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How Do I Administer a Trust?

How Do I Administer a Trust? So, you just found out that you are the trustee of your relative’s trust. What do you do? This blog gives an overview of the steps that a trustee needs to take to administer a trust after the settlor (i.e., creator of the trust) passes away. In general, a trust administration is the orderly administration of a trust after settlor or the settlors pass away.  It can either be the administration and distribution of one or more trusts for the benefit of a surviving spouse after one spouse passes away or the administration and distribution of a trust to the beneficiaries after a single settlor passes away or both settlors pass away. This particular blog will focus on the administration of a trust created by one settlor.  How Long Does a Trust Administration Take? In general, a trust administration takes between six months and one year to complete.  There are many factors that can lead to a delay in the administration of a trust.  One factor that always causes delays in the trust and increases the attorney’s fees and costs associated with it is the presence of difficult parties.  Most trust  administration issues can be resolved by the parties with appropriate dealings outside of the court.  However, like any contested matter, the more that that trustee has to go back to court to get administrative issues resolved, the more the trust administration process will be delayed.  Another factor that can delay the trust administration process is a difficult asset, such as a hard to sell timeshare or other trust asset.  Finally, one additional factor that can delay the trust administration process is a formal accounting in a case.  Because the court accountant and the court typically take months to approve a final accounting, this almost always delays the trust administration process considerably.  For this reason, unless it is unavoidable, I always encourage the trustee to do an informal accounting with the beneficiaries, rather than a formal accounting approved by the court. What Are the Key Steps of a Trust Administration? After the settlor passes away, there are several things that need to be done to make sure that his or her trust is administered properly.  First, it is important to meet with an attorney as soon as possible after the settlor passes away. Depending on the type of trust that you are dealing with, there may be deadlines to make certain tax and other elections that need to occur within a certain time...

What Happens to My “Digital Assets” If Something Happens to Me?

What Happens to My “Digital Assets” If Something Happens to Me? In the last 20 years, the concept of “digital assets” has emerged as our world has been taken over by the likes of web domains, e-mails, Facebook, and Twitter. The term “digital assets” can include many different things: your ownership and intellectual property rights in social media accounts, your access to online bill payments or money processing, your rights to use software or listen to music, and your ability to view e-mails and other similar information. These digital assets primarily take on these different forms: (1) information stored on computers, tablets, and smart phones, such as photographs, videos, e-mails, and music; (2) online accounts and social media, such bank accounts, bill pay, accounts with Amazon.com, Pay Pal, or e-Bay, and subscriptions to online magazines as well as Facebook, LinkedIn, and Twitter; and (3) storing files in “the cloud”. This has created a whole new area in our laws, and with technology ever changing, our legal system is frankly struggling to keep up. These “digital assets” impact almost everyone in our modern society. As a result, there have been several cases in recent years about who has access to these digital assets when someone passes away. This blog discusses a recent Arizona statute that addresses these issues and also gives the readers some practical advice about how to handle their own digital assets. Arizona’s New Digital Assets Statute In an effort to address these concerns, Arizona legislators passed a new law dealing with digital assets that went into effect in May, 2016 (“Act”). Although the Act also deals with the ability of trustees, conservators, and agents under a financial power of attorney to access digital assets, this blog focuses on the sections of the Act that deal with a personal representative’s right to access such assets. First, some comments by the drafters of the Act are helpful in understanding the framework of the Act.  The Act creates in “three-tier priority system”. First, the Act “gives top priority to a user’s wishes as expressed using an online tool.” Second, if there is no online tool in effect, then the Act “gives legal effect to the user’s directions” in a will or trust.  Third, if no such directions exist, then “the terms of service governing the account will apply.” In general, when a personal representative is making a request for disclosure from Outlook or Facebook, Twitter, he or she must follow the terms of the Act. Under the Act, “if a...

Three Ways to Transfer Your Business

Three Ways to Transfer Your Business Let me paint the picture. You are in your 60’s or early 70’s after having working the last 20-30 years building up a successful family business and you are trying to figure out a way to slow down and enjoy some of the fruits of your labor. Some of your family members work in the business, and others do not want to have anything to do with it. In addition, some of your children have the ability to run the business, but you are not quite ready to turn it over to them yet. As you sip on your Corona on the beach in San Diego, you wonder: How do I this? Where do I start? For most business owners, their family business is a huge part of the value of their estate. Yet, so many business owners fail to properly plan for the transfer of their business as part of their estate plan. However, this type of planning is crucial for the success of your business. If you have not already drafted your business succession plan as part of your overall estate plan, then I strongly recommend that you start the process when you get back from the beach in August. With proper planning, you can probably get the documents drafted and in place by the end of 2017 if you start when you get back. But don’t delay, as these business succession plans have a way of working their way back onto the “back burner” when things start to pick up again in late August or early September. Although there are other options, the three most common options are discussed below.  Sell Your Business Outright One way to transfer the business to your children is to sell them your interest, outright, during your life. If you sell it to them, then you will need to sell for fair market value, or else the transfer may be considered a part sale – part gift, which could trigger gift taxes with the IRS. The terms of the sale are also important. For an outright sale, there are essentially two options. First, there can be a cash sale where the children pay the full purchase price at the time of closing, typically with the assistance of bank financing. Second, the buyer pays off a seller carry-back note over time. For either option, it is important that the cash flow of the business be able to support the bank note payment or the seller-carryback note...

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