Tax / Legal question

Ask a trusted relative to be the trustee.

during your life, you will be the trustee. After your death, you will hopefully have available a trusted family member and/or friend who will be willing to serve as trustee for free (they should be reimbursed for legit out of pocket expenses). This is usually how it is done.

On Sat, 15 May 2010 20:02:39 EDT, "Wallace" wrote Re Re: Tax / Legal question:

That is good advice.

May I also suggest that before you set up the trust, buy and read a book about Living Trusts so that you have a good understanding of how they work.

Last year we had a close family member with a living trust pass away. I was the successor trustee. We were mighty glad that during that disorienting, confusing and chaotic period of life-changing tragedy we didn't have to deal with the probate process.

| Last year we had a close family member with a living trust pass away. | I was the successor trustee. We were mighty glad that during that | disorienting, confusing and chaotic period of life-changing tragedy we | didn't have to deal with the probate process.

Could you describe how this worked? There are two things I've always wondered about. How do you deal with random personal property, i.e., is it somehow declared to belong to the trust? Without the probate process is anyone appointed as a representative to, e.g., sign final tax returns?

Dan Lanciani ddl@danlan.*com

On Sun, 16 May 2010 16:06:38 EDT, ddl@danlan.*com (Dan Lanciani) wrote Re Re: Tax / Legal question:

The living trusts (LTs) that we in our family use have a clause that

"...the Settlor may add or remove property to Schedule-A [where the trust property is listed] at any time.."

Just about anything can be added to the list covered by the LT. However as a practical matter IMO it only makes sense to list important and/or substantial personal assets there. That can be done by just writing a letter to the LT adding/deleting what you want. Then attached the letter to the LT document.

It helps a lot to have important financial accounts to be in the name of the trust, e.g. "Dan Lanciani Trust, Dan Lanciani Trustee". Since the LT uses the SSN of the Settlor it's usually pretty easy to change the account names.

Technically, random personal property not listed as belonging to the LT should go through probate as it is covered by the deceased's Will. If that personal property is substantial and/or important to the beneficiaries covered in the Will, or there is a possibility of dispute, then you definitely need to probate that property if it's not listed in the LT.

There are a lot of good books out there about establishing LTs to avoid probate. I would suggest you get one from the library and read it as a good start to finding out how they work.

Note that, depending on state law, there may be advantages to doing probate even if you have a LT and can thus distribute assets without probate.

We are really glad that we used a LT in addition to a Will.

Normally when a trust is set up there is a document that transfers random personal property to the trust. This generally shows the trustor's intention that the trust own such property. At least in California a court, when asked, will give an order that property (even real estate) belongs to a trust when it is clear from the trustor's documents that was his intent, even though for some reason the transfer had not legally taken place.

I've seen this happen mostly with real properties that were refinanced. They may have been held in a trust already, but the refinancing lender generally requires the property be taken out of the trust before new loan papers are signed.

It can go back into the trust after that, but borrowers are seldom told what is going on, and properties in those cases often end up out of the trust.

As for the tax returns, IRS isn't terribly picky, as near as I can tell. If nothing more formal applies, whoever has the decendent's assets can act as the personal representative for the tax returns.

I had to do some research on this recently because I'm serving as a friend's executor. He broke the longstanding family tradition of DIY estate planning and actually had a will. But his aunt and his mother, both of whom died in 2009, did everything through joint tenancy and TOD accounts. Since all the assets wound up with my friend, I'm filing all the returns and don't expect any trouble. Of course, it doesn't hurt that they're all balance due returns.

I anticipate more trouble from picky things like title companies and holders of assets. His father, who died in 1999, is still on a lot of things. And my favorite is two 2009 1099-R's I found in his father's name and SSN for IRA distributions. I finally get my letters testimentary Thursday and will be able to start turning over rocks to see what's there.

Phil Marti VITA/TCE Volunteer

What is an example of where probate is a good thing?

On Tue, 18 May 2010 22:16:02 EDT, " snipped-for-privacy@yahoo.com" wrote Re Re: Tax / Legal question:

When there is a possibility of unknown debts. I believe that in most states probate starts the clock running for most creditors to submit claims on the estate and after the clock runs out, some claims can be barred.

What is the statute of limitations on debts with and without probate?

It depends on state law. In California the general statute of limitations on debts is four years. But from the time notice of probate is published claims have to be filed within four months or they are banned.

Interesting. I wonder if the four month period applies to the inter vivos Trust, and not just the deceased. The trust is a separate entity.

Stu - do you know about how long it takes to probate an estate in San Mateo County?

In Maryland, creditors have six months from the date of notice to file a probate claim.

It's also worth noting that in most jurisdictions there is a concept of "Transferee Liability". Under this theory the liability can attach to the beneficiary IF the asset was transferred incorrectly, including without giving an unknown creditor proper notice and the opportunity to file a claim.

So even if probate isn't required, not filing can provide a credit with an extended opportunity to file a claim against an asset - legitimate or not you'd still have the cost of fighting the claim. By opening a probate estate and posting notice you can pull the rug out from under a creditor easier and quicker if necessary.

Gene E. Utterback, EA, RFC, ABA

California hasn't been a state long enough to be sure of the answer. ;-)

In California a trust for a decedent can get the same protection if it gives notice to creditors the same way a probate estate is required to.

Because of the issue of notice to creditors, it is practically impossible to close a California probate in less than six months. Depending on other issues, eight to twelve months is actually about the quickest it can be done when you're trying hard to do it quickly.

Other states have different procedures, and may conclude probates in a shorter time.