Imagine your grandmother still lives in her own home and is the owner of a piece of land in another county. One day a nice man knocks on her door and strikes up a conversation. She does not get many visitors and enjoys the company. The man starts stopping by on a regular basis. In one of their conversations she mentions the piece of land that she owns. Her newfound friend offers to purchase the land from her so she doesn’t have to worry about maintaining it anymore and won’t wonder what will happen to it when she is gone. Thinking that she is doing the right thing, your grandmother sells the property to her “friend” for well below fair market value.
Additionally, imagine your father was recently released from the hospital and requires assistance at home. You live out of state and hire your cousin’s best friend’s college-age daughter, Anna, to come by the house a few days a week to help out. Anna tells your father that it would be easier for her to help him pay bills and to go to the store for him if your father adds her to his bank account. Several weeks later, you find out that your father’s bank account has been drained.
Unfortunately, situations like these are becoming more and more prevalent. A properly executed estate plan can not only prevent confusion and infighting after the death of a loved one, but it can also help to prevent elder abuse during an individual’s life. Estate planning offers a wide range of avenues that can ensure you and your assets are safe both before and after your death. In difficult times, parties looking to take advantage of elderly persons can prey on those that do not have a properly executed estate plan in place.
In some instances, those seeking to take advantage of you can even be the ones you love the most. Creating a trust and choosing the proper Trustee and Co-Trustee can create a buffer between you, the creator of the trust (also referred to as the Settlor or Trustor), and the assets. If you are concerned that your loved ones may haggle or fight with each other over assets, selecting an outside Trustee or Co-Trustee, such as a bank or independent trust company, can help alleviate those fears. Communication is an underrated element of estate planning and is often overlooked. When your estate plan is completed, sit and talk with your family and trusted advisors – together – and explain why you decided to take a particular course of action. Clear and calm communication can prevent familial strife and the dreaded “L” word: Litigation.
Creating a Family Trust
A revocable trust is a document that provides for the management and distribution of your assets both during your lifetime and upon your death. The primary advantages of a trust are avoiding probate and guardianship proceedings. The Settlor transfers their assets to the trust during their lifetime so that the trust is the owner of the assets. The Settlor names a series of Trustees who will serve if the Settlor is incapacitated or upon death. The Settlor may also choose to name someone to serve as a Co-trustee with them to assist with management of the trust. Aside from avoiding probate and guardianship, putting your assets in a trust can help prevent elder abuse during your lifetime. The ability for a third-party stranger to take advantage of an elderly grandparent or parent decreases once the assets are placed into a trust. The trust becomes the sole owner of the assets and the Trustee or Co-trustees are the only parties allowed to distribute, sell or transfer the assets in their capacity as Trustees. Scammers and people seeking to take advantage of the elderly are looking for easy ways to gain access to assets. If the trust is the owner of the assets, it creates multiple hurdles for the would-be abuser to overcome in order to gain access to your loved one’s funds.
Once you have decided that you want to create a trust, you will have to select a Trustee. The Trustee is in charge of the trust and acts in accordance with the trust agreement for the benefit of the beneficiaries. During your lifetime, you are the primary beneficiary of the trust. The Trustee owes fiduciary duties to the beneficiaries and could be held liable if the trust agreement is not followed or if assets of the trust are misused. This is why selecting your Trustee is a very important step of the estate planning process. Some things to consider in selecting a Trustee:
- Will you serve as Trustee?
- Would it be beneficial to have someone serve as a Co-trustee with you to help in the management of your assets?
- If you decide to have a Co-trustee, do you want to require two signatures on all transactions, or do you want them to have the authority to sign for the trust independently?
- Will you select an individual, bank trust department or trust company to serve as Trustee?
- If selecting an individual, is the person you are selecting able to manage finances in a responsible manner and able to be fair and follow instructions?
If you select an individual to serve as Trustee, you will want to select successor trustees to act if your first named trustee unable or unwilling to serve as Trustee.
Having a Co-trustee to act along with you in the management of your trust during your lifetime can create a buffer between you and potential abuse or scams. Not only can a Co-trustee check your actions, they can check the actions of others around you. You should clearly communicate the intent behind any requirements you place in your trust agreement to the Co-trustee and successor trustees. Upon your incapacity or your death, the responsibility and decisions related to the trust will be solely in the hands of your trustee, so ensure your trust is drafted clearly and choose your Trustees carefully. In some circumstances, the Trustee may face backlash from beneficiaries and will have to uphold the trust agreement no matter what. If the trust contains ambiguities, it can lead to litigation. An attorney experienced in estate planning can ensure your wishes are carried out by carefully drafting your trust agreement and assisting you in deciding on the right individual or corporate fiduciary to serve as Trustee.
Communication is Key!
The final step in the estate planning process is to communicate your wishes to your loved ones and heirs. A calm and clear line of communication can prevent years of heartache after you are gone. Communication may bring about difficult conversations between you and your loved ones, but it is best to have the conversations now to avoid any problems down the road.
An open line of communication with your family or loved ones is essential in protecting yourself from abuse. Not only will everyone in the family know the plan, drastically decreasing the likelihood of abuse, but the chances a stranger can take advantage of any confusion created by not having an estate plan decrease as well.
In addition, if everyone understands your intent and plan in advance, the Trustee will have an easier job managing expectations after you are gone. Mistrust can be caused by a lack of communication in the months after a loved one is gone, when one family member has all of the information and the others are left wondering with little information. We at BML encourage you and your family – no matter what your estate plan is – to discuss the details in depth.
At Ball Morse Lowe, we want the opportunity to help you with your estate plan and want to help you protect yourself and your assets. BML has an extremely qualified and dedicated team that is updated on all current estate planning laws. Please reach out to us for all of your estate planning needs and our team will help you every step of the way.