EVERYTHING A BABY BOOMER SHOULD KNOW
And
The Family Dynamic
A Word About Trustees And Guardians
One of the shortcomings of a Will is that when both parents are gone the assets of the estate are generally given outright to the children if they are eighteen or older. Some of them may not be ready to manage this windfall profit and would greatly benefit from a trust.
There are many trusts and trustees to choose from to help guide children until a certain age. A trust for the children’s benefit can be very flexible, or not, depending on the desired goal. Would it be only for their education? Would it be distributed at ages twenty, twenty-six and thirty? Could they buy a car at age eighteen? What exactly would it mean to provide funds for their needs?
These are all good questions that can be answered with the appropriate directive in the trust. A directive is an actual statement explaining your intentions. But what every Trust needs in order to work is a good Trustee.
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Banks Or Professional Trustees?
When you choose a trustee you need to take the above mentioned qualities into consideration. Banks often have departments that specialize in managing trust accounts, and professional trustees are well-suited to accept substantial deposits and distribute money by computer. However, that says little for their human qualities.
These institutions normally view trust funds as though the money was bequeathed to them. They are simply not equipped to handle the day-to-day needs of a person with any compassion. They generally are not equipped to personally service the “smaller” beneficiary.
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A Few More Important Words About A Trustee
Before you pick a trustee, or request someone to act as trustee, think of what you are asking of them. You are putting them in a position of serious responsibility and perhaps a target for unruly or dissatisfied heirs.
Not only must they manage the “money” you accumulated over your life, but either “may” or “shall” distribute the principle of the trust to beneficiaries. This means they either “shall” distribute the trust funds based on reasonable proof of the beneficiary’s needs, putting the beneficiary more in control; or “may” distribute the funds, leaving distribution of the funds up to the trustee’s sole discretionary power.
These issues of who controls the distribution of trust funds, and by what standard of discretion the trustee may use to distribute those funds, are governed by the language used in the trust. That is why standard “boilerplate” forms are tricky if you don’t know what you are doing.
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Some Ethical Considerations, e.g. Who Does Your Attorney Represent?
The estate planning should begin before you meet with an attorney. Upon making an appointment you should be sent a questionnaire such as the one that can be downloaded from the Appendix in this guidebook.
The questionnaire in this Appendix is designed for married persons, but is easily adaptable for a single person. (A single person’s estate is simpler because of no ownership issues). You are required to fill out these forms to the best of your ability. This mental exercise will prepare you for the breadth and scope of estate planning. Even if you only read it, you will better understand the task at hand.
If you are married you must determine if the attorney will represent both of you, or just one. If you have been married to the same person and share the same children, then the answer may be easy.
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Leaving It All To The New Wife
One thing any experienced estate planner will attest to is the common phenomena of the man whose wife dies after thirty years of marriage. Let’s call them Bob and Joan. Bob then remarries a younger woman in due course. The children of the first marriage are grown and moved out of the house, or perhaps to another state.
In a majority of cases, if there is no plan in place at the time that Joan dies, Bob will scrap any notion of leaving both their property to the adult children, and will inevitably leave it all to the new wife. It happens all the time. The children, he feels, are old enough to take care of themselves and his loyalty is to the woman with him at the end.
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“Spousal Fiduciary Duty” Husbands and Wives Must Communicate – Truthfully
What a concept! This is something the law has developed to help balance any business acumen or financial advantage one spouse may have over the other. It helps regulate their confidential relationship regarding community property transactions between themselves. For example, suppose Husband wants to leave the family residence to a daughter of a previous marriage, including Wife’s community share.
The Husband’s fiduciary duty to Wife, and vice versa, is the same as that between business partners. He must explain what he wants to do and put his plan in order without putting Wife’s estate at an unfair disadvantage. If Wife is okay with giving up her share of the residence, than she must put it in writing. Otherwise the gift would be voidable.
There is a duty (Calif. Family Code § 721) between husband and wife to give true and accurate information regarding anything that affects their community property transaction. It imposes a duty of the “highest good faith.”
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Leaving It To The Children
As for leaving money to children, there is much to take into consideration depending on the age and temperament of the child. (See A Word About Trustees.) The older you get the more outrageous it seems to leave a large sum of money to an eighteen year old.
It is commonly recommended that a trust be used to stagger payments between the ages of 23, 26, and 30. The expectation here is that at 23 your son will want to buy a Porsche, at 26 he will have graduated college, and at 30 he will have settled down and know what he wants. For others, the ages of 20, 30 and 40 sound more appropriate.
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An Insider's Guide to Estate Planning
TO ESTATE PLANNING:
KNOW WHAT YOU’RE TALKING ABOUT!
Why pay money so an attorney can try and explain the difference between a Bypass Trust and a QTIP Trust, when this book will answer that question long before you have to pay for a consultation?
This guidebook helps you map out your estate plan so it goes exactly where you want it to go. It explains the tools you need to give away or preserve your money, homes, businesses, heirlooms, cars, boats, jewelry, tools, art, memorabilia, and every other artifact of life you have accumulated over the last 45 to 65 baby booming years.
Mark S. Cornwall, Esq.
210 E. Figueroa Street
Santa Barbara, CA 93101