Wealth Preservation, Trusts and Estates

The Romney’s 2010 tax return (which is quite  lengthy and can be viewed in it’s entirety by clicking Mitt Romney’s Tax Return) gives us a few hints about trust and estate planning techniques of the wealthy that may have relevance for you – even if your net worth is closer to 1 million dollars than 150 million.

Article By: David M. Frees III, JD

As a matter of side interest, the Romney’s assets were held in a “blind trust” which arguably eliminates or minimizes conflicts of interest for a politicain or officeholder since they no longer know what investments are held by the trust and make no direct investment decisions.

However, the existance or not of a blind trust makes no difference from an estate tax planning perspective.

Why?

Any trust which allows you to continue to use the assets, and/or to control or revoke the trust will generally be included and taxed in your estate.

So what can we tell from his income tax return that might hint as his estate planning and why do you care?

Well, you should care if your assets, including real estate, IRAs and life insurance, business interests and investments exceed $1 million dollars since at the end of this year the amount that can be passed to your heirs without federal estate tax falls back to only $1 million dollars.

And, to make matters worse, the effective rate rises again from 35% to 42-55%.

Since Romney presumably has paid for some very  savvy lawyers, there might be a few lessons here that could matter to you and should be reviewed with your own lawyer before the end of the year.

First, there appears to have been a Grantor Trust established as the return shows income from a trust reported on his return.

If you own a business, certain types or real estate, and other assets and your estate exceeds certain limits, a Grantor Trust, or the sale of assets to a defective grantor trust might be an excellent way to transfer the asset and the growth on the asset out of your estate and further benefit the next generation by continuing to pay all of the taxes due on that income.

It also appears that the Romney’s funded a CRUT or Charitable Remainder Uni-Trust.

The CRUT can be an excellent way to transfer appreciated assets, to get a charitable deduction, and to retain income from those assets for some period of time.

There are lawyers, financial advisers, and accountants who advise the use of these trusts for tax planning alone.  Personally, I believe that they are best suited for those clients with a true charitable intent.

But, if you need income but would like to make a sizable gift to a charity that is important to you, consider and discuss this technique.

The 203 page return reveals the truly complex and seemingly insane level of energy required to comply with the intricacies of the Internal Revenue Code but I’ll take lessons and get ideas for my clients wherever I find them.

If you need information about Grantor Trusts, GRATs or CRUTs or any other planning techniques to protect your surviving spouse or herirs, we are pelased to offer a consultation to determine if you would benefit from an enhanced estate plan.(TM)

Please feel free to call 610-933-8069.

By:  David M. Frees III, JD

dfrees@utbf.com

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Picking an executor is a critical part of any sophisticated or even simple and effective estate plan. Having the wrong executor or someone that does not fully understand your wishes can wreak havoc on your estate’s administration and more importantly on the execution of your wishes. In fact, other than the decision to create and execute an estate plan; executor selection may be one of the most important estate planning decisions you will make. Consider the Pennsylvania case below.

In a recent 2011 Pennsylvania case a co-executor removed decedent’s safe and financial records two days before the death and failed to return or disclose this to the beneficiaries or list the items on the inheritance tax return. The Orphans Court removed and surcharged the co- executor for attorney fees and costs of the estate. Jonik Est. (O.C. Div. Phila.), 1 Fiduc. Rep. 3d 296.

Would your executor do this to you?

Do you have the right executor?

How do you pick the right person or institution to do this job?

Click here to read more about how to select the right executor for your estate plan.

Being an executor is a tough job. The executor must find your legal and financial documents, gather your assets, pay off all your debts, keep the beneficiaries informed, make financial decisions, and implement your wishes as if you were there.

Many times we see executors who are overwhelmed by the amount of work required by law to be an executor in Pennsylvania.  For that reason, it is important to pick someone who can handle it and even more importantly can get the job done the way you would want your estate administered.

Furthermore we often see even dedicated executors make the same simple but dangerous mistakes. To educate yourself and or your executors click below to get a free copy of our resource for executors.

The Ten Most Common Mistakes Executors Make… and how to avoid them

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One of the Irrevocable Trusts we prepare for clients who enter into

Nursing Home Asset Protection planning is referred to as the Medicaid Intentionally Defective Grantor Trust (MIDGT).  One of the tax features of the MIDGT is that the person, usually an elderly parent, who transfers assets to the irrevocable trust will continue to be responsible for paying the income tax due on the trust earnings even though he or she has severed all other ties to the assets.  One of the significant benefits of the parent, in this scenario, retaining the responsibility to pay the income tax is that he or she will be able to offset the income earned by the trust using possible long term care costs.

Below is a brief review of the Medical Care Costs that you or a loved one might incur and which might be used to offset income or gain.

It is important to maximize all income tax deductions available to you or a loved one.  Medical expenses are deductible only to the extent they exceed 7.5% of a taxpayer’s adjusted gross income (AGI). You can only use medical expenses that are not reimbursed through insurance or other means.  It is infrequently the case that the common medical expenses can be used as deductions because either the costs are covered by insurance or they do not rise to the necessary percentage of gross income.

That being said, the entire cost of a long-term care facility, including meals and lodging, can be a deductible medical expense. The care cost is fully deductible if the principal reason for entrance into the facility is the provision of medical care.  The retained ability to take such a large deduction could result in significant income tax savings.

A person living in an assisted-care facility can only deduct a portion of the cost of the payment to the care facility.  The IRS does not view the entire payment as a medical care cost considering the taxpayer is only being “assisted” and is not receiving complete care.

You can also take medical deductions if you are spending significant dollars to upgrade your home in order to remain at your residence comfortably.  Equipment and home modifications to accommodate the handicapped (no age limit) that do not increase the market value of the home are deductible as a medical expense.  Examples of such deductible improvements include additions of handicap accessible bathrooms or hospital beds.

So you can see, the income tax savings could be significant if the care recipient is claiming the income and offsetting it with care costs.  This would potentially let the trust assets to grow income tax free for years.

As a side note, these medical deductions can even be taken at the estate level after a person’s death.  When a person dies owing medical expenses, and those expenses are paid by the estate within one year, a medical expense deduction can be taken on the decedent’s final income tax return (Form 1040) or on the federal estate tax return (Form 706).

For a more detailed review of the Medicaid Intentionally Defective Grantor Trust click here.

For additional information on Elder Law Planning and the use of Elder Law, asset protection planning please contact Douglas L. Kaune at 610 933 8069 to schedule a client conference to determine if the Firm can be of assistance. For a review of Doug’s bio page click here.

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If Your Spouse Dies in 2011 or 2012
You May Think That There
Is No Estate Tax Return Due

You Might Right And You Might
Be Surprised To Know You Should
Still File

Most people now know, that if they die during the calendar
year 2011 or 2012 that there is a five million dollar exemption
from federal estate taxes.

And, it would be logical to therefore assume, that if you lose a spouse
during 2011 or 2012, and if your spouse’s assets are less than
five million dollars, that you would not need to file a return.

In fact, that’s true.  You don’t have to file.

But, because of something called federal estate tax
PORTABILITY, you will certainly want to.

If you fail to file, then you do not “inherit” your deceased
spouse’s remaining credit amount.

Perhaps an example will help to make this strange idea
of portability a bit clearer.

If spouse A passes away and has three million dollars worth
of assets that pass directly to surviving spouse B who has
his/her own assets of one million dollars and they
also have 2 million of joint assets, the surviving spouse
ends up with assets totaling six million dollars.

However, if the surviving spouse fails to file a federal
estate tax return at the death of the first spouse, she only
has her own five million dollar exemption.

That amount will not cover the six million dollar estate
that she will have at her death.  One million dollas will
be taxable.

To avoid this result, all the surviving spouse has to do
is file the federal estate tax return at the death of the first
spouse.

Now this type of return can be expensive – as hiring
lawyers almost always is.  They are complicated, they are
time intensive, they require obtaining extensive amounts
of information about assets and their valuation, but
by filing the return she inherits the five million dollar
exemption of the first spouse and this alone might save
their children or heirs hundreds of thousands or even
millions of dollars of federal estate tax at the death of the
second spouse.

Complicated.  Yes.  Oversimplified here?  Yes.

But the basic theory is simple.  If a spouse passes away in
2011 or 2012 be sure to seek advice from a knowledgeable
a lawyer who keeps current in these matters about the need
to file a federal estate tax return.

For more information on this important topic read FORBES
on the federal estate tax and portability.

by:  David M. Frees III, JD
610.933.8069

dfrees@utbf.com

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Is Being An Executor or Trustee More Dangerous Than You Think?
Yes! Even your own kids might sue you.

By: David M. Frees III JD

In many cases it might be. But, if you own your own business
you might want to pay particular attention to this case.

If you’re a business owner who wants the trustees of a trust to
keep the stock of your legacy then it’s very important to protect them
from liability so that they don’t feel compelled to sell it to
shield themselves from law suits like this one.

However, the exact rules and circumstances should be carefully
reviewed and discussed as part of your estate planning.

A review of the case is useful:

In a recent Pennsylvania case involving executor liability for investments
the Superior Court ruled in Estate of Warden, which can be found at
2010 PA Super 121 (July 9, 2010), the Pennsylvania Superior
court found in favor of trustees who failed to sell a business
predominantly because of specific language in the will to protect them.

The facts are interesting.

Under his will, Mr. Warden established a testamentary trust that was
funded with 110,000 shares of stock in his company, Superior Tube
Company, with a value of $1.5 million at the time of Mr. Warden’s
death in 1951. Superior Tube became SGI.

The trust terms provided that the trustees were not liable for any
actions taken in good faith. Does your will have this clause?

Should it?

Read on and then chat with your lawyer.

Mr. Warden expressed a preference for long-term investment performance
with respect to trust investments, and restricted the sale of the company
unless all trustees consented to the sale at a certain price. And, the trust
continued to hold the stock of the company through mergers and other
stock exchanges and name changes.

In 1987, Mr. Warden’s grandson successfully petitioned the court to be
appointed as successor trustee of the trust, to serve along with
Wachovia Bank, N.A.

No beneficiaries objected to the appointment.

Mr. Warden’s great-grandchildren, who held a 12.5% interest in the
trust income, thereafter filed objections to the trustees’ accountings
and sought to surcharge their father and Wachovia Bank as co-trustees.

The other beneficiaries, apparently satisfied with the investments,
did not file objections.

At the time the beneficiaries filed the suit, the value of the SGI stock
had increased from $1.5 million at Mr. Warden’s death to at least
$189 million.

The beneficiaries filed the suit after attending a family meeting where
they learned of an SGI operating loss of $66 million sustained from
2000 through 2003 that would result in a major reduction in their
dividend payments.

Following a 13-day trial, (imagine the legal fees on this one) the
trial court overruled the objections. They essentially ruled in favor
of the trustees. The beneficiaries appealed- more legal fees.

On appeal, the Pennsylvania Superior Court affirmed the trial court on
the grounds that:

(1) the higher standard of care for a corporate fiduciary does
not apply where the trust instrument explicitly mandates a different
standard of care such as the good faith standard;

(2) because Mr. Warden indicated a good faith standard in the trust
instrument, the trustees only breach their duty if they do not act in
good faith, which means if they intentionally acted with a
dishonest state of mind;

(3) the allegations that Wachovia failed to follow its policies, attend
SGI board meetings, review financial statements, or meet with the
co-trustee did not rise to the level of intentionally
dishonest behavior;

(4) because the trust terms required the consent of all co-trustees to the
sale of SGI stock, and did not provide a mechanism for breaking a tie
between Wachovia and the co-trustee, Wachovia
did not have a duty to compel the co-trustee to sell the SGI stock;

(5) the trustees were authorized by the trust terms to hold assets even
if they did not generate returns;

(6) a trust investment may fluctuate in value in a short-term time
period over the administration of a trust, but a short-term decline in
value is not a loss where the overall long-term performance of the
stock shows an increase in value;

(7) here, the asset increased from $1.5 million to $189 million, and
the beneficiaries’ focus on the alleged $300 million loss in value between
the 1990s and 2003 was inappropriate;

(8) the beneficiaries’ claims were barred by laches (a legal concept
designed to give people a fair time within which to bring their claims or to
be barred) because their grandmother never objected to the trustees’
actions, no other beneficiaries objected to the administration prior to 2004,
the beneficiaries did not demand an accounting until four years after
succeeding to their grandmother’s interest in the trust, and they were
aware of the high concentration of SGI stock 13 years before becoming
beneficiaries and four years after becoming beneficiaries before requesting
an accounting; therefore, the beneficiaries had an affirmative duty to inquire
and bring their claims sooner.

The bottom line?

If you Own a closely held business it might be sold upon your death.
But, if you want it to be held in a trust you’d better consider some
specific provisions to give the trustees guidance and to protect them
if they follow your rules.

For more information about estate planning, succession planning,
and exit planning for the owners of closely held and family owned
businesses, call or email me at 610-933-8069 or at dfrees@utbf.com

Thanks also to the firm of McGuire Woods Fiduciary Advisory Services and Steve
Leimberg for calling this case to our attention and for their savvy analysis.

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When a person dies without a will, (intestate), his or her property will go through a court supervised intestate process.

That process is a set of inflexible rules created by state law that dictates how the deceased person’s property and assets are distributed.  Only a will, or a non probate beneficiary designation (a combination of the two is usually best) will prevent these state rules from applying to your assets.

Want to avoid the intestate process?  Make sure to execute a will and make sure to coordinate your will with your non probate property such as IRAs and life insurance payable under a beneficiary designation.

Here’s a brief video from Bloomberg on why it’s important to have a will. You can skip the ads.

If you have a will click here to read Is It A “Probate Asset” Or Not”? to find out more about which of your assets go through probate.

The Pennsylvania Intestate Process

If there is no will the intestate process begins with the Orphan’s Court appointing a personal representative to pay creditors, to receive legal claims, and manage the estates expenses. Estate expenses range from the decedents (person who has died) unpaid bills, loans, administrative fees, costs, and payments to the administrator for their service.

After the court appoints the administrator and the expenses are paid the intestate law will identify heirs for distribution of assets. Here is a summary of Pennsylvania intestacy statutes, which dictates to the court and the estate as to the heirs of a given estate when there is no will:

State	Priority Under Intestate Laws	When there are Children of Different Generations (grandchildren)
PA	1. Spouse and no children or parents – everything to spouse. 2.Spouse and parent (no children) — everything to spouse. * 3. Spouse and children — spouse takes 1/2 the estate. If the children are also the spouse’s, the spouse also takes $30,000. If they are not, spouse only takes 1/2. Children divide the remainder equally as long as they are in the same generation. 4. Children and no spouse — the children take all. Shares are divided equally among the children in the same generation. 5. Parents, no children or spouse — parents share equally. 6. No spouse, children, or parents –brothers, sisters, or their children take all. Shares are divided equally as long as those eligible are in the same generation. See 20 Pa. Con. Stat. Ann. §§ 2101, et. seq. (2002).	The estate is divided into as many shares as there are living members of the nearest generation of children to the victim, including deceased children in the same generation who left behind children. Each surviving heir in the nearest generation to the victim receives one share and the share of each deceased person in the same generation is divided among his or her descendants in the same manner. See 20 Pa. Con. Stat. Ann. §§ 2101, et. seq. (2002).

• Pennsylvania intestate statute was amended on October 3, 2003. See 2003 PA Legis. Serv. 26 (West).

• This is a general summary only.  It does not include distributions when none of the relatives set forth in these charts is alive.  This is not a substitute for state law, and to the extent state law varies with this chart, state law controls. For more information, an attorney familiar with state statutes and case law should be consulted.

If no heirs can be identified the estate and its property and assets will be given to the state.

If there are heirs the administrator will distribute the assets to the heirs according to Pennsylvania’s probate laws.

If you do not have a will and die the probate court will distribute your estate according to intestate law. And, Pennsylvania’s intestate law may vary significantly from your actual wishes.  This is especially true if you have children from a prior marriage, want your spouse to have all of the assets, want to include other people or charities.

Why?  No close friends are factored in and family to whom you are not close to may inherit the most.  No charities are included and your spouse may not even get to receive or use your assets.

In the end, administering an estate without a will may not do what you want, it may not select the administrator that you desire, and it may be considerably more expensive than probating an estate with a will.

Questions about having a simple will, trusts for children and grandchildren, special needs trusts?

Please email me at dfrees@utbf.com

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The Answer May Not Always Be What You Expect

Simply “Probate” means at death an estate (the deceased person’s property) is administered and supervised by the court, often called probate court. The court will make sure the Last Will is administered correctly and if there is no will state law is followed by a court appointed administrator.

Many people ask us how they can “avoid probate” before they understand what it means and how long it will actually take. For example in Pennsylvania it is a fairly straightforward process, many cooperative families can “opt out” of much of the process, and it takes as few as several months and can be helpful in making sure the executor, the person who distributes the property, does what the Last Will says to do and that he or she is protected from subsequent claims and law suits.

Many people also do not know that most property transferred at death passes outside of probate through a non-probate mode of transfer. Here are some examples of things that do not go through the probate process and may not even be distributed according to the will.

1. Joint tenancy property both real and personal

The decedent’s (the person who has just died) interest ends at death. The survivor has the whole property.  Bank accounts, brokerage and mutual fund accounts, and real estate are often held in joint tenancy, particularly between married couples. At the death of the first, this property generally transfers directly to the surviving joint account holder or joint tenant on the deed no matter what the will says. These assets are still taxable for both State Inheritance Tax purposes and possibly for Federal Estate Tax purposes. And, who pays that tax is often a function of the tax clause in the will. Be sure to get good legal advise on this issue.

2. Life Insurance

Life insurance proceeds on the decedent’s life are paid by the insurance company to the beneficiary named in the insurance contract. However, while such policies are not taxed by Pennsylvania, they are taxed for Federal Estate Tax purposes.

3. Bonds & Contracts with payable on death (POD) provisions

Federal E and H Bonds, and pension plans often have survivor benefits as do tax-deferred investment plans such as IRA’s 401(k)’s, and brokerage accounts if there is a death beneficiary. While the beneficiary of such accounts receive the money directly, the proceeds may or may not be taxable for Income Tax and or Inheritance and Estate Tax Purposes.

4. Interests in Trust

When property is put in trust, the trustee holds the property for the named beneficiaries. The trustee in accordance with the terms of the trust instrument invests, holds and or distributes the trust property to the beneficiaries.

To read our trust guide How To Find The Right Trust For You click here.

Property in a testamentary trust does pass through the probate process but an inter vivos trust during the decedents’ life does not.  To read more about inter vivos gifts read Should I Make Gifts Now As Part Of My Estate Planning.Such trusts if revocable during your life are Taxable but irrevocable trusts may avoid taxation for Death Tax purposes.

Distribution of non-probate property does not involve a court proceeding.  The controlling contract, trust, or deed terms control the distribution of the property.

Distribution of probate property under a will or an intestate estate (someone who dies without a will) may require a court proceeding involving probate of a will or finding of intestacy followed by appointment of a personal representative to settle the probate estate.

Find out the best way to utilize both the probate and non-probate process in planning your comprehensive will and trust.

A successful comprehensive estate plan takes all of these factors into account when organizing your will or trust.

Whitney O’Reilly

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Estate Planning Seems Hard, Costly, and
Time Consuming?

Can Estate Planning Be Any Easier?

Many recent polls have concluded that
fewer than half of all adult Americans (44%)
even have a will much less an estate plan that
coordinates wills and assets to achieve what
they really want.

And, many Americans responding to a recent
AOL online poll said that they were more
concerned about maintaining their weight
than in doing a will.

Yet, almost 75% of those
polled said that
they should have a will.

In other words, we all know
we should but most of us don’t

-or if we do, they are out of date.

So what’s the problem?

Why don’t people
get to signing and updating their wills
and estate plans especially when the failure
to do it right can be so costly?

And, if the process is too hard, is there
an easier way to get it done the right way?

Here are the answers to a few of the most
important questions that families need
to ask about the ease and effectiveness of
estate planning and about how and why to
get it done.

Why don’t American families get to estate
planning even though they know it needs to
be done and they want to protect their heirs?

Again, according to the polling data Americans
say that they are too stressed about their day
to day activities to get that will done, AND
the process seems too complicated.

According to the survey, most families
whether affluent or moderately well to to agree,
“It Has To Be Easy.”

Why not use the internet?
Isn’t it safe and easy?

Most Americans still don’t trust the internet
for something this personal and complex.
And, internet based programs are often
not much less expensive than a lawyer when you
add up all of the smaller charges.

Finally, such programs do a bad job of helping
people with sophisticated needs to coordinate
their  documents, assets, and trusts in a cohesive
and easy to understand system.

Well, as lawyers who spend their lives helping
people to complete their wills and estate plans
including wills, trusts (when needed),
powers of attorney, medical powers, living wills
HIPPA authorizations, and all of the essential stuff
that makes life easy for our surviving heirs, reduces taxes,
protects them from law suites and divorce and many
other risks, we listen.

It’s now easier than ever to get a simple estate plan
or a complex trust based estate plan in force from
a lawyer who meets with you personally, customizes
your plan and helps you to structure and to coordinate
your assets to make the plan actually work.

The truth is, we haven’t really had to make too many
changes to achieve these goals for our clients.

For years, our clients have been raving about
our proprietary process.  And, while it may take a few weeks
to get an appointment (because we are client friendly and
good at what we do), the whole process for most people -
from start to finish- only takes two appointments and a
a few minutes to fill out some paper work and to
answer some well thought out questions.

Do many affluent clients and families take longer?
Sometimes.  But usually, they get the basic planning
in place within a few weeks and with a few appointments.

In fact, even clients who use advanced techniques
such as Irrevocable Trusts, GRATs, and Qualified
personal residence trusts to move assets out of their
estates for tax purposes often get these done in a short
amount of time.

And, the savings and protection can be substantial.

Do some families require more meetings or a
family meeting?

Sometimes families with closely held businesses or family
vacation homes will need or request an extra meeting and/or
one of our famous family meetings.  When family
meetings are used they usually help to improve the result
and help the next generation to understand and to more
easily do what needs to be done when the time comes.

Family meetings can involve as much or as little
financial detail as you want to share but they are
great at eliminating family disputes and the delays,
costs, and problems that arise when no one knows
what to do.

How does your process ensure that we get an
estate plan or will customized to our family’s needs
and goals at a fair price?

Well, a “fair price” is in the eyes of the beholder.
But, we don’t want or expect you to take a chance that
what we think is fair seems too high to you.

So we offer prospective clients the ability to meet with us,
to hear all the options, and to get a flat fee in advance for all
of the specific planning that they have selected. There is
no fee for that consultation.  We take all the risk.

How can we do that?  The truth is that almost everyone
who has one of those appointments hires us.

We know, from listening to clients that this
removal of risk makes for a trusting and effective
relationship right from the start.

And, if you want to know more before you start
working with us, you are also free to review our
extensive library of informative
reports, videos and articles on our two sites:

http://www.utbf.com/trust-estate

and

http://www.PaEstatePlanners.com

Watch, listen, and read what we write and produce
on a variety of topics and judge for yourself and
read what clients and other lawyers say about us
on rating services such as AVVO.com.

Want to read what other lawyers say about Dave?
AVVO Peer Comments* See notes below.

You can also see that David Frees has been a
“Top Lawyer” in the Main Line Today’s rating
of Trust and Estate lawyers, and that he has been
a SuperLawyer for many years.

How much homework is required?

We have created, based on over 25 years
of client appointments and experience, a
document – sent to you before your appointment -
that will walk you through the most important things
that you need to think about.  After your appointment,
we’ll review what  needs to be done and what you want
to do or what you want the lawyer to do for you.

If you’re so experienced, then isn’t this
very expensive too?

In the Trust, Estate, and Wealth Preservation
Section of the firm, this is what we do every day.

We invest hundreds of thousands of dollars
in software, training, and hiring of talented
people that make up the team that helps you.

Paralegals, an effective system and a focused
practice allows us to offer services that are
often very reasonable or appropriately expensive
depending on how advanced and sophisticated your
estate planning needs may be.

But, you’re never surprised by a bill
because you get to select your specific planning
tools and you always know, before you commit
to any costs, exactly what the fees will be.

I hope that this helps you to move out
of the majority of Americans who have no
will or an old and defective estate plan and
into the elite group of families and individuals
that have estate planning that will accomplish your
specific goals.

For a copy of our copyrighted Enhanced
Estate Planning Questionnaire or
any of our consumer reports or Affluent
Family Series of Reports, call 610-933-8069
or email dfrees@utbf.com.

For more reports and information call
David Frees at 610-933-8069.

*Please note, that at least one person mentions
the word “expert” when referring to David as a
trust and estate lawyer.  However, while this
is not true in all states, Pennsylvania lawyers
may not refer to themselves as experts in any field.
David limits his practice to trusts and estates but
wants to inform you that their is no such thing
as a trust and estates “expert,” in Pennsylvania.

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Many people initially look to friends and family members to act as Trustees for Trusts created under a Last Will for their children. The prevailing thought is that the family member or friend will be more invested in the lives of the children and will therefore do a great job. The clients also believe that it will be the most cost effective approach to naming a Trustee because the friend or family member may choose to take little or no compensation.

Although friends and family members might do a good job, I have experienced enough cases where that is not the case that I suggest considering the use of a Corporate Trustee. This is not to say that the family member or friend would not be well intentioned in their efforts. They almost always are. The problem is that they do not always know the best way to approach the job as trustee. They do not fully understand the investment options or the income tax considerations. They often tire of having to deal with the minutia of the job including, but not limited to, the need to field the calls from beneficiaries who want their money. These potential negatives can serve to cost the Trust more in loss than the fees saved by naming the individual trustee.

Many clients are now opting to name a Corporate Fiduciary, such as a bank or financial institution, as the Trustee. The key component to this shift is that the clients are now naming the friend or family member to act as the Trust Protector. The Trust Protector is given the power to oversee the actions of the Corporate Trustee. Most importantly, the Trust Protector is given the power to remove and replace the Corporate Trustee. This gives us something that is close to the best of both worlds, professional advice and management and family involvement.

Read our article Choosing a Trustee: Individual Trustee vs.Corporate Trustee to find out the advantages and disadvantages of either scenario so you can pick the right trustee for your trust.

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You may think that if you already have a will or trust you do not need an estate planning memo. But the truth is a will alone often is insufficient to provide your family or loved ones with the crucial information, documents, and instructions for what to do after you are gone. And if you have gone to the trouble of creating a will or trust to minimize or to eliminate fees, and taxes its important to take the next step to make it work effectively.

So what is the next step?

A personal Estate Planning Memo.

An Estate Planning Memo of instructions often includes information about funeral and burial arrangements, important family records, the location of your estate plan including your will and other legal documents, financial records, safe deposit box information and more.

As an example, in cases of wills with trusts for children and or grandchildren you might want to give the trustee non-binding background information on distributions to children.

Do not leave your family or loved ones to figure out where important documents, legal and financial information, and last wishes are located and what they mean.

Leave a Memo explaining what to do, how to do it, and where the information they need is. It will often eliminate and reduce fees and costs.

Your surviving family or loved ones simply have to follow the instructions and will have all the information they need in order to effectively and efficiently settle your estate.

Make an Estate Planning Memo of instructions and not only will your family or loved ones benefit when you are gone but you will benefit by having this Memo for your records of where all your documents are, what all your important policies are, and other critical information at your finger tips instead of all over your office, or in desk drawers, or even in bins in the basement.

We have learned over our many years of experience that an Estate Planning Memo, along with a comprehensive estate plan, can save your estate and your loved ones money, time, energy, and cut down or eliminate family disputes.

Read Do You Have a Memo With Your Will or Trust? on what to include in your Memo.

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