listed below are the basic things to know about estate plans, wills, and (eek!) probate court.

Requirements of a Last Will and Testament

The last will and testament is a legally-enforceable document that you create. It outlines your wishes for what you want to happen to your assets (property, personal possessions, money, etc.) after you die. In Florida, there are several requirements for a last will and testament. And, within some of those requirements, there are exceptions.

First, the testator (person who is making the will) must be eighteen or older and of “sound mind.” Sound mind isn’t overly complicated. It just means that you need “testamentary capacity.” You need to mentally understand the extent and nature of the property your will dispose of posthumously, and you need to understand your relation to those who will claim a benefit from your will. Essentially, you must know you’re writing a will, and you need to be cognizant of the property in your will and the people to whom you’re transferring the property. 

Second, the will must be in the correct form of writing, i.e. non-holographic. It cannot be “holographic” (AKA “olographic”). A holographic will is a will that has been completely handwritten and signed by the writer/testator. It is an alternative to a lawyer-written will. Some states might allow holographic wills, but Florida does not.

Third, the testator must sign the will. If the testator is unable to sign it (quadriplegic paralysis is a common example of why a testator might be unable to sign his will), the testator may direct another person to sign it on his behalf. That person must sign the will at the direction of the testator and in the presence of the testator.

Fourth, the will must be signed at the bottom. The signature doesn’t have to be formal—it can even be a symbol or letter; so long as the testator uses that symbol as his signature, it is acceptable. 

Fifth, two competent witnesses must be present at the signing. The witnesses must sign the will in the presence of the testator and one other person. 

What is Probate Court? 

Probate court is the court where last wills and testaments go to be authenticated (validated as real) and then executed. It is also where people who die intestate go. If someone dies intestate, that means that they die without a will.

In the case of intestacy, the probate court itself will divvy up the deceased’s property. Creditors will be the first recipients, followed by anyone else with a legal claim. Probate court is time-consuming, expensive, and, in the case of intestacy, it doesn’t always reflect what the deceased would have wanted. 

How to Avoid Probate Court 

Even if you don’t die intestate, you will likely have to go through probate court unless your estate is extremely small. A trust is another way to transfer assets without going through probate court. A trust goes into effect when you’re alive, not when you’re dead. You transfer legal title to an asset to a trustee, who holds it until you want the beneficiary to receive it. A trust can be created in a last will and testament. 

The bottom line (and the most takeaway from this article) is that you must have a plan for your asset distribution after you die. Going to probate court for will authentication is far different than going there for intestacy. You don’t need to wait until your old or sick to make an estate plan. In fact, the best time to do it is when you are in good health and clear-headed.

Though not having an estate plan might not have the same fright-factor as Michael Myers chasing people with a knife, it’s still scary. Make sure you talk to an attorney to find out how you can protect yourself and your family from the real-life horror movie that is dying intestate. Learn more about probate. 

Well, there’s no getting around it. Election day is fast approaching, and, in less than one month, we’ll all be making one of the most important choices of the year. No matter who you’re voting for, it’s important to get out there and make sure that your voice is heard. Many states have early and mail-in voting, and, of course, you can vote in person, too.

Elections aren’t the only events in life that require tough choices. Some of the most difficult phases of and events in our lives require serious decisions. The key is to make sure you always have a plan, no matter what. In this article, we’ll talk about three major life events and the legal documents they involve.

Death

Death is inevitable, and though you might not live on, your assets will. You have a few options when it comes to asset (money, property, possessions, etc.) distribution. Two of the main ones are last will and testaments and trusts. 

A last will and testament is the estate planning tool with which most of the population is familiar. This document lays out how you want your assets distributed after you die. A will must be authenticated in probate court before the wishes enshrined in it can be executed. 

For a will to be authentic in Florida, there are a few requirements. First, the testator (person writing the will) must be at least eighteen years old. Second, he or she must be of sound mind. Third, he or she must sign the will. Fourth, there must be two competent witnesses, and fifth, the will cannot be “holographic” (handwritten). There are certain exceptions/tweaks to the third and fourth requirements, but those five are the basic must-haves. 

A trust, by contrast, goes into effect immediately, not just when you die. A trust is a three-party relationship. You (the grantor) sign title to your asset(s) over to a third party (the trustee). Then, upon your direction—or when you die—the trustee turns over the asset(s) to the person you intended as the recipient all along. This recipient is called the beneficiary. 

Divorce

Divorce can shake up your estate plan. Revisit your estate plan after the divorce is finalized. There are certain documents, such as healthcare proxy, power of attorney, and any trust beneficiaries, that require updating if you are divorcing your spouse. Even if the divorce is amicable, you will need to make changes. 

You might still want to leave your spouse something, which is your right, divorced or not. Check your prenuptial and/or postnuptial agreements, as well as your state’s laws, to see what can and cannot be altered in your estate plan.

There are some documents you might not be able to change during the divorce. In some states, you cannot change beneficiary designations for life insurance, 401(k) plans, pensions, and similar accounts until after the divorce has been finalized. 

The bottom line is this: divorce means you have a lot to do to ensure that your estate plan reflects your wishes accurately.  

Sickness

While divorce requires you to update and correct, sickness (and old age) require even more proactive action. It’s best to complete certain documents, like a living will, power of attorney, and guardianship papers before something happens.

A living will, in contrast to a last will and testament, goes into effect while you are still living. This legal document contains directions for your medical care. If you are too sick or incapacitated to tell doctors and nurses what you want, the medical staff can refer to this document for assistance. Examples of items included in a living will are preferences for pain management, DNR (Do Not Resuscitate), and organ donation. The living will tends to reflect the patient’s values and spiritual or religious views.

A power of attorney is a trusted individual that you appoint to manage your financial and/or medical affairs if you’re unable to do so yourself. This person is usually a spouse, family member, or trusted friend. 

Guardianship papers are important for those with minor children. These documents designate who will take custody of your dependents in the event of your death or incapacitation. 

Though life is always going to be fraught with surprises, some good and some bad, having a solid plan will alleviate stress and allow you to face difficulties head-on. Talk to an estate planning attorney today about how to safeguard yourself and your loved ones, and learn more about asset protection. 

And don’t forget to vote! 

We’ve all had someone tell us at some point, “Don’t take it personally.” Well, if there’s one thing you should take very personally, it’s personal asset protection. People are familiar with estate planning’s protection of assets after they die, but they might not be familiar with what estate planning can do for them while they are alive. 

Especially in these uncertain times, it’s important to know about personal asset protection and do all you can to maximize your legal options and safeguards. Here is a brief overview of what we mean when we say, “personal asset protection.”

The Basic Definition 

Let’s start with the basic definition of personal asset protection, including what does and does not qualify. Asset protection involves strategies and legal tools to guard your wealth from creditors, lawsuits, and similar agents looking to cash in. Asset protection is used by businesses and individuals to limit what their creditors can and can’t take to satisfy a debt. You don’t have to be a millionaire to engage in asset protection—it’s something that is just as suitable for the working class as it is for the 1%.

What Asset Protection is Not

There is no denying that asset protection has gotten somewhat of a bad reputation. Over the years, there have been highly-publicized cases of illegal offshore accounts and shady white-collar dealings. However, those cases are not examples of asset protection: they are crimes. 

Asset protection operates within the bounds of the laws governing creditors and debtors. Concealment, fraudulent transfer, bankruptcy fraud, and contempt are all crimes—they are not legitimate ways to protect your assets, and you should never engage in them. 

Assets to Protect

It is advised that you protect your assets before a claim/liability happens. After a claim or liability happens, it is often too late to protect your assets. Therefore, you must be prepared. Retirement accounts, homesteads, annuities, life insurance, and trusts are all assets that you may be able to protect from creditors in the event of a suit. 

There are many methods of personal asset protection, but three of the most common include: asset protection trusts, family limited partnerships, and accounts-receivable financing. 

Common Methods 

An asset protection trust is subject to complex regulations and requirements. This trust is self-settled. The grantor (you) becomes the beneficiary and can access the trust account funds (your money). If structured correctly, the asset protection trust will not be reachable by creditors. It also offers certain tax savings, depending on your state. 

Secondly, accounts receivable financing involves capital that is principle to a business’s “accounts receivable.” Accounts receivable refers to certain business assets, such as outstanding balances of customer invoices that are due but have not been paid yet. Accounts receivable financing is more suited for a business than an individual, though small businesses owners can certainly take advantage of this flexible funding. 

Thirdly, a family limited partnership is another asset protection tool that is geared towards small businesses. An FLP lets a family pool its money together to run a company. Each member of the family purchases shares of the company, and they profit proportionately to those shares. This has been called a “powerful estate planning tool” for business owners. 

Protecting Your Home 

Though your home is not your only asset, it is perhaps your most valuable. The first way to protect your home from creditors is to take advantage of what is known as a “homestead” exemption. This exemption protects the value of your home from creditors. Forty-eight states have this homeowner protection, though they differ in terms of requirements and amounts. Also, twenty-one of those states require a homeowner to file paperwork to qualify for this exemption (i.e. it’s not automatic). 

Implementation of an equity stripping plan, creation of a domestic asset protection trust, moving the title of your house to the low-risk spouse’s name, and buying umbrella insurance are other options to protecting your home from creditors.  

If this is confusing to you, don’t be alarmed. You can contact an estate planning attorney to talk about your options. Though lawsuits seem like they won’t happen to you, they are remarkably common. America is a litigious society. There are forty million lawsuits filed every year in America. As the time-worn saying goes, it’s better to be safe than sorry. 

Visit our website to learn more about asset protection. 

If there’s one thing that has been true about 2020, it’s that things are changing rapidly. Whether it’s breaking news updates every day about the Coronavirus pandemic or tragic news about our favorite actors dying (#WakandaForever), this has been a tough year for us all. 

So how do we cope? When it comes to constant change and a stressful environment, you can only affect what is under your control. In this article, we’ll talk about ways to cope with life changes by using the legal system to your advantage. 

Living Will

If you don’t recognize the term “living will,” you might recognize this document as an “advance directive.” There’s no denying that the Coronavirus pandemic is here, perhaps to stay. And there’s also no denying that it is causing people to become sick (from mild symptoms to ventilation required), sometimes fatally. The numbers increase every day. 

What doesn’t change is that you need to be prepared if you fall ill. A living will is a legally-enforceable, written document that lays out your wishes in the event that you are hospitalized and unable to communicate. These wishes include medical treatments that you do or don’t want, whether you want to be kept alive under any circumstances, and organ donation and pain management preferences. 

These are all highly personal and contingent on your values and lifestyle. That’s why it is important to have your requests written; that way, they will be honored.

Power of Attorney

Along the same lines of a living will is a power of attorney. A power of attorney is a trusted individual who you appoint to manage your financial and/or medical affairs in the event that you are unable to do so yourself (incapacitation, illness, cognitive decline, etc.).  By appointing a trustworthy power of attorney, you know that you are in good hands. And, if the power of attorney performs poorly, there are legal safeguards in place to remove him or her from the position. 

Asset Protection 

Estate planning works on both sides of the veil, so to speak. It allows you to control how your assets are distributed after you die, as well as how to protect them while you are alive. By setting up trusts (whether inter vivos or testamentary), you can ensure that your assets are safeguarded against potential lawsuits or challenges. 

You can protect your assets so that your heirs get the most out of your estate after you die. In addition to those benefits, an estate planning attorney can also help you minimize tax obligations on your estate post-mortem. 

Small Business Planning 

Americans are very entrepreneurial, and a pandemic has not changed that cultural fact. Several businesses that were started during or immediately after economic collapse, recession, or serious global catastrophes include: General Motors, Hewlett-Packard, Burger King, Microsoft, Uber, Airbnb, and many more.

If you already have a business, then you know how precarious the times are. Having a business succession plan in the event of your death will protect what you have worked so hard for. If you’re just starting a new business, you should take protective steps as well. This includes purchasing top-notch insurance.   

Taking Care of the Kids 

Kids are resilient, but there is no denying that they, too, have gone through major changes in the past year. Kids are unable to go back to school, and they often see their in-person social lives shrink (if not disappear entirely). Though there is not much you can do about that, there are legal ways to take care of your kids’ future. 

Guardianship

If your kids are under the age of eighteen and something happens to you, who will get them? Estate planning allows you to set up guardianship papers, putting your kids’ lives into the hands of trusted adults. Contact your proposed guardian before you appoint them into the position. Setting up guardianship is a “just in case” safeguard that, while unpleasant to think about, is still a must-do.

529 Plans 

Pandemic or not, colleges will still exist in the future, and they will still likely be expensive. The IRS allows you to set up a 529 tax plan, which is a tax-advantaged program that allows you to save up for your kid’s college education. Each state is different, and every state has its own requirements, rules, and regulations for setting up such a plan. Contact an attorney to discuss your options.

Dealing with change can be scary and intimidating, particularly if you are not used to it. Fortunately, there are ways to manage the way we deal with these “winds of change.” Talk to an estate planning attorney to see how these legal safeguards can give you peace of mind.