Who Do You Trust? What you need to know about choosing or changing your trustee, executor, or agent. Cheryl Schaffer, MST, CPA, AEP Estate & Trust Partner Wright Ford Young & Co cheryl@cpa-wfy.com 949-910-2727 Victoria Gray, CFA, CTFA, TEP Vice President The Northern Trust Company vag1@ntrs.com 949-717-5507
The Estate Plan Where There s A Will, There s A Way! A plan is the greatest gift one can give to one s family. As long as there are families, estate planning, Wills, and Trusts will still be needed, even if the estate tax is permanently repealed. Long before the estate tax was enacted in 1916, people used Wills and Trusts to plan for the distribution of their wealth. The primary goal of estate planning is and always has been to achieve your personal and family goals, legacy, values; tax considerations are secondary. 2
Takeaways Who should plan for incapacity or death? Your estate plan is of great importance because it is likely the last communication that you will have with those whom you love. These documents can also provide guidance to those who will care for our family members our executors and trustees when we no longer can do so ourselves. Frequently descendants and/or trust beneficiaries have questions about the transfer plan in place for their family s wealth. Give them the answer by ensuring that your estate plan respects your values, goals and aspirations for your loved ones. By clearly articulating your goals, your estate planner can better design an estate plan that helps ensure your intentions are met, and your trustee(s) will be in better position to administer your wealth transfer instruments in accordance with those intentions. And for those with a plan already in place, allow these detailed questions to further inform your vision, thereby helping to ensure that your wealth transfer intentions build the legacy you desire and deserve. 3
Who Can Serve as a Fiduciary? An executor and trustee generally have different responsibilities, none the less, one person or entity can serve both roles. The role can be a lifelong, and sometimes beyond, responsibility. Individual [Family, Friends, Attorney, Accountant] Professional [Private Professional Fiduciaries, Corporate Fiduciaries] 4
The Basic Estate Planning Documents Wills and Codicils take effect at death, may or may not involve probate Trust and Amendments Many kinds of trusts Building blocks of a typical trust Type of document Transferring assets to your trust Grantor s rights and powers Designations and rights of beneficiaries Fiduciary rights, powers and obligations Investment standards and decisions Distribution of Income and Principal Miscellaneous trust provisions and exhibits Healthcare Directives provides instructions to your agent for your care during your life Living Will provides for your disposition at death Power of Attorney gives authority to your agent to act on your behalf during your life A letter to your loved ones and/or advisers explaining your desires, goals, and intent. Fair is not the same as equal. 5
Trusts and Trustees What is a Trustee? A trustee is the person who must manage the assets in a trust for the benefit of the beneficiaries. During your lifetime, you are the trustee of your trust while you are able and willing. If you are incapacitated, the named successor trustee manages the trust assets for your benefit while you are alive. After your death, the named successor trustee manages and distributes the trust assets to and for the beneficiaries according to the trust. 6
The Trustee hats A Trustee wears many hats: Fiduciary Administrator/Coordinator Surrogate Parent/mentor/teacher/therapist Business owner/employee Real estate owner/environmentalist/insurance coordinator Investment owner Accountant Planner Protector Healthcare Coordinator Legal Coordinator 7
Basic Duties of a Trustee Duty to keep the beneficiaries reasonably informed of the trust and its administration Duty to administer the trust according to the terms of the trust Duty of loyalty Duty of impartiality among beneficiaries, unless otherwise provided in the trust Duty not to use or deal with trust property for the trustee s own profit Duty of a trustee not to take part in any transaction adverse to the beneficiary Duty to knowingly become a trustee of an adverse trust Duty to take reasonable steps to take, keep control and preserve the trust property Duty to make the trust property productive under the circumstances for the trust Duty to keep the trust property separate from the non-trust property Duty to properly designate property as part of a trust Duty to enforce claims that are part of the trust property Duty to take reasonable steps to defend actions that may result in a trust loss Duty to not delegate to others the performance of acts reasonably required Duty to supervise agents and co-trustees in matters properly delegated Duty as a co-trustee to participate in the administration of the trust Duty as a co-trustee to take reasonable steps to prevent another co-trustee breach of trust Duty to compel a co-trustee to redress a breach of trust Duty to distribute to beneficiaries as per the trust or if per a power of discretion 8
The Role of Trustee Following is a representative though by no means comprehensive summary of what is expected from a trustee. Depending upon the trust s terms and holdings, the trustee will assume many or all of these responsibilities. Legal Obligations Accounting and Administration Investment Management Securities Custody Tax-Related Responsibilities Duties to Beneficiaries Estate Settlement/ Executorship Responsible for proper administration Investigates claims and opposes invalid claims in court Seeks legal counsel when needed Establishes bookkeeping procedures Inventories and changes asset titles Pays bills Performs continuous accounting Submits records for independent audit Develops appropriate strategy to protect the interests of the grantor and beneficiaries Reviews assets regularly for quality and performance Makes timely and intelligent adjustments to the portfolio Plans transactions to minimize taxation Collects all assets and related income Tracks dividend notices, bond calls and maturities Acts upon stock warrants and subscription rights Maintains detailed records of all assets and transactions Documents asset acquisition dates, cost bases and adjustments Keeps records of taxable income Files annual trust tax returns Furnishes information for beneficiary tax returns Communicates regularly Makes mandatory payments Exercises discretion if payments are discretionary Distributes assets on trust termination Provides detailed account statements Ensures courts and taxing authorities requirements are met Investigates and discharges obligations to creditors Determines final distributions in keeping with the trust agreement Arranges final transfer of assets Arranges for daily investment of cash 9
How to choose or change a trustee Ask questions Interview prospective trustees Credentials, licenses, skill sets History and longevity Succession Services offered References Fees and costs for standard duties, extraordinary services Potential conflicts 10
Organizing Your Plan Review with your trustee/advisor team, your current plans and documents [know what your documents include; write/ask questions] Design flexibility into your documents. Prepare an Inventory of your assets to include title held, account numbers, acquisition date, tax costs, and contact information [Confirm titling.] Prepare a Contact List of relatives [a Family tree is most helpful], advisers, important people and discuss. [Include address, email address, telephone, etc.] Talk to your family before the event. Prepare for child care based on age and circumstances Plan for incapacity Access codes, keys, alarm company notification 11
Organizing Your Plan Review your insurance coverages, such as: o Homeowners [property, casualty, fire, flood, earthquake] o Scheduled items such as jewelry, collections, other o Auto o Umbrella o Medical/Health/Dental [List doctors and medicines] o Life o Business continuity Review employer/employee benefits and coverages Review retirement vehicles IRAs [traditional, Roth] Review business continuity or exit strategy 12
Organizing Your Plan Plan for pets [food, water, comfort, veterinarians] Plan for digital assets including password management [any online account, email, social networking, websites, domain names, photosharing websites, etc.] Plan for special/non-financial assets i.e. real estate, oil, gas & minerals, copyrights, patents or royalties Taxes: o Income taxes [personal/fiduciary/business] o Gift taxes o Estate Taxes o Generation Skipping Taxes [GST] o Property [Real Estate, property, business] Review Charitable Planning [current, planned] 13
Keep Secure! Portable Base of Operation [from the October 2005 issue of AARP Bulletin-as updated for today s presentation] Will and/or trust documents Powers of attorney Insurance Policies Contact list Recent investment statements [could substitute your inventory if all data and contact information recorded] Recent tax return[s] Copies of birth/marriage certificates Social security cards [copies] Passports and other identity documents List of prescriptions you take [you may want to keep the pharmacy print out that also lists instructions and cautions] Emergency cash Cell phone charger for the car/standard, extra batteries Safe combination Safe deposit box keys Copy of driver s license Computer user names and passwords List of checking/savings account numbers [again you could substitute your inventory] List of credit card numbers and company information [inventory] 14
Keep Secure! Safe-Deposit Box Originals of Wills and/or Trusts Copies of Powers of Attorney Life insurance policies Original inventories [financial, home [photos/list], appraisals, etc.] Family birth, marriage, and death certificates Adoption papers Citizenship papers Military service records Loan agreements, notes Certificates of deposit Real Estate deeds Vehicle titles Mortgage paperwork Stock and bond certificates Jewelry/coins/precious metals Employment contracts/business agreement 15
Keep Secure! Friend, Relative, or Adviser [Be clear how and when information to be used and how it will be safeguarded in the meantime.] Paper or digital copies of your documents/inventory Your emergency contact information including email and cell phone Contact list for heirs and advisers should something happen to you. 16
Be Prepared. Remember, the greatest gift you can give to yourself and those you love is a well thought out plan. To borrow a popular motto, Be Prepared. How prepared are you? A good plan violently executed now is better than a perfect plan next week. - General Patton 17
Cheryl is well recognized for her work in tax planning and preparation for individuals, estates, trusts, and private foundations. Cheryl obtained her B.S. from California State Long Beach and her Masters in Taxation from Golden Gate University. She is a frequent lecturer on estate and income tax issues, has instructed other CPAs for continuing education programs, has taught private foundation taxation at the graduate level and has lectured annually for the Estate and Trust Section of the Orange County Bar Association. Cheryl Schaffer, C.P.A., MS.T., A.E.P Accredited Estate Planner Tax Partner of Estates and Trusts Wright Ford Young & Company 16140 Sand Canyon Avenue Irvine, CA 92618 949-910-2727 Cheryl@cpa-wfy.com Cheryl is the past chairperson of the California Society of CPAs Estate Planning Committee, past president of the Planned Giving Roundtable of Orange County, past chairperson of the American Heart Association s Planned Giving Committee, and former board member of Someone Cares Soup Kitchen. She is past President of the Orange Coast Estate Planning Council. 18
Victoria A. Gray is a Vice President and Senior Administrative Officer for Trust and Estate Services of Northern Trust s Newport Beach office. Prior to joining The Northern Trust Company in August of 1989, Mrs. Gray was Vice President and Senior Trust Officer for Boston Safe Deposit and Trust, Newport Beach. She also served as Senior Trust Officer for Bank of America and as a Trust Officer for Wells Fargo Bank. Mrs. Gray received a B.S. Degree in Mathematics and a M.B.A. Degree from California Polytechnic State University, San Luis Obispo. She also holds lifetime California State Teaching Credentials for secondary and community college education in the areas of math, chemistry, and statistical analysis. Victoria A. Gray, CFA Vice President, Personal Fiduciary Services The Northern Trust Company 16 Corporate Plaza Newport Beach, CA 92660 (949) 717-5507 VAG1@ntrs.com Mrs. Gray s professional affiliations include serving on the board of STEP, Society of Estate and Trust Practitioners, Orange County Chapter. She is past president of the Orange Coast Estate Planning Council and previously on the board of the Partnership for Philanthropic Planning-Orange County as past President. She is currently on the UCI Advisory Council. She has presented and co-presented on a variety of topics related to trust administration and fiduciary matters for the University of California Continuing Education of the Bar-Orange County Chapter and the CalCPA Orange County/Long Beach Chapter, the Orange Coast Estate Planning Council, as well as, the Sigma Chapter, Graduate Women in Science and other organizations. Additionally, she helps to lead the Orange County and Desert Literary Societies in promoting literacy. She is affiliated with the Boy Scouts of America through Troop 606 and was past chair of the Women of Excellence Awards Program. She was appointed to the Board of Trustees of the Orange County Council of the Boy Scouts in 1999, and the Learning for Life Character Education Board in 2001. She belongs to the Daughters of the American Revolution and is a member of Soroptimist International as a Past-President, Treasurer, and chaired the Distinguished Women s Events for a number of years. She s had the privilege of partnering with a number of charities as a volunteer for specific projects or events. Mrs. Gray is also a member of the Cardinal Key and Kappa Mu Epsilon honor societies. She earned the Chartered Financial Analyst [CFA] designation and is a member of the Los Angeles and Orange County Societies of Financial Analysts. She also holds the Certified Trust and Financial Advisor [CTFA] designation from the Institute of Certified Bankers. 19
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