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Aretha Franklin Dies Without a Will and Leaves Her Family to Deal with Court and Conflict

Aretha Franklin, heralded as the “Queen of Soul,” died from pancreatic cancer at age 76 on August 16th at her home in Detroit. Like Prince, who died in 2016, Franklin was one of the greatest musicians of our time. Also, like Prince, however, she died without a will or trust to pass on her multimillion-dollar estate.

Franklin’s lack of estate planning was a huge mistake that will undoubtedly lead to lengthy court battles and major expenses for her family. What’s especially unfortunate is that all of this trouble could have been easily prevented.

A common mistake
Such lack of estate planning is common. A 2017 poll by the senior-care referral service, Caring.com, revealed that more than 60 percent of U.S. adults currently do not have a will or trust in place. The most common excuse given for not creating these documents was simply “not getting around to it.”

Whether or not Franklin’s case involved similar procrastination is unclear, but what is clear is that her estimated $80-million estate will now have to go through the often lengthy court process known as probate, her assets will be made public, and there could be a big battle brewing for her family.

Probate problems
Because Franklin was unmarried and died without a will, Michigan law stipulates that her assets are to be equally divided among her four adult children, one of whom has special needs and will need financial support for the rest of his life. It’s likely that caregivers for her son will need to decide whether to accept the inheritance coming to him and lose all governmental support he may’ve been able to receive, or they may have to disclaim all of the inheritance from his mother’s estate.

It’s also possible that probate proceedings could last for years due to the size of her estate. And all court proceedings will be public, including any disputes that arise along the way.

Such contentious court disputes are common with famous musicians. In Prince’s case, his estate has been subject to numerous family disputes since he died two years ago, and that even led to the revocation of a multimillion-dollar music contract. The same thing could happen to Franklin’s estate, as high-profile performers often have complex assets, like music rights.

Because these court battles will be public, not only will the contents of Franklin’s estate be available for everyone to see, but her family’s potential squabbles will likely be the subject of news headlines. All of these things could’ve been prevented with a well-drafted and counseled estate plan.

Learn from Franklin’s mistakes
Although Franklin’s situation is unfortunate, you can learn from her mistakes by beginning the estate planning process now. It would’ve been ideal if Franklin had a will, but even with a will, her estate would still be subject to probate and open to the public. To keep everything private and out of court altogether, Franklin could’ve created a will and a trust. And, within a trust, she could have created a Special Needs Trust for her child who has special needs, thereby giving him full access to governmental support, plus supplemental support from her assets.

While trusts used to be available only to the mega wealthy, they’re now used by people of all incomes and asset values. Unlike wills, trusts keep your family out of the probate court, which can save both time, money, and a huge amount of heartache. Plus, a properly funded trust (meaning all of your assets are titled in the name of the trust) keeps everything totally private.

Trusts also offer several protections for your assets and family that wills alone don’t. With a trust, for example, it’s possible to shield the inheritance you’re leaving behind from the creditors of your heirs or even a future divorce.

Moreover, trusts also offer protection if you become incapacitated and are no longer able to make decisions about your financial and healthcare needs. Using a trust, you can appoint someone of your choosing (not the court’s) to handle your financials if you’re unable to. With only a will in place, your family would have to petition the court to appoint a conservator or guardian to handle your affairs, which can be costly, time-consuming, and stressful.

Finally, if you have a child with special needs like Franklin did, a Special Needs Trust can prevent your child from losing eligibility for important government benefits, like Medicaid and Social Security. A Special Needs Trust—also not subject to probate—allows you to contribute funds for your child’s care without disqualifying them for these benefits.

Don’t wait another day
Regardless of your financial status, planning for incapacity or your eventual death is something that you should immediately address, especially if you have children. You never know when tragedy may strike, and by being properly prepared, you can save both yourself and your family massive expense and trauma.

Don’t follow in Franklin’s footsteps; use her death as a learning experience. Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, meet with us as your Personal Family Lawyer®. If you already have a plan in place, we can review it to ensure it’s effective and up-to-date. Contact us today for more information—we promise to make it easy.

This article is a service of Marianne S. Rantala, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

6 Key Steps For Conscious Co-Parenting: Part Two

6 Key Steps For Conscious Co-Parenting: Part Two

Last week, we shared the first part of this series, discussing some of the key steps for conscious co-parenting. In part two, we continue with the final stepshttp://rantala.com/blog/2018/08/22/6-key-steps-for-conscious-co-parenting-part-one/

Today, many married couples who decide to end their marriages choose conscious divorce. However, once the divorce is finalized, you must continue using the same positive approach in your joint-parenting efforts.


Conscious co-parenting is a child-centered process, where both you and your ex agree to work as cooperative partners for the sake of your kids. This ultimately helps both you and your children adapt in a healthier way.

Such collaboration can be challenging, but last week we offered three ways you can successfully navigate the process. Here, we continue with three additional ways to make conscious co-parenting work for you:

 

4. Respect your co-parent’s time with the children
Conscious co-parenting is about demonstrating to your children that you still want the other parent in their lives.

To this end, don’t do anything that might stop your kids from having an enjoyable time when they’re with the co-parent. This means not scheduling children’s activities during the co-parent’s time, unless you’ve asked them first. It also means respecting their time together by not constantly calling or texting.

It’s normal to miss your children when they’re away, but it will be easier and healthier for everyone if you respect their time together.

5. Get outside support
When it comes to divorce, the experience is often painful and unsettling. The underlying emotions can be overwhelming if they aren’t processed properly, which can have negative effects on your parenting skills.

Given this, it’s crucial you have support systems in place to move through this phase of life. There’s no single solution, so try a few different supportive outlets to find the one(s) that most suit you.

Whether it’s therapy, support groups, trusted confidants, and/or meditative solitude, you should take this opportunity to practice self-care. For better or worse, our personal identities are often largely centered around our marriages, so it’s perfectly natural to go through a grieving process when they end. Just don’t let the grief become too burdensome.

6. Use conscious co-parenting to achieve personal growth
While it may sound paradoxical, divorce can offer a wonderful opportunity for personal growth. The steps discussed here can help you adjust to your new life in divorce’s immediate aftermath, but they can also allow you to better express yourself throughout your life overall.

Consciously choosing a cooperative co-parenting relationship is just the beginning. You can bring the same mindful focus to every other area of your life. Treating your co-parent in a compassionate, respectful, and patient manner can provide the foundation for how you deal with all of life’s relationships and circumstances.

By doing this, you can serve as a role model for your children, demonstrating how they can deal with adversity in their own lives. In fact, conscious co-parenting can provide them with an array of vital skills that will strengthen their ability to endure the trials and tribulations they’ll likely face in the future.

From custody agreements to alimony payments, there are numerous legal issues that can arise when co-parenting, so be sure you have the legal support you need by consulting with us as your Personal Family Lawyer®, and we can help you identify how to get the best support possible. And given the fact that your family structure has changed, you’ll want to update your estate plan as well. Contact us today for assistance with any of these matters.

This article is a service of Marianne S. Rantala, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

6 Key Steps For Conscious Co-Parenting—Part One

Committing to a conscious divorce means protecting your children from end-of-marriage related trauma. When the marriage ends in a cooperative manner, divorce can be transformed from a contentious event into one that can inspire healthy growth.

In fact, engaging in divorce with a positive focus can better prepare both you and your kids for your new lives. But getting the divorce finalized is only the first step. Where the rubber really meets the road is how you navigate your new relationship as a co-parent.

To this end, it’s vital you keep the same mindful, child-centered approach to co-parenting. Conscious co-parenting means both parents put aside any negativity they may have toward one another, so they can place their children’s needs first.

While this may sound simple, it can be challenging. To help you get started, we’ve outlined six steps that are crucial to a collaborative approach to co-parenting.

  1. Establish a “professional” relationship with your co-parent
    Your marriage with your ex may done, but your relationship as co-parents will last a lifetime. Think of your new co-parenting relationship as a business partnership, where your business is raising successful, well-adjusted children. This professional approach can not only help you become a more effective parent, but it also helps prevent unnecessary conflict over personal boundaries and past problems.

For example, if you schedule a time to pick up the kids, treat it like an appointment with a colleague; don’t blow it off or be late. Be as courteous to your co-parent as you would with any business colleague.

This can be difficult, especially in the beginning when emotions are still raw. Just keep in mind that most people you work with aren’t necessarily your friends, but you must still work together to get the job done. Your job as co-parent is no different.

2. Communicate clearly, cordially, and consciously with your co-parent
Effective communication is paramount to successful co-parenting. This can present a challenge if poor communication was a primary cause of the divorce. By setting a professional tone, however, you may find communication becomes easier, since it’s free from emotional baggage.

Stop finger pointing and leave emotion out of your correspondence. Instead of accusing, think in terms of discussing. Co-parenting isn’t about one side winning and the other losing; it’s about teamwork, compromise, and conflict avoidance.

When communicating, make your kids and their healthy adjustment the focal point. Tailor everything you say in terms of shared responsibility, using terms like “we” and “us,” instead of “you” or “me.” Avoid anything judgmental: stick to the facts and how they affect your children’s well-being.

Never talk down about your ex in front of the kids, and don’t allow your children to be disrespectful toward your co-parent, either. You never want them to feel like they must choose a side.

Finally, don’t use your children as messengers. Speak directly to the co-parent yourself. With so many convenient ways to communicate these days, you should have no problem getting your message across directly. Indeed, there are special websites and apps, such as Coparently and Our Family Wizard, specifically designed to enhance co-parenting communication and allow you to easily share information and even upload joint calendars and schedules.

  1. Create a comprehensive parenting plan
    Every successful partnership requires planning, so sit down together and come up with a set of mutually agreed-upon guidelines and routines. This is essential for fostering security and predictability to help the children quickly and comfortably adapt to their new situation.Even though they may despise it, kids thrive on structure, so be consistent. If the rules and schedule differ when they’re with mom than when they’re with dad, this can cause conflict and confusion. Children develop best when parents present a united front, so make sure they understand rules will always be enforced.The more details the plan includes, the better. Try to anticipate potential problems ahead of time. How will holidays, birthdays, and vacations be shared? How will you resolve major disagreements between co-parents? How will new romantic relationships be handled? Be sure to revisit and update the plan regularly as the kids mature.

    Developing such a comprehensive plan with an ex is challenging, so it’s often helpful to have a third-party present for advice and dispute mediation. As your Personal Family Lawyer®, we can either help you to develop and maintain conscious co-parenting arrangements or refer you to trusted colleagues in the community who can do so and make sure that your estate planning reflects your custody wishes.

Next week, we’ll continue with part two in this series, discussing the key steps in conscious co-parenting.

This article is a service of Marianne S. Rantala Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

Avoid This Major Mistake When Adding an IRA to Your Estate Plan

Some people assume that because they’ve named a specific heir as the beneficiary of their IRA in their will or trust that there’s no need to list the same person again as beneficiary in their IRA paperwork. Because of this, they often leave the IRA beneficiary form blank or list “my estate” as the beneficiary.

But this is a major mistake—and one that can lead to serious complications and expense.

IRAs aren’t like other estate assets
First off, your IRA is treated differently than other assets, such as a car or house, in that the person you name on your IRA’s beneficiary form is the one who will inherit the account’s funds, even if a different person is named in your will or in a trust. Your IRA beneficiary designation controls who gets the funds, no matter what you may indicate elsewhere.

Given this, you must ensure your IRA’s beneficiary designation form is up to date and lists either the name of the person you want to inherit your IRA, or the name of the trustee of your trust, if you want it to go to a revocable living trust or special IRA trust you’ve prepared. For example, if you listed an ex-spouse as the beneficiary of your IRA and forget to change it to your current spouse, your ex will get the funds when you die, even if your current spouse is listed as the beneficiary in your will.

 

Probate problems
Moreover, not naming a beneficiary, or naming your “estate” in the IRA’s beneficiary designation form, means your IRA account will be subject to the court process called probate. Probate costs unnecessary time and money and guarantees your family will get stuck in court.

When you name your desired heir on the IRA beneficiary form, those funds will be available almost immediately to the named beneficiary following your death, and the money will be protected from creditors. But if your beneficiary must go through probate to claim the funds, he or she might have to wait months, or even years, for probate to be finalized.

Plus, your heir may also be on the hook for attorney and executor fees, as well as potential liabilities from creditor claims, associated with probate, thereby reducing the IRA’s total value.

Reduced growth and tax savings
Another big problem caused by naming your estate in the IRA beneficiary designation or forgetting to name anyone at all is that your heir will lose out on an important opportunity for tax savings and growth of the funds. This is because the IRS calculates how the IRA’s funds will be dispersed and taxed based on the owner’s life expectancy. Since your estate is not a human, it’s ineligible for a valuable tax-savings option known as the “stretch provision” that would be available had you named the appropriate beneficiary.

Typically, when an individual is named as the IRA’s beneficiary, he or she can choose to take only the required minimum distributions over the course of his or her life expectancy. “Stretching” out the payments in this way allows for much more tax-deferred growth of the IRA’s invested funds and minimizes the amount of income tax due when withdrawals are made.

However, if the IRA’s beneficiary designation lists “my estate” or is left blank, the option to stretch out payments is no longer available. In such cases, if you die before April 1st of the year you reach 70 ½ years old (the required beginning date for distributions), your estate will have to pay out all of the IRA’s funds within five years of your death. If you die after age 70 1/2, the estate will have to make distributions over your remaining life expectancy.

This means the beneficiary who eventually gets your IRA funds from your estate will have to take the funds sooner—and pay the deferred taxes upon distribution. This limits their opportunity for additional tax-deferred growth of the account and requires him or her to pay a potentially hefty income tax bill.

A simple fix
Fortunately, preventing these complications is super easy—just be sure to name your chosen heir as beneficiary in your IRA paperwork (along with a couple alternate beneficiaries). And remember to update the named beneficiary if your life circumstances change, such as after a death or divorce.

With us as your Personal Family Lawyer®, we can help you select the ideal beneficiary for your IRA and other estate assets. What’s more, we have systems in place that will ensure your designated beneficiary form is always up-to-date with the correct heir listed should your life circumstances dictate a change. Call us today to get started.

This article is a service of Marianne S. Rantala, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

The Ins and Outs of Collecting Life Insurance Policy Proceeds

Unlike many estate assets, if you’re looking to collect the proceeds of a life insurance policy, the process is fairly simple, provided you’re named as the beneficiary. That said, following a loved one’s death, the whole world can feel like it’s falling apart, and it’s helpful to know exactly what steps need to be taken to access the insurance funds as quickly and easily as possible during this trying time.

And if you’ve been dependent on the deceased for regular financial support and/or are responsible for paying funeral expenses, the need to access insurance proceeds can sometimes be downright urgent.

Here, we’ve outlined the typical procedure for claiming and collecting life insurance proceeds, along with discussing how beneficiaries can deal with common hiccups in the process. However, because all life insurance policies are different and some involve more complexities than others, it’s always a good idea to consult with a Personal Family Lawyer® if you need extra help or guidance.

Filing a claim

To start the life insurance claims process, you first need to identify who the beneficiary of the life insurance policy is—are you the beneficiary, or is a trust set up to handle the claim for you?

We often recommend that life insurance proceeds be paid to a trust, not outright to a beneficiary. This way, the life insurance proceeds can be used by the beneficiary, but the funds are protected from lawsuits and/or creditors that the beneficiary may be involved with—even a future divorce.

In the event that a trust is the beneficiary, contact us so that we can create a certificate of trust that you (or the trustee, if the trustee is someone other than you) can send to the life insurance company, along with a death certificate when one is available.

In any case, you (or the trustee) will notify the insurance company of the policyholder’s death, either by contacting a local agent or by following the instructions on the company’s website. If the policy was provided through an employer, you may need to contact their workplace first, and someone there will put you in touch with the appropriate representative.

Many insurance companies allow you to report the death over the phone or by sending in a simple form and not require the actual death certificate at this stage. Depending on the cause of death, it can sometimes take weeks for the death certificate to be available, so this simplified reporting speeds up the process.

From there, the insurance company typically sends the beneficiary (or the trustee of the trust named as beneficiary) more in-depth forms to fill out, along with further instructions about how to proceed. Some of the information you’re likely to be asked to provide during the claims process include the deceased’s date of birth, date and place of death, their Social Security number, marital status, address, as well as other personal data.

Your state’s vital records office creates the death certificate, and it will either send the certificate directly to you or route it through your funeral/mortuary provider. Once you’ve received a certified copy of the death certificate, you’ll send it to the insurance company, along with the other completed forms requested.

Multiple beneficiaries
If more than one adult beneficiary was named, each person should provide his or her own signed and notarized claim form. If any of the primary beneficiaries died before the policyholder, an alternate/contingent beneficiary can claim the proceeds, but he or she will need to send in the death certificates of both the policyholder and the primary beneficiary.

Minors
While policyholders are free to name anyone as a beneficiary, when minor children are named, it creates serious complications, as most insurance companies will not allow a minor child to receive life insurance benefits directly until they reach the age of majority. And the age of majority varies between states—with some it’s 18, and others it’s 21.

If a child is named as a beneficiary and has yet to reach the age of majority, the claim proceeds will be paid to the child’s legal guardian, who will be responsible for managing those funds until the child comes of age. Given this, in the event a minor is named you’ll need to go to court to be appointed as legal guardian, even if you’re the child’s parent. This is why we recommend never naming a minor child as a life insurance beneficiary, even as a backup to the primary beneficiary.

Rather than naming a minor child as a life insurance beneficiary, it’s often better to set up a trust to receive the proceeds. By doing that, the proceeds would be paid into the trust, and whomever is named as trustee will follow the steps above to collect the insurance benefits, put them in the trust, and manage the funds for the child’s benefit.

Whatever you decide, you should consult with us as your Personal Family Lawyer® to determine the best options for passing along your life insurance benefits and other assets to minor children.

Insurance claim payment
Provided you fill out the forms properly and include a certified copy of the death certificate, insurance companies typically pay out life insurance claims quickly. In fact, some claims are paid within one to two weeks from the start of the process, and rarely do claims take more than 60 days to be paid. Most insurance companies will offer you the option to collect the proceeds via a mailed check or transfer the funds electronically directly to your account.

Sometimes an insurance company will request you to send in a completed W-9 form (Request for Taxpayer Identification Number and Certification) from the IRS in order to process a claim. Most of the time, a W-9 is requested only if there is some question or issue with the records, such as having an address provided in a claim form that doesn’t match the one on file.

A W-9 is simply a way for the insurance company to verify information to prevent fraudulent activity. To this end, don’t be alarmed if you’re asked for a W-9. It’s a common verification practice, and it doesn’t automatically mean the company suspects you of fraud or plans to deny your claim.

While collecting life insurance proceeds is a fairly simple process, it’s always a good idea to consult with us as your Personal Family Lawyer® if you have any questions or need help to ensure the process goes as smoothly as possible during the often-chaotic period following a loved one’s death.

This article is a service of Marianne S. Rantala, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

Before Agreeing to Serve as Trustee, Carefully Consider the Duties and Obligations Involved—Part 2

Last week, we shared the first part of this series explaining the powers and duties that come with serving as trustee.   Following in part two, we discuss the rest of a trustee’s core responsibilities. Click here to see Part 1:  http://rantala.com/blog/2018/07/19/before-agreeing-to-serve-as-trustee-carefully-consider-the-duties-and-obligations-involved-part-1/

Being asked to serve as trustee can be a huge honor—but it’s also a major responsibility. Indeed, the job entails a wide array of complex duties, and trustees are both ethically and legally required to effectively execute those functions or face significant liability.

To this end, you should thoroughly understand exactly what your role as trustee requires before agreeing to accept the position. Last week, we highlighted three of a trustee’s primary functions, and here we continue with that list, starting with one of the most labor-intensive

of all duties—managing and accounting for a trust’s assets.

Manage and account for trust assets

Before a trustee can sell, invest, or make distributions to beneficiaries, he or she must take control of, inventory, and value all trust assets. Ideally, this happens as soon as possible after the death of the grantor in the privacy of a lawyer’s office. As long as assets are titled in the name of the trust, there’s no need for court involvement—unless a beneficiary or creditor forces it with a claim against the trust.

In the best case scenario, the person who created the trust and was the original trustee—usually the grantor—will have maintained an up-to-date inventory of all trust assets. And if the estate is extensive, gathering those assets can be a major undertaking, so contact us as your Personal Family Lawyer® to help review the trust and determine the best course of action.

The value of some assets, like financial accounts, securities, and insurance, will be easy to determine. But with other property—real estate, vehicles, businesses, artwork, furniture, and jewelry—a trustee may need to hire a professional appraiser to determine those values. With the assets secured and valued, the trustee must then identify and pay the grantor’s creditors and other debts.

Be careful to ensuring that regularly scheduled payments, such as mortgages, property taxes, and insurance, are promptly paid, or trustees risk personal liability for late payments and/or other penalties. Trustees are also required to prepare and file the grantor’s income and estate tax returns. This includes the final income tax return for the year of the decedent’s death and any prior years’ returns on extension, along with filing an annual return during each subsequent year the trust remains open.

For high-value estates, trustees may have to file a federal estate tax return or possibly a state estate tax return. However, Trump’s new tax law of 2017 doubled the estate tax exemption to $11.2 million, so very few estates will be impacted. But keep in mind, this new exemption is only valid through 2025, when it will return to $5.6 million.

During this entire process, it’s vital that trustees keep a strict accounting of every transaction (bills paid and income received) made using the trust’s assets, no matter how small. In fact, if a trustee fails to fully pay the trust’s debts, taxes, and expenses before distributing assets to beneficiaries, he or she can be held personally liable if there are insufficient assets to pay for outstanding estate expenses.

Given this, it’s crucial to work with a Personal Family Lawyer® and a qualified accountant to properly account for and pay all trust-related expenses and debts as well as ensure all tax returns are filed on behalf of the trust.

Personally administer the trust

While trustees are nearly always permitted to hire outside advisers like lawyers, accountants, and even professional trust administration services, trustees must personally communicate with those advisors and be the one to make all final decisions on trust matters. After all, the grantor chose you as trustee because they value your judgment.

So even though trustees can delegate much of the underlying legwork, they’re still required to serve as the lead decision maker. What’s more, trustees are ultimately responsible if any mistakes are made. In the end, a trustee’s full range of powers, duties, and discretion will depend on the terms of the trust, so always refer to the trust for specific instructions when delegating tasks and/or making tough decisions. And if you need help understanding what the trust says, don’t hesitate to reach out to us for support.

Clear communication with beneficiaries

To keep them informed and updated as to the status of the trust, trustees are required to provide beneficiaries with regular information and reports related to trust matters. Typically, trustees provide such information on an annual basis, but again, the level of communication depends on the trust’s terms.

In general, trustees should provide annual status reports with complete and accurate accounting of the trust’s assets. Moreover, trustees must permit beneficiaries to personally inspect trust property, accounts, and any related documents if requested. Additionally, trustees must provide an annual tax return statement (Schedule K-1) to each beneficiary who’s taxed on income earned by the trust.

Entitled to reasonable fees for services rendered

Given such extensive duties and responsibilities, trustees are entitled to receive reasonable fees for their services. Oftentimes, family members and close friends named as trustee choose not to accept any payment beyond what’s required to cover trust expenses, but this all depends on the trustee’s particular situation and relationship with the grantor and/or beneficiaries.

What’s more, determining what’s “reasonable,” can itself be challenging. Entities like accounting firms, lawyers, banks, and trust administration companies typically charge a percentage of the funds under their management or a set fee for their time. In the end, what’s reasonable is based on the amount of work involved, the level of funds in the trust, the trust’s other expenses, and whether or not the trustee was chosen for their professional experience. Consult with us if you need guidance about what would be considered reasonable in your specific circumstance.

Since the trustee’s duties are comprehensive, complex, and foreign to most people, if you’ve been asked to serve as trustee, it’s critical you have a professional advisor who can give you a clear and accurate assessment of what’s required of you before you accept the position. And if you do choose to serve as trustee, it’s even more important that you have someone who can guide you step-by-step throughout the entire process.

In either case, you can rely on us as your Personal Family Lawyer® to offer the most accurate advice, guidance, and assistance with all trustee duties and functions. We can ensure that you’ll effectively fulfill all of the grantor’s final wishes—and do so in the most efficient and risk-free manner possible. Contact us today to learn more.

This article is a service of Marianne S. Rantala, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

Before Agreeing to Serve as Trustee, Carefully Consider the Duties and Obligations Involved—Part 1

If a friend or family member has asked you to serve as trustee for their trust upon their death, you should feel honored—this means they consider you among the most honest, reliable, and responsible people they know.

However, being a trustee is not only a great honor, it’s also a major responsibility. The job can entail a wide array of complex duties, and you’re both ethically and legally required to effectively execute those functions or face significant liability. Given this, agreeing to serve as trustee is a decision that shouldn’t be made lightly, and you should thoroughly understand exactly what the role requires before giving your answer.

Of course, a trustee’s responsibility can vary enormously depending on the size of the estate, the type of trust involved, and the trust’s specific terms and instructions. But every trust comes with a few core requirements, and here we’ll highlight some of the key responsibilities.

That said, one of the first things to note about serving as trustee is that the job does NOT require you to be an expert in law, finance, taxes, or any other field related to trust administration. In fact, trustees are not just allowed to seek outside assistance from professionals in these fields, they’re highly encouraged to, and funding to pay for such services will be set aside for this in the trust.

To this end, don’t let the complicated nature of a trustee’s role scare you off. Indeed, there are numerous professionals and entities that specialize in trust administration, and people with no experience with these tasks successfully handle the role all of the time. And besides, depending on who nominated you, declining to serve may not be a realistic or practical option.

Adhere to the trust’s terms
Every trust is unique, and a trustee’s obligations and powers depend largely on what the trust creator, or grantor, allows for, so you should first carefully review the trust’s terms. The trust document outlines all the specific duties you’ll be required to fulfill as well as the appropriate timelines and discretion you’ll have for fulfilling these tasks.

Depending on the size of the estate and the types of assets held by the trust, your responsibilities as trustee can vary greatly. Some trusts are relatively straightforward, with few assets and beneficiaries, so the entire job can be completed within a few weeks or months. Others, especially those containing numerous assets and minor-aged beneficiaries, can take decades to completely fulfill. To ensure you understand exactly what a particular trust’s terms require of you as trustee, consult with us as your Personal Family Lawyer®.

Act in the best interests of the beneficiaries
Trustees have a fiduciary duty to act in the best interest of the named beneficiaries at all times, and they must not use the position for personal gain. Moreover, they cannot commingle their own funds and assets with those of the trust, nor may they profit from the position beyond the fees set aside to pay for the trusteeship.

If the trust involves multiple beneficiaries, the trustee must balance any competing interests between the various beneficiaries in an impartial and objective manner for the benefit of them all. In some cases, grantors try to prevent conflicts between beneficiaries by including very specific instructions about how and when assets should be distributed, and if so, you must follow these directions exactly as spelled out.

However, some trusts leave asset distribution decisions up to the trustee’s discretion. If so, when deciding how to make distributions, the trustee must carefully evaluate each beneficiary’s current needs, future needs, other sources of income, as well as the potential impact the distribution might have on the other beneficiaries. Such duties should be taken very seriously, as beneficiaries can take legal action against trustees if they can prove he or she violated their fiduciary duties and/or mismanaged the trust.

Invest trust assets prudently
Many trusts contain interest-bearing securities and other investment vehicles. If so, the trustee is responsible not only for protecting and managing these assets, they’re also obligated to make them productive—which typically means selling and/or investing assets to generate income.

In doing so, the trustee must exercise reasonable care, skill, and caution when investing trust assets, otherwise known as the “prudent investor” rule. The trustee should always consider the specific purposes, terms, distribution requirements, and other aspects of the trust when meeting this standard.

Trustees must invest prudently and diversify investments appropriately to ensure they’re in the best interests of all beneficiaries. Given this, trustees are forbidden from investing trust assets in overly speculative or high-risk stocks and/or other investment vehicles. Unless specifically spelled out in the trust terms, it will be up to the trustee’s discretion to determine the investment strategies that are best suited for the trust’s goals and beneficiaries. If so, you should hire a financial advisor familiar with trusts to help guide you.

Given the unpredictable nature of the economy, it’s important to point out that poor performance of trust investments alone isn’t enough to prove a trustee breached his or her duties to invest prudently. Provided the trustee can show the underlying investment strategies were sound and reasonable, the mere fact that the investments lost money doesn’t make them legally liable.

Next week, we’ll continue with part two in this series explaining the scope of powers and duties that come with serving as trustee.  Click here to view Part 2:  

http://rantala.com/blog/2018/07/27/before-agreeing-to-serve-as-trustee-carefully-consider-the-duties-and-obligations-involved-part-2/

This article is a service of Marianne S. Rantala, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

Donate Appreciated Assets to Charity Instead of Selling Outright For Tax and Income Benefits Using a Charitable Remainder Trust

If you have highly appreciated assets like stock and real estate you want to sell, it may make sense to use a charitable remainder trust (CRT) to avoid income and estate taxes—all while creating a lifetime income stream for yourself or your family AND supporting your favorite charity. 

A CRT is a “split-interest” trust, meaning it provides financial benefits to both the charity and a non-charitable beneficiary. With CRTs, the non-charitable beneficiary—you, your child, spouse, or another heir—receives annual income from the trust, and whatever assets “remain” at the end of the donor’s lifetime (or a fixed period up to 20 years), pass to the named charity(ties).

How a CRT works
You work with us to set up a CRT by naming a trustee, an income beneficiary, and a charitable beneficiary. The trustee will sell, manage, and invest the trust’s assets to produce income that’s paid to you or another beneficiary.
The trustee can be yourself, a charity, another person, or a third-party entity. However, the trustee is not only responsible for seeing that your wishes are carried out properly, but also for managing the trust assets in accordance with complex state and federal laws, so be sure the trustee is well familiar with trust administration.
With the CRT set up, you transfer your appreciated assets into the trust, and the trustee sells it. Normally, this would generate capital gains taxes, but instead, you get a charitable deduction for the donation and face no capital gains when the assets are sold.

Once the appreciated assets are sold, the proceeds (which haven’t been taxed) are invested to produce income. As long as it remains in the trust, the income isn’t subject to taxes, so you’re earning even more on pre-tax dollars.

Income options
You have two options for how the trust income is paid out. You can receive an annual fixed payment using a “charitable remainder annuity trust (CRAT).” With this option, your income will not change, regardless of the trust’s investment performance.

Or you can be paid a fixed percentage of the trust’s assets using a “charitable remainder unitrust (CRUT),” whereby the payouts fluctuate depending on the trust’s investment performance and value.

Tax benefits

Right off the bat, as mentioned above, you can take an income tax deduction within the year the trust was created for the value of your donation—limited to 30% of adjusted gross income. You can carry over any excess into subsequent tax returns for up to five years.

And again, profits from appreciated assets sold by the trustee aren’t subject to capital gains taxes while they’re in the trust. Plus, when the trust assets finally pass to the charity, that donation won’t be subject to estate taxes.

You will pay income tax on income from the CRT at the time it’s distributed. Whether that tax is capital gains or ordinary income depends on where the income came from—distributions of principal are tax free. 

If you have highly appreciated assets you’d like to sell while minimizing tax impact, maximizing income, and benefiting charity, consult with us as your Personal Family Lawyer®, so we can find the best planning options for you.

This article is a service of Marianne S. Rantala, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

Appoint a Guardian to Keep Your Kids In Safe Hands At All Times

Probably every parent who has watched the news lately has felt the heartbreak  over what’s happening to immigrant families at the border due to the Trump administration’s immigration regulations. 

As you likely know, the administration’s new “zero-tolerance” policy has led to the separation of more than 2,300 children from their parents at the U.S.-Mexico border between May and June 2018 alone.

Putting politics aside, with horror stories of toddlers being ripped from their mothers’ arms and audio recordings of children crying and begging for their parents, we imagine it would be hard for anyone with their own kids not to be disturbed.

What’s more, perhaps these events have got you thinking about how it would be for your children to be taken into custody of strangers. And if not, let this be the moment you willingly feel the fear and decide to use your privilege of being able to make choices on behalf of your children to ensure their well-being and care by the people you want no matter what happens.

It can happen to your family
Even though most people think that something like that could never happen to their family, they’re totally wrong. While your kids almost certainly won’t be taken into custody by U.S. border agents, your children could be taken into the care of strangers if something happens to you—even if your family or friends are on the scene.

But you can do something to protect your children and ensure they’re always in the care of people you know, love, and trust. If you use this atrocity against families to take action on behalf of your own kids—instead of merely feeling numbness and paralysis over not knowing what to do—these events can inspire you to do the things you know you must in order to properly take care of your family.

Understand the risk
While it may seem like a long shot, the consequences are serious enough that you must consider the real possibility of what could happen and ensure you’ve taken right actions to protect your loved ones. Let’s say you and your spouse have gone out to dinner together and left the kids with a babysitter. But on the way home, you’re in a car accident. The police will get to your house, find your children home with a babysitter, and have no choice but to take your kids into the care of the authorities (strangers) until they can figure out what to do.

This is the case even if you have friends or family living nearby. If you haven’t left proper legal documentation, the authorities have no option but to call child protective services—that is, unless you’ve legally given them an alternative. This is true, for example, even if you have named godparents. You must give the authorities a legal basis for keeping your children with the close friends or family you designate.

Without your action, when the babysitter answers the door, she’s in complete shock and willing to stay with your kids while the authorities find a relative to take them. Unfortunately, she doesn’t have the legal authority to care for the children—even temporarily—so the police have no choice but to call child protective services. These authorities will take your children into custody until they can locate and/or appoint the proper guardian.

Alternatively, maybe you have plenty of family, who’d want to take custody of your children if something were to happen to you. Perhaps some of them even live close by, so the authorities could locate them easily. It may be that even more than one family member would want to take custody of your children (and the financial resources you’re leaving behind for them).

We’ve seen what happens when well-meaning family members—who think they’d be the best choice as caretaker for their young relatives—go to battle in the name of love. It isn’t pretty. In such a situation, it takes years of legal fighting, making lawyers wealthy, while the children are stuck in the middle. In almost every case, each side fighting for the care of the children feels certain they’re doing what the parents would’ve wanted and what’s best for the children.

Know your options and your responsibility

The sad thing is, this all can be completely (and very easily) prevented. However, to ensure your children are never taken into the care of strangers—or put in the middle of a family conflict—you must take action now. Please do not leave this to chance. You have the privilege to be able to guarantee that your children are never taken into the care of strangers—or into the care of anyone you would not choose—but you must take action now to exercise that privilege.

Perhaps you believe this could never happen to your family because your family would never fight over your children or because you’ve named close friends as godparents. But why take that risk, when it’s so easy to do the right thing by the people you love more than anything?

And if you think you’ve already done the right thing because you have a will that names legal guardians for your children, think again. We’ve found that in most cases, even parents who worked with a lawyer to name legal guardians have made at least one of six common mistakes that leave their children at risk.

These mistakes are made because unfortunately, most lawyers do not know what’s necessary for planning and ensuring the well-being and care of minor children.

As your Personal Family Lawyer®, we’ve been trained by the author of the best-selling book, Wear Clean Underwear!: A Fast, Fun, Friendly, and Essential Guide to Legal Planning for Busy Parents, on legal planning for the unique needs of families with minor children at home. If you’ve already created a will, we can help you identify whether you’ve made any of the six common mistakes that could leave your children at risk. If you have not yet taken any action, we can help you take the first steps and make the very best decisions for the people you love.

 

Here’s how to get started

⇒ If you haven’t yet taken any action at all, we’ve created an easy-to-use website, where you can take the first steps to create legal documents naming long-term guardians for your children (the people you would want to raise your kids if you could not do so) absolutely free. Do it here now: https://mariannesrantalapc.kidsprotectionplan.com/

Afterward, call us for a comprehensive Family Wealth Planning Session to look at what else you may want to have in place to ensure the well-being and care of your children no matter what.

⇒ If you’ve already named long-term guardians in a will on your own or with a lawyer, we’ll review your existing legal documents and waive our normal $950 legal documents review fee to identify whether you’ve made any of the 6 common mistakes that could leave your children at risk. To activate this offer, simply call our office at (631) 627-3433. Tell us you’d like your existing plan reviewed, and you want to activate our “keep the children safe” special, and my team will waive the $950 plan-review fee.

Whatever your situation, you should take action now using one of our above services to make certain that your children are never taken into the care of strangers. You might think that such a thing could never happen to your family, but in these scary times, you can never be too safe.
 

This article is a service of Marianne S. Rantala, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

Create a Special Needs Trust to Protect the Financial Future of Your Child with Special Needs

It always surprises me to hear parents who have a child with special needs tell me that they were not aware of what they needed to do to ensure the future well-being and care of their child is properly handled. Or sometimes, they tell me they didn’t know they needed to do anything at all.

If that’s you, and you have a child with special needs at home, this article is for you. And if you have friends or family who have a child with special needs, please share this article with them.

Every parent who has a child with special needs must understand what’s needed to provide for the emotional, physical, and financial needs of their child, if and when something happens to them.

 

Naming guardians
Of course, the first and most critical step in ensuring the well-being and care of your child with special needs’ future is to name both short and long-term legal guardians to take custody of and care of your child, in the event of your death or incapacity. And as you well know, this responsibility doesn’t end at age 18, if your child will not grow into an adult who can independently care for him or herself.

While we understand this lifetime responsibility probably feels overwhelming, we’ve been told repeatedly by parents that naming legal guardians in writing and knowing their child will be cared for in the way they want, by the people they want, creates immense relief.

We frequently build in plans where the named guardians are properly instructed—and even incentivized—to give your child the same care you provide. For example, we’ve created plans whereby the named guardian is compensated for taking the child to dinner and the movies weekly, or doing something similar if this is something the child used to enjoy doing with his or her parents.

But without written instructions (and perhaps compensation) built into the plan, fun activities like this can often go by the wayside when you’re no longer available. For guidance on selecting legal guardians and properly instructing them to provide your child with special needs the same level of care and attention you do, consult with us as your Personal Family Lawyer®.

Beyond naming a guardian, you’ll also need to provide financial resources to allow your child to live out his or her life in the manner you desire. This is where things can get tricky for children with special needs. In fact, it may seem like a “Catch-22” situation. You want to leave your child enough money to afford the support they need to live a comfortable life. Yet, if you leave money directly to a person with special needs, you risk disqualifying him or her for government benefits.

 

Special Needs Trusts
Fortunately, the government allows assets to be held in what’s known as a “special needs trust” to provide supplemental financial resources for a physically, mentally, or developmentally disabled child without affecting his or her eligibility for public healthcare and income assistance benefits.

However, the rules for such trusts are complicated and can vary greatly between different states, so you should work with us as your Personal Family Lawyer® to create a comprehensive special needs trust that’s properly structured and appropriate for your child’s specific situation.

 

Setting up the trust
Funds from a special needs trust cannot be distributed directly to a beneficiary and must be disbursed to a third-party who’s responsible for administering the trust. Given this, when you initially set up the trust, you’ll likely be both the “grantor” (trust creator) and “trustee” (the person responsible for managing the trust), and your child with special needs is the trust’s “beneficiary.”

You’ll then name the person you want responsible for administering the trust’s funds once you’re no longer able to as “successor trustee.” To avoid conflicts of interest, overburdening the named guardian with too much responsibility, and provide checks and balances, it can sometimes be best to name someone other than your child’s guardian as trustee.

As the parent, you serve as the trustee until you die or become incapacitated, at which time the successor trustee takes over. Each person who serves as trustee is legally required to follow the trust’s terms and use its funds and property for the benefit of the individual with special needs.

And in all cases, you should name a series of successor trustees, which can even be a bank, trust company, or other professional fiduciary, as backups to your primary named trustee.

 

Placing money and property into a special needs trust
There are two ways to set up a special needs trust. In one situation, we build it into your revocable living trust, and it will arise, or spring up, upon your death. From there, assets that are held in your revocable living trust will be used to fund your child’s special needs trust.

In other cases, we can set up a special needs trust that acts as a vehicle for receiving and holding assets for your child now. This makes sense if you have parents or other relatives who want to give your child with special needs gifts sooner rather than later.

We’ll be dedicating a future article on the available estate planning options you can use to pass money to a special needs trust. Until then, consult with us as your Personal Family Lawyer® if you need guidance on the planning vehicles that are best suited for this purpose.

 

The trustee’s responsibilities
Once the trust is funded, it’s the trustee’s job to use its funds to support the beneficiary without jeopardizing eligibility for government benefits. To handle this properly, the trustee must have a thorough understanding of how eligibility for such benefits works and stay current with the law.  The trustee is also required to pay the beneficiary’s taxes, keep detailed records, invest trust property, and stay current with the beneficiary’s needs.

Given this huge responsibility, it’s often best that you name a legal or financial professional who’s familiar with the complexities of the law as trustee or co-trustee, so they can properly handle the duties and not jeopardize eligibility.

If you need help creating a special needs trust for your child, contact us as your Personal Family Lawyer ®. We can develop a sustainable living plan for your child with special needs that will provide her or him with the financial means they need to live a full life, while preserving their access to government benefits. Contact us today to get started.
 

This article is a service of Marianne S. Rantala, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.