tote-mu.com

Archive for December, 2011

Traveling with ski equipment can be a nightmare and a half. Airlines are not as accommodating as they used to be when checking items in, especially large ones. However, in a recent change there seem to be a variety of self storage companies that are offering low cost storage units for skiers and snowboarders alike.

You must be a diehard snow creature to appreciate an opportunity like this. For example, average skiers travel 4 times a year to their favorite ski destination. This can amount to a total cost of over $500 on baggage fees alone for two people, not to mention the hassel of lugging it to and from the airport. With many storage facilities offering rates as little as $9.99 per month for vail-self-storage storage in Vail Colorado your savings could be worth it.

Because this is a relatively new concept to many people I have included a checklist to help you decide if a Park City or Vail self storage facility is right for you.

               – Is the storage facility close to the resorts?

               – Will you be traveling to the same area throughout the year?

               – Does the storage unit have ample security measures in place?

               – Is there an actual savings to be had?

               – Will you be able to access the storage unit after hours?

               – Does the storage facility have month to month pricing options?

If you have responded positively to most of these questions then you might need to consider leaving your ski and snowboard equipment in a local storage unit. I know this may still feel like a foreign concept to most people but I urge you to reconsider and look at the benefits of not traveling with all that stuff and the money you will be saving, while supporting a Vail self storage company.

An increasing number of people are utilizing the revocable living trust as the primary document in their estate plans. A revocable living trust is an entity created during lifetime in which an individual (called a trustee) holds legal title to property on behalf of a beneficiary, who is typically the individual establishing the trust (or the grantor).

It is a revocable trust because the grantor, at all times and for any reason, retains the absolute power and right to revoke the trust, or to otherwise amend or change the trust terms in any fashion. In addition, the grantor may withdraw the trust assets at anytime by taking the properties back into his or her individual name.

The living trust is beneficial because it permits an individual to transfer title of his or her assets now, but that transfer is not to the individual’s beneficiaries, but rather to the trust entity. In fact, the re-titling of assets during lifetime is generally considered to be the revocable trust’s principal advantage since assets held by the trust will not be subject to court supervision. Furthermore, the grantor typically serves as initial trustee so as to maintain complete control over the management of the assets.

In the event of an incapacity or illness, a successor takes over as trustee to manage the trust and otherwise provide for the grantor, without the necessity of seeking the appointment of a legal guardian to take title to his or her assets.

Upon death, the successor trustee would be in charge of the assets without the necessity for probate proceedings. If probate were required, delays in transferring the properties to one’s family and the potential for additional legal, accounting and court costs could result. Without court involvement, the trustee can expeditiously transfer the assets in accordance with the grantor’s wishes, which will remain private, as a trust agreement need not be deposited with the probate court at death.

The trust will often contain significant tax planning provisions as well as terms of ongoing trusts for the grantor’s family. This arrangement could permit the grantor’s assets to be kept together in one piece for the family’s benefit for a period of years. In addition, the trust could also provide for the protection of the properties from creditors or claims against the family.

While the revocable trust will, in effect, take the place of a Last Will and Testament, in that the trust will provide for the disposition of the grantor’s assets at death, a Will is nonetheless a necessary instrument in every estate plan. If a trust is established, but one’s assets are not properly transferred to the trust during lifetime, a Will would be required to direct the disposition of assets at death. In an estate plan that includes a revocable trust, a Will could merely provide that any assets that might be titled in a grantor’s individual name pass to the trust to be held by the successor trustee under the general provisions of the grantor’s estate plan. Moreover, a Will would name a guardian for any minor children.

The current banking and financial crisis has created an ideal opportunity for community banks, trust companies and similar organizations to re-evaluate the way they deliver trust and wealth management services. Gone are the days when the Board of Directors turned a blind eye on poorly performing trust departments. In a new era of increased oversight and accountability, bank regulators and senior management will be more vigilant than ever about making sure that trust departments are well-managed and profitable.

Despite a high-cost, low-margin profile, providing trust and related wealth management services is essential for most banks because of its relationship appeal. Given a choice, for example, most bank customers would prefer to have all of their banking needs handled by a single bank rather than having their checking account, mortgage and business loans with one bank and their trusts and other financial assets managed by another.

One way banks, trust companies and similar organizations can maximize the relationship value of providing trust and wealth management services while minimizing costs is by strategically outsourcing various components of providing those services. Depending on the size of the department and complexity of the services provided, it is not unusual to reduce the core costs of providing trust and related wealth management services by 50%, or more, by strategically outsourcing trust administration and operations.

Increased Control Over Strategic Business Results

A fear of “losing control” is one of the most frequently used arguments against outsourcing by bank trust department managers. However, the results of a survey by Accenture revealed that an astounding 86% of those surveyed concluded that outsourcing gave their organization “…more control over strategic business results in a variety of critical areas, such as shareholder value and revenue,” not less.

Cost Savings Can Strengthen Growth Efforts

Not surprisingly, the Accenture survey also found that “…73% of the companies redistribute the cost benefits of outsourcing to either bottom line or growth efforts.” Not all cost savings should necessarily go to the bottom line. In some cases, it may be more prudent to reinvest some or all of those savings in new business development and frontline positions that have a greater impact on a trust department’s ability to attract and retain high net worth clients.

I am often amused by the ads and offers I see concerning
living trusts.

Almost always, one of the big sales pitches is how a living
trust will save th*usands of doll*rs in “nasty” probate fees.

This leads the consumer to believe that you pay for probate,
but living trusts are “fr*e.” (that is, after you’ve paid the
promoter to set one up for you).

Not so.

Here’s an email I received from one of my subscribers
(she has given me permission to discuss her question in this
article):

Hi Phil,
My mom passed away recently and my sister is 1st trustee.
She claims she gets 10% of my mom’s estate as 1st trustee.
Is this true? What is the normal fee for 1st trustee?

Great question. Often one of the biggest, if not the biggest,
areas of dispute between children or heirs after a death occurs.

What is a trustee fee? How is it calculated? Are there other
fees?

If you have a trust and don’t know the answer to these questions,
I think the proper thought is “Uh-ohh!”

OK, let’s have a quick review of trustee fees.

First let’s make a distinction between the times a trustee may
be called upon to act.

Remember, one of the best uses of a trust is to manage the
assets of someone who is incapacitated. My best friend and
his sister have been managing their mother’s affairs (as
trustees) for the last 10 years. Mom is 95, in decent physical
health, but has advanced Alzheimer’s).

Let’s save the discussion of trustees fees charged for
managing an incompetent’s estate for a future article. Let’s
get down to answering the above question.

Here it is again:

Hi Phil,
My mom passed away recently and my sister is 1st trustee.
She claims she gets 10% of my mom’s estate as 1st trustee.
Is this true? What is the normal fee for 1st trustee?

Basically, the question is “How much can a trustee charge to
handle an estate after a death?”

How do we answer this?

First, we have to look at the trust instrument.

Most competently drawn trust instruments will have a section
that deals with trustee fees.

The better ones are fairly specific and make a distinction
between acting as trustee while the beneficiary is alive, but
incompetent, and acting as trustee after a death has occurred
(similar actions to what an executor performs through a probate).

So, first, we look to the trust instrument. Often it will specify
a fee. Sometimes it will say .75% to 1.25% of the total value
of the assets being managed and transferred (since this is the
typical fee charged by the professional trust companies run by
many banks).

In fact, let’s see what California law tells us about trustee fees
(every state will have a statute, go to your county law library
and ask the law librarian to help you look it up).

In California, the law of living trusts is contained in the
Probate Code. Here is what Probate Code Sections 15680-82 tells us:

15680. (a) Subject to subdivision (b), if the trust instrument
provides for the trustee’s compensation, the trustee is entitled
to be compensated in accordance with the trust instrument.

(b) Upon proper showing, the court may fix or allow greater
or lesser compensation than could be allowed under the terms of the
trust in any of the following circumstances:

(1) Where the duties of the trustee are substantially
different from those contemplated when the trust was created.

(2) Where the compensation in accordance with the terms
of the trust would be inequitable or unreasonably low or high.

(3) In extraordinary circumstances calling for equitable
relief.

(c) An order fixing or allowing greater or lesser compensation
under subdivision (b) applies only prospectively to actions taken in
administration of the trust after the order is made.

15681. If the trust instrument does not specify the trustee’s
compensation, the trustee is entitled to reasonable compensation
under the circumstances.

So to answer the question, we have to find out what the trust
instrument says. If it is silent, then Section 15681 tells us the
compensation is to be “reasonable compensation under the
circumstances.”

What is reasonable under the circumstances? If it were me,
I would gather up the brochures of the various bank trust
departments in the area to determine their rates. Where I
live, the fee is .75% to 1.20%, depending on the size of the
trust and the type of assets. The minimum is $5,000.

So, it looks like the answer to the question is that if the
trust instrument says the 1st trustee is entitled to 10%
compensation, then she may be. However, if it doesn’t then the
amount to be charged must be reasonable.

And, even if the trust instrument said 10%, I would seriously
consider asking a court to change the compensation per
15680 (b) (2) that allows the court to change compensation
“Where the compensation in accordance with the terms of the trust
would be inequitable or unreasonably low or high.”

This article needs to be continued since we haven’t even
touched on the big m*ney m*ker for trustees and attorneys,
“extraordinary fees.”

Good luck and until next time,

Phil Craig

P.S. Feel free to forward this on to any friends.

A very common type of revocable living trust is one that is created by a couple that will continue until both spouses have passed away. When the second spouse passes away, usually one of the couple’s adult children becomes the successor trustee. The successor trustee (or successor co-trustees, if two children share this responsibility), then assumes control of the trust and is responsible for distributing the trust’s assets.

At that time, the assets in the original trust must be re-registered in the name of the successor trustee. In doing so, the successor trustee needs to give the title holders of each asset in the trust a certified copy of the death certificate, as well as a certification of the trust that now shows the adult child as the successor trustee. This notice literally must be made to every bank, brokerage, credit union, life insurance company, and other institution where the decedents held assets.

It is necessary for all of the assets in the trust to remain in the trust following this asset re-registration period until any taxes, debts, and other expenses are paid. Therefore, no distributions should be made from the trust until all potential liabilities have been resolved.

The successor trustee is also responsible for obtaining a Federal Tax Identification Number, or EIN, for the trust. Prior to the second spouse’s death, the assets in the original trust were held under his or her Social Security number. And, from January 1st through the date of death of the second spouse, any income earned by the trust is taxed as income to the second spouse’s Social Security number. However, from the date of death forward, any income earned by the trust is taxed to the EIN number of the trust. In fact, this EIN number will be used on all of the year end trust income tax returns until the trust’s assets are fully distributed and the trust ends.

If any real estate was included in the trust, the property assessor in every county where that property was located must complete an official Change of Ownership – Death of Real Property Owner statement. This statement will be used by the county assessor in order to determine whether the property needs to be reassessed for property tax purposes.

In order to change title on each real estate parcel, an Affidavit – Death of Trustee form is needed. This form, in conjunction with a certified copy of the death certificate, is necessary in order to change the title of the property into the name of the successor trustee.