Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Wednesday, November 26, 2014

Stepping Up as Successor Trustee


When a current trustee is unable to serve, a successor trustee fills the vacancy.  In order to act, the successor trustee will need to show a certificate or affidavit of trust, as this is indicative that they embody the legal authority to act on behalf of the trust. 

Upon an individual’s death or incapacity, the assets held in trust are not frozen and the successor trustee can access and manage the assets without court intervention.  However, any assets that are not held in trust will be frozen until someone with proper legal authority to manage them comes forward.  This may require court intervention. 

In order to take advantage of potential tax benefits, minimize trustee liability, and maintain proper records, careful attention should be taken by the trustee to complete all of the required duties.  Consider seeking professional help, as it may expedite the settlement process and insure no steps are missed.

See Carissa Giebel, Acting as a Successor Trustee, Green Bay Gazette, Nov. 24, 2014. 

November 26, 2014 in Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

8 Common 529 Plan Misconceptions

Student loan

A 529 college savings plan is a vehicle allowing families to save for college costs with tax-deferred earnings growth and tax-free distributions.  Additionally, many states offer a tax break for residents contributing to their plans. 

However, the rules about purchasing the plan and using the money can be difficult to digest, and there can be much confusion about how the plans operate.  Below are some of the common misconceptions:

  1. You are limited to your home state’s plan. Many individuals believe they are limited to plans offered by their state of residence.  However, a buyer can select any state’s plan, but first look to see if your state offers tax benefits or reductions for residents.
  2. Contribution limits equal those of your IRA. 529 plan contribution limits are set by the states and can be as high as $380,000.  To avoid gift tax consequences, federal law allows single taxpayers to contribute up to $14,000 in one year or make a lump-sum contribution of $70,000 to cover five years.  “It’s not limited to $5,500 if you’re under 50 like it is with an IRA.”
  3. Your income is too high to contribute. Some investors confuse a 529 plan with a Coverdell Education Savings Account, which is only available to people with income below $110,000 for singles or $220,000 for those married filing jointly.  529 plans have no income limits.
  4. The account must be in your child’s name. The donor, not the beneficiary is in charge of a 529 plan.  Thus, it is best to have the account with the parent listed as the owner or the trustee with the child as the beneficiary.
  5. The money will be lost if your child does not go to college.  If the beneficiary does not use the money in the 529 plan for some reason, the assets can be transferred to another beneficiary.  A 529 plan is very flexible.
  6. The money can only be used for a four-year college. Funds from a 529 plan can be used toward many postsecondary education programs, not just traditional colleges.
  7. The beneficiary must be below a specific age. A 529 plan can be opened for a beneficiary of any age, and the funds can be distributed regardless of how old the beneficiary is when he or she attends college or graduate school.
  8. It will hurt your child’s chance of getting financial aid. Although 529 plans will factor into the financial aid calculation, the benefits usually outweigh the drawbacks.

See Kate Stalter, 8 Common Misconceptions About 529 Plans, U.S. News & World Report, Nov. 24, 2014. 

November 26, 2014 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Battle Over Officer's Estate

Dave Monrogio

A battle is brewing over the estate of a Naples police officer who killed himself during a domestic violence double shooting. 

The Board of Trustees of the Naples Police Officers’ Retirement Trust Fund filed a complaint this month, asking a judge to determine who should receive Officer Luis “Dave” Monroig’s $100,000 lifetime pension: his ex-wife or his mother. 

Although Monroig’s sixteen-year marriage ended in divorce in August 2013, he never changed the primary beneficiary of his city pension benefits before shooting both himself and his girlfriend in her Estero home. 

The complaint states, “The Board of Trustees cannot determine which defendant is entitled to the death benefit under the terms of the (pension) plan, the marital settlement agreement, the beneficiary designation and (a new state law) without running the risk of double payment.” 

Under the law, which went into effect July 1, 2012, if the policy holder designated an ex-spouse as a primary beneficiary before their marriage legally ended and the policy holder dies on or after July 1, 2012, that beneficiary is considered predeceased and benefits would then go to the contingency beneficiary. The law affects life insurance policies, annuities, IRAs, 401Ks and other employee benefit plans.

Monroig’s father is also challenging his daughter-in-law’s right to his estate, which involves a car worth $5,000 and other personal effects, clothing, and furniture. 

See Aisling Swift, Battle Heats Up Over Dead Officer’s Pension, Estate, Naples News, Nov. 23, 2014.

November 26, 2014 in Current Affairs, Estate Administration, Estate Planning - Generally, New Legislation | Permalink | Comments (0) | TrackBack (0)

Using an IRA and DAF for Charitable Estate Planning

BagFor individuals wishing to continue their charitable donations into the afterlife, a Donor-Advised Fund can assist in this area of estate planning. By naming a qualified foundation as beneficiary of an IRA and entering a Designated Fund Agreement, a DAF can provide tax benefits such as reducing estate tax and capital gains, and make sure that the donor's favorite charity in life is still supported after their death.

See, DAF as the Beneficiary of an IRA, Charitable Planning, Nov. 20, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

November 26, 2014 in Estate Planning - Generally, Estate Tax | Permalink | Comments (0) | TrackBack (0)

Real Life Legal Books Available for Free Download December 1-3, 2014

Real_Life_LegalReal Life Legal publishes concise booklets designed to provide non-lawyers with straight-forward information on a variety of legal topics including several relevant to estate planning.

Real Life Legal is making these books available for free download from December 1 through December 3 of this year.  For more information, download their press release by clicking on this link.

November 26, 2014 in Books - For the Classroom | Permalink | Comments (0) | TrackBack (0)

Families of Miners Killed in Explosion Seek Restitution

Gavel2Over four years ago, a mine explosion in the Upper Big Branch mine in West Virginia killed many miners, and a year later the mine's owner agreed to pay restitution to the miners' families as part of a non-prosecution agreement. Now, some of the families have filed a lawsuit against the company claiming they were never paid their restitution and seeking payment to be made.

See Yawana Wolfe, Miner's Families Sue Over Death Payments Delay, Courthouse News Service, Nov. 25, 2014.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

November 26, 2014 in Current Affairs, Current Events, Estate Administration, New Cases | Permalink | Comments (0) | TrackBack (0)

Risks of Retained Death Benefit Life Settlements

RiskA retained death benefit life settlement allows the seller to retain the contractual right to death benefits, such as a life insurance policy, to have the purchaser maintain the policy  and pay some death benefits to the seller. However, these policies can be risky for sellers. In addition to the risk of the policy lapsing despite notice requirements to the seller, tax consequences can vary by each agreement and are often unfavorable for sellers. The tax consequences depend on how the transaction is treated, such as being considered an annuity or loan or other type of transaction. These policies can be complicated, and require careful consideration and balancing of risk versus reward.

See Robin S. Weinberger and Peter N. Katz, Retained Death Benefit Life Settlements: Considering the Uncertainties, Life Health Pro, Nov. 21, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

November 26, 2014 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Duties of a Trustee

QuestionWhen a family member is named as trustee of a trust after the death of a family member, the new role and fiduciary duties that come with it can be confusing and stressful. In addition to considering seeking legal assistance, here are some key duties of a trustee:

  • Find all assets of the trust.
  • Protect those assets.
  • Separate the trust's property from all other property.
  • Make sure all laws and trust terms are followed.
  • Act with the care that a prudent person would act with.
  • Act as a loyal and impartial trustee.
  • Make sure to avoid conflicts of interest.
  • Protect the trust by enforcing both claims the trust may have and defending the trust in claims of others.
  • When discretionary matters come up make sure to act reasonably.
  • Make sure to provide beneficiaries with accounting reports.
  • Ensure co-trustees fulfill their duties as well.
  • Keep confidential information confidential.

See Wayne M. Zell, You Have Been Named as Trustee for a Living Trust--Now What?, The National Law Review, Nov. 20, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

November 26, 2014 in Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Tuesday, November 25, 2014

Share Family's Money History During Holidays

Family dinner

For many families, Thanksgiving is one of the only times the entire family will be together.  This provides an opportunity to tackle family finances and long-term planning decisions.

While many families shy away from addressing touchy subjects around the holidays, discussions can lead to some rewarding and productive exchanges. 

To start, do not jump right into talks about money or future living arrangements.  Rather, begin with family history and legacies.  “Encourage them to share with their children and grandchildren their successes and failures.  And it’s almost impossible to talk about anything in life without talking about money.”

Family gatherings are an ideal opportunity to pass along money lessons to children.  This is also a good time for elderly parents to talk with adult children about family heirlooms and let them know which items have sentimental value to them. 

See Glenn Ruffenach, This Thanksgiving, Share Your Family’s ‘Money History’, Market Watch, Nov. 24, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

November 25, 2014 in Estate Administration, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Swiss Museum Accepts Gurlitt's Bequest

Swiss Museum

The trustees of the Kunstmuseum Bern announced that the museum would accept the bequest of the art collection of Cornelius Gurlitt.  Because the collection is believed to contain looted works and could expose the Swiss museum up to years of litigation, the institution has taken the full six months allowed by German probate law to make the decision to accept or reject the gift. 

As I have previously mentioned, the collection comprises of around 1,300 works by artists including Picasso, Chagall and Renoir found in Gurlitt’s Munich apartment in 2012 during a routine tax investigation.  The majority of the collection is believed to have been accumulated by Gurlitt’s father, Hildebrand Gurlitt, a Nazi-era art dealer.

The president of the Jewish World Congress, Ronald Lauder, warned the Bern museum that accepting the bequest would “trigger an avalanche of lawsuits.” 

See Julia Michalska and Javier Pes, Swiss Museum Accepts Gurlitt’s Problematic Bequest, The Art Newspaper, Nov. 24, 2014. 

November 25, 2014 in Current Affairs, Estate Administration, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)