Provided by Charlie Robinson
“We have children who
are beneficiaries of trusts with lots of assets who are unable to get shoes from
the trustee. What good is a trust that doesn’t take care of its beneficiaries?”
That was the first question I was asked recently at a seminar sponsored by the
local association for retarded citizens. The question centers on an issue that I
believe at least as important as the proper drafting of the appropriate estate
planning documents. Who will be the fiduciary i.e., trustee, power of attorney,
personal representative to follow my wishes if I become incapacitated and when I
die?
Traditionally both client
and attorney tend to believe that the estate planning/life planning work is
complete when the documents are signed and the assets correctly titled.
Nonsense!
The
completion of documentation is critical but is really the starting place for the
equally important next phase - implementation. Planning starts the journey but
you only get to your destination by implementing the plan. Does the person or
company you have named to take over at your incapacity or death have the
expertise of a seasoned trust department? If the person you have named to serve
as your fiduciary cannot deal comfortably with the following questions, then the
success of your plan implementation may depend on your fiduciary’s decision to
utilize competent legal, financial, and accounting advice.
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Answer
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Do you understand the terms
of the trust agreement and can you explain them to the trust’s beneficiaries? |
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Answer
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Is there a current
beneficiary entitled to income for life? If so, do you know how to calculate the
income distributions? Do you know when you may be required to distribute
principal to an income beneficiary? Do you know how to calculate the amount of
the principal distribution?
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Answer
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Is the current beneficiary
entitled to discretionary principal distributions? Do you understand the
standards which are listed in the trust agreement for making principal
distributions? Do you need to consider the impact of all principal distributions
on the remainder beneficiaries? |
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Answer
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Do you know who the
potential remainder beneficiaries are? |
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Answer
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Do you understand Florida’s
Principal and Income Act? Do you know how to determine if a receipt is principal
or income or should be allocated between both? Do you know how to determine if
an expense is principal or income or should be allocated between both? |
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Answer
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Do you think that a
brokerage statement is an annual fiduciary accounting? |
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Answer
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Do you know who is entitled
to receive copies of an annual accounting? Do you know what happens if an
interested party does not receive annual accountings? |
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Answer
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Do you know how to develop a
portfolio that complies with Florida’s Prudent Investor Rule?
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Answer
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Do you know how to determine
the tax cost bases of the trust’s assets?
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Answer
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Do you know which tax
returns you will need to file as trustee? |
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