San Antonio, TX Estate Planning

Removing Unwanted Trustees

Choosing a trustee is hard -- but getting rid of one is harder. Beneficiaries who choose to switch trustees can find the process costly, drawn out, and unpleasant. But it may be getting a bit easier.

Can you swap your trustee for a new one?

Many good reasons exist for why a trust beneficiary might want to change trustees. The beneficiary might have moved to another state and prefer a trustee who is closer. The trust investments might have evolved and a trustee with different investment expertise might be needed. Modern trusts normally contain provisions that allow removing a trustee in these types of situations. However, for trusts that do not have such provisions, which includes most older trusts, removing a trustee can be difficult. Unless the trustee voluntarily resigns, the beneficiary will have to go to court and prove that the trustee has done something negligent or worse.

A recent article in Barron's, titled "Dumping a Trustee," explains that in some states it is getting easier for beneficiaries to remove unwanted trustees. This is especially true in states that have adopted the Uniform Trust Code. The Code empowers beneficiaries to remove a trustee on a no-fault basis. This means the beneficiary still needs a good reason for the request, but that reason does not have to rise to the level of wrongdoing by the trustee.

As the article details, if bank mergers have caused the original bank trustee to no longer exist or to have merged with a much larger out of state bank, that can be a good enough reason to change trustees.

If you are a beneficiary considering removing a trustee, then regardless of any provisions in the trust you should first consult with an experienced estate planning attorney. That is the best way to learn what the rules are in your state and how any trust provisions might affect trustee removal.

Reference: Barron's (September 27, 2014) "Dumping A Trustee"

Estate Plan Location, Location, Location

You might think those three words - "Location, location, location!" - are uttered more by realtors than estate planning attorneys, but I beg to differ. Of course, when I repeat the phrase to clients I am not talking about the site of new home or office, but rather the location of individuals' most important planning documents.

When you hear about the importance of location, you probably think of real estate. But realtors aren't the only ones chanting "location, location, location." Estate planning attorneys are just as concerned with location, but for different reasons.

In a recent article titled "Location, Location, Location re: Estate Planning Documents," The National Law Review explains why location is important to estate planning attorneys. Where your estate plan documents are located is an important part of ensuring that your plan is fulfilled as intended. If no one knows where everything is after you pass away, they will not be able to carry out your estate plan.

Location, however, is not the end of the subject. It does not do any good to tell someone where to find your estate plan if no one will be able to easily access the plan. For example, if you put your plan in a safety deposit box, the bank is not going to let just anyone access it after you pass away. Even if a family member goes to the bank with the key, unless the bank has prior authorization to allow that person to access your box after you pass away the bank will turn him or her away. A court order will be needed to access the box.

While you are thinking about where to store your estate plan documents, remember to think about how someone will be able to access them after you pass away. If you have questions about location and access, ask your estate planning attorney for suggestions.

To set up a free consultation to design and estate plan click here.

Reference: The National Law Review (September 26, 2014) "Location, Location, Location re: Estate Planning Documents"

Andrew Madoff's Estate Could Face Clawback

The court-appointed trustee seeking to recover money for bilked investors began taking aim at Andrew Madoff's money even before his Sept. 3 death from mantle cell lymphoma. Two federal officials also said Madoff would have likely faced tax evasion charges if he had not died.

Have you ever heard of a clawback?

When investors are defrauded in financial schemes, courts will often appoint trustees. These trustees have the responsibility of going after people who profited from the schemes and returning money to the defrauded investors. In a Ponzi scheme, this often means that those investors who paid in first and who received payouts from the funds that later investors paid into the scheme have to return the money they received. This is what has happened in the case of Bernie Madoff's Ponzi scheme. It's called a clawback.

With Andrew Madoff's death, however, there is a new twist. The trustee has long tried to recover money from Andrew with little success. Now that he has passed away, his estate will have to defend itself against the trustee's attempts. The issue is not one that goes away upon death. Interestingly, The New York Daily News, in a recent article titled "Bernie Madoff's last surviving son was under scrutiny until he died - and questions still surround $16 million estate," reports that federal investigators were considering charging Andrew with tax evasion. This move would have pressured him to repay the money, even though investigators could not prove Andrew was involved in the scheme.

The Madoff situation is obviously unusual. One thing to keep in mind as it develops, however, is that any legal issues you might have at the time you pass away may continue. When that is the case, then your estate still has to deal with them. If you are someone who might be sued because of business dealings, you will want to consider this when choosing an executor or trustee.

Better yet, consult an experienced estate planning attorney to help guide you through these potentially dangerous waters.

Click here for more information on protecting your assets with estate planning.

Reference: The New York Daily News (September 28, 2014) "Bernie Madoff's last surviving son was under scrutiny until he died - and questions still surround the $16 million estate"

Parents Went to Court Over Son's Burial

The facts of the Wilson case involved a divorced couple, at odds over where to bury the ashes of their 23-year-old son, who was killed in a tragic car crash when he was hit by a drunk driver.  When he died, the son was single and had no children.  He left no will or specific instructions for the disposition of his body.  His parents, William and Lili, were the co-personal representatives and sole beneficiaries of his estate.  They agreed on having his body cremated, but couldn’t agree on what to do with the ashes.

When deciding how to dispose of a decedent's ashes, are the remains considered property? This is not an easy scenario for the court or the family involved.

A recent case in Florida concerned the remains of a 23-year-old man who was killed by a drunk driver. The man was not married and did not have children. This left his parents as his sole heirs and his parents were divorced. The two disagreed over what to do with his ashes.

The father wanted to divide the ashes between the two of them, while the mother disagreed with that on religious grounds. Because they could not agree, they ended up in court.

To read the full story of this unusual litigation, click over to an article in Wealth Management titled "May He Rest in Pieces?." The article has the entire story of the litigation, the legal theories the parents relied on, and why the court decided as it did.

Ultimately, the mother won in this case.

This case highlights two important issues. The first is that you should make the disposition of your remains part of your broader overall estate plan. That did not happen in this case because the deceased did not have an estate plan, not even a will.

This is another important issue and a common problem. Younger people think they have many years left to create an estate plan. However, as this case shows, you never know when you might have a life-ending accident. Without an estate plan, you very well could leave family members to argue over something as basic and fundamental as what to do with your remains.

Regardless of how old you are, make sure that you have made your wishes known and make sure that you consult an experienced estate planning attorney. You can never know when it will be too late to do either.

For more information on the fundamentals of estate planning, click here.

Reference: Wealth Management (September 24, 2014) "May He Rest in Pieces?"

Deceased's Tax Liabilities Fall on Executor or Executrix

The decedent Robert Reitano owned stock in two closely held corporations, each of which owned a fishing boat.  His assets consisted of little else besides the shares of stock.  Marci McNicol, who owned stock in one of the corporations, was appointed the executrix of the decedent’s estate.  In her role as executrix, McNicol was given notice of the decedent’s “significant” federal tax liabilities.  McNicol did not pay these liabilities, but instead distributed the decedent’s stock in the two corporations to herself.

If you are the executor or executrix of an estate, can you be held liable for the deceased's tax bills?

A recent article in JD Supra, titled "T & E Litigation Newsletter - September 2014 #1," tells the story of a federal tax case involving an executrix who was held personally liable for the deceased's tax liabilities. In this case, the deceased had few assets besides stock in two corporations, each of which owned a fishing boat. The executrix, who also had stock in the corporations, was informed that the deceased had significant federal tax liabilities. Instead of using the deceased's stock to pay the tax liabilities, the executrix transferred the stock to herself.

In this case, the executrix was held personally liable for some of the tax liabilities of the deceased under the Federal Priority Statute. Just as it sounds, that statute provides that a deceased person's debts to the federal government take priority over other debts.

The statute also states that if an executor or personal representative knows about the debt to the government and chooses to pay other debts before paying the government debt, that person can be held personally liable.

This can be something of a trap for executors who are not aware of the law. The executor cannot choose which debts to pay and then ignore other debts. Instead, an experienced estate attorney should be consulted about any debts in the estate and how they should be paid.

For more information on fulfilling your role as the personal representative and probating an estate click here.

Reference: JD Supra (September 12, 2014) "T & E Litigation Newsletter - September 2014 #1"