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Trust Administration: How a Trustee Can Collect Reasonable Fees

January 24, 2017/in Estate Planning /by Michael Lonich

Although trusts do avoid the complication and expense of probate proceedings, a trustee—the person given power to hold legal title to and to manage trust assets—is not necessarily spared the administrative burdens that can accompany estate management.  Trustee responsibilities can include clearing title to property held in the decedent’s name, the preparation and filing of estate and income tax returns, and the collection of insurance proceeds—essentially any task necessary to administer the trust as the trust instrument instructs.  Typically, the creator of the trust—the settlor—will appoint a trustee in the trust instrument and provide compensation from his or her estate for the trustee’s services.  However, if the trust instrument does not specify any compensation, California Probate Code § 15681 allows a trustee to receive “reasonable compensation under the circumstances.”

In re McLaughlin’s Estate defines “reasonable.”  First, the trial court has wide discretion when making a fee determination, but it should consider the following factors:

1) The gross income of the trust estate

2) The success or failure of the trustee’s estate administration

3) Any unusual skill or experience which the trustee may have brought to his/her work

4) The fidelity or disloyalty displayed by the trustee

5) The amount of risk and responsibility assumed by the trustee

6) The time spent by the trustee in carrying out the trust

7) Community customs as to fees allowed by settlors/courts or as to fees charged by trust companies and banks

8) The character of the administration work done

9) Whether the work was routine or involving skill and judgment

10) Any estimate which trustee has given of his/her own services.

In McLaughlin, the appeal court concluded, after considering the above factors, that the trial court justly allocated reasonable fees—the trustees had profitably and with special skill managed the trust property, had accurately summarized receipts and transactions, and had committed a large amount of time to the trust’s administration.

Estate of Nazro provides another example of the above factors in action: Here, although the trustee received dividend checks, made bank deposits, wrote checks, prepared quarterly accountings, and reviewed trust assets, the work did not consume much of the trustee’s time.  Further, the court noted that corporate trustees in the area customarily charged management fees based on a schedule of percentages of the value of the various trust assets.  Therefore, the court held that $2,500 was an appropriate amount of compensation for the trustee’s services.

Ultimately, managing a trust estate is not always a walk in the park—if not otherwise provided, trustees should not be afraid to ask for compensation for their services.  However, keep in mind that compensation must reasonable and proportional to the work done on behalf of the trust.

If you have recently been named or appointed as a trustee or you are interested in creating a trust, please contact the experienced attorneys at Lonich Patton Erlich Policastri.  We can help you understand what being a trustee entails, and if you want to create a trust, how you can properly compensate your chosen trustee.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Sources:

California Probate Code § 15681

In re McLaughlin’s Estate (1954) 43 Cal.2d 462

Estate of Nazro (1971) 15 Cal.App.2d. 218

https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png 0 0 Michael Lonich https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png Michael Lonich2017-01-24 11:09:252021-12-22 20:11:06Trust Administration: How a Trustee Can Collect Reasonable Fees

Three Things to Know About Creating a Living Trust

July 27, 2016/in Estate Planning, Probate /by Virginia Lively

First, one of the biggest advantages of creating a living trust is avoiding probate court.  Administering a will or trust through probate court takes time and money.  A living trust is a great estate planning vehicle because it can keep the entire administration process court-free.  When the settlor of the trust passes away, the terms of the trust dictate how the estate should be administered. In turn, probate court is avoided.

Second, make sure that the successor trustee is someone who is capable of administering the trust.  Often times, the oldest child is chosen to be the successor trustee.  However, the oldest child is not always the right choice.  A successful administration requires a trustee who is organized, diligent, and capable of administering the trust.  It is also beneficial to have someone with an understanding of accounting.  If your oldest child does not have any of these characteristics, consider appointing another child, relative, or friend.  If no one you know is capable of administering the estate, you may have to hire a third party. There are a number of trust companies and banks that administer trusts.  The biggest concern about hiring a third party is the administration fees, which can be substantial.  If your estate can handle the fees, a third party may be the right choice for you.  Lastly, a trust will never fail for lack of a trustee.  If the elected trustee refuses, another one will be appointed.

Finally, creating a trust avoids California’s intestacy laws.  A state’s intestacy laws provide the default estate plan for those who die without a will.  In California, the beneficiary of a decedent’s estate depends on whether the property was community property or separate property.  Assuming that decedent was married and had community property, the surviving spouse’s intestate share is the decedent’s one-half share of the community property.  On the other hand, if the decedent’s property was separate property, the intestate share of the surviving spouse depends on how many children the decedent had, if any.  While it is important to know a state’s intestacy laws, they should be avoided at all cost.  Thus, creating a trust is a way to avoid intestate succession and have your estate administered the way you want it.

If you are interested in creating a living trust or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information.  The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters, and we are happy to offer you a free consultation.  Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Sources:

California Probate Codes § 6400-6414.

https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png 0 0 Virginia Lively https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png Virginia Lively2016-07-27 10:22:382021-12-22 20:15:57Three Things to Know About Creating a Living Trust

Trust Administration: The Basics

April 3, 2014/in Estate Planning /by Michael Lonich

Trust administration is the process used to ensure that a trustee complies with California law and is carrying out the mandates of the trust as written. For example, a common task in trust administration is ensuring that the title to assets held in the trust is properly transferred. Trust administration also includes the process by which a trust creator’s (also known as the “trustor” or “settlor”) estate is distributed following his or her death. Following the creator’s death, the successor trustee(s) takes over management of the trust. The trustee must take multiple steps to properly administer the trust assets.

After the death of the trustor, the trustee of any trust has a number of fiduciary duties with regard to the trust and its assets. Here are some important examples:

  • Locate the deceased’s important documents, including the will, trusts, tax papers, and funeral directives.
  • If deceased was living alone, change locks and secure the house.
  • Check on insurance for the property and any cars the deceased owned to be certain the assets within the trust are protected.
  • Arrange to have certified copies of the deceased’s death certificate from the city or county where the death occurred.
  • Take an inventory of all assets and the value of those assets, because the value will affect the new tax basis of the items going forward. The value of all these items at death may need to be considered when evaluating federal state tax liability (if any).
  • Make a list of any household items that will be distributed to beneficiaries, and consider photographing the items to help with organization.
  • Take an inventory of bank accounts and the like. It may help to streamline the accounts and consolidate them into one place so that it is easier to keep a record of all trust activity, including bills paid and deposits made.
  • As trustee, you are responsible for paying any remaining debts or bills. If these are not paid you, and not the estate, may be personally liable.
  • You may need to obtain a Tax ID number for the trust if the trust will generate more than a few hundred dollars between the date of decedent’s death and when all of the assets are distributed. This step can be complicated and you may want to refer to an attorney or a tax professional for advice.
  • Make sure that all tax returns are filed in a timely fashion.
  • File any claims for life insurance, IRA’s or other assets that require claims. Also be sure to liquidate any assets that need liquidating, but get advice before you act because there may be serious tax consequences.
  • Accounting is required of trustees by law. Keep a record of all assets in existence at death and show all additions to the trust, subtract all expenses, and be prepared to show current assets within the trust. Place the assets into a non-interest bearing account to make sure the value does not change after the final accounting is complete.
  • Distribute the trust assets. Have a lawyer or other professional create a receipt and release form for each beneficiary, memorializing that each person received their inheritance and that the trustee is released from further liability.

While trust administration is generally handled outside the court system, breach of any of the trustee’s fiduciary duties can result in a court action being brought by a beneficiary. For this reason, it is important that a trustee seek out the help of a qualified trust attorney for guidance as needed.

The attorneys at Lonich Patton Erlich Policastri  are experienced in the area of trust administration and can advise the trustee regarding their duties and responsibilities while guiding them through the trust administration process. In addition, our attorneys have experience assisting beneficiaries who believe the trustee is not acting properly. We invite you to contact our office to schedule a free consultation, with no obligation, to discuss your trust administration needs.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png 0 0 Michael Lonich https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png Michael Lonich2014-04-03 16:30:512021-12-22 20:59:07Trust Administration: The Basics

Selecting a Successor Trustee for Your Revocable Trust

November 22, 2010/in Estate Planning /by Michael Lonich

A “trustee” is a person who is responsible for managing the trust assets.  Many individuals choose to name themselves as the trustee of the trust so they can exercise control over the trust during their lifetime.  In addition, it is wise to add a successor trustee who will manage the trust assets if you ever become incapacitated or die.

When choosing a person to serve as your trustee or successor trustee, make sure you pick someone who is reliable and honest.  The trustee has a vast amount of authority and will not be required to act under the court’s direct supervision.

Just recently, the individuals in charge of the estate of 104 year old heiress, Huguette Clark, have come under attack for some questionable dealings with her estate.  A criminal investigation is pending regarding the attorney and accountant in charge of handling Clark’s money.  The investigation is looking into the sale of her Stradivarius violin for $6 million and a Renoir painting for $23.5 million.  Click here for the full article.

To learn more about successor trustees, please contact us.  Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png 0 0 Michael Lonich https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png Michael Lonich2010-11-22 15:15:292021-12-22 22:00:25Selecting a Successor Trustee for Your Revocable Trust
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Located in San Jose, Lonich Patton Ehrlich Policastri handles matters for clients in northern California, specifically San Jose and Silicon Valley. Our services are available to anyone within the following counties: Santa Clara, San Mateo, Contra Costa, Santa Cruz, Monterey, and San Benito. For a full listing of areas where we practice, please click here.

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