Problems arise with parents trust

Dear Len & Rosie,

My brother and I are trying to manage my mother and step-father’s estate. The one thing that keeps coming up is that we need a court document specifying that my brother and I are executors of the estate. When we asked the lawyer what we should do he said just have them call him. This is for the IRS, a life insurance company and also a bank. Is it common when the estate is less than $1,000,000.

I should also explain that the Law firm that originally did the living trust closed its doors and another firm took over the trust. My parents found out when they want to make some changes to the trust. When they passed my brother and I were left with a mess. We immediately got a copy of the trust and called the lawyer. I have to say he has not been very helpful and this is that last straw. Should he help us obtain this court document showing that my brother and I are the administrators or can we do this on our own?

James

Dear James,

The court document the bank and insurance company are talking about is called “Letters Testamentary”, which is granted to the executor of a probate estate only after a will has been admitted to probate. Whether or not you need to probate the estate of the survivor of your mother and her husband depends on the size of the probate estate.

By “probate estate” we mean the properties and assets titled solely in the name of the surviving spouse, without any pay-on-death beneficiaries or joint tenants. Assets held within the trust don’t count either, but insurance policies that don’t have designated beneficiaries do count and are subject to probate. If the total probate estate is $150,000 or less, then you and your brother can collect your parents’ various accounts using small estate affidavits under Probate Code section 13101. If the total is more than $150,000, you need to file for probate in most cases.

If your mother and step-father failed to transfer some of their assets into their trust, it may still be possible to avoid probate, depending on the terms of the trust and how each of their non-trust assets are held. Under the right circumstances you may petition the court under an appellate court decision in the case, “Estate of Heggstad”. What the petition comes down to is something like this: “Dear Judge, mom and dad made a trust, and the trust says their home and other assets are trust property, but they never bothered to put everything in the trust the way they should of. So please, judge, please give us an order saying that our parents’ assets are in the trust anyway.”

The first step in trust administration is to review the trust, and each and every asset owned by your mother and step-father that has to be transferred. What has to be done depends on the nature of each asset and how it is titled and whether or not there are any pay-on-death beneficiaries.

This can be tedious if your mother and her husband were not very organized, but it has to be done, and the legal fees for this work are almost never included in the fees lawyers charge to create a trust. You do not have to hire your mother’s old attorney or the one who replaced him or her, but you should sit down with a trusts and estates attorney and review everything.

Len & Rosie

Understanding “right of survivorship"

Dear Len & Rosie,

I made a new will after my husband died ten years ago. I had five children, and my will divides my estate among them equally. Four years ago, my son Richard died. He had two children, and a wife, an awful woman named Margaret. There is no love lost between us. I want to make sure that she gets nothing when I die. Do I need a new will?

Sarah

Dear Sarah,

Pull out your will and read the part that talks about who gets what when you die. Read it closely. There are two ways that Margaret could get your money. The first way is simple. The will must say that if Richard predeceases you, his share of the estate shall pass to his wife Margaret. If your will says this, then you definitely need a new will.

Even if Margaret is not getting Richard’s share, you are not yet in the clear. If your will says the shares of your children are by “right of survivorship”, then your estate will be divided among your then-living children after your death. Richard’s two children will get nothing. If you want them to receive their father’s share, the gift to your children should be by “right of representation”, which means the share of a dead child would pass to his or her living descendants.

Margaret would still get nothing. But if Richard’s children are under the age of 18, then any inheritance they receive from your estate cannot be distributed to them directly. It would be held in a guardianship or maybe by a custodian under the Uniform Transfers to Minors Act. And guess who is most likely to be guardian or custodian? Margaret. The money would belong to your grandchildren, but she would be in charge of it, and she would be in an ideal position to rip off her own kids.

To prevent this, your will should leave the shares of your estate passing to your grandchildren in either a sprinkling trust, or in a custodial account under the Uniform Transfer to Minors Act with your will spelling out that Margaret will never be trustee or custodian. Your will should also appoint the people you want as trustees or custodians who could then spend the money on your grandchildren to pay for their education and other needs. This way, even if Margaret continues to raise your grandchildren, she won’t get her hands on their money.

You should review your will with a trusts and estates or elder law attorney. You may also want to consider getting a trust to avoid probate. Probate is usually much more expensive than administering a trust and takes an average of one to two years to complete. Take care of this now, and you’ll have the piece of mind of knowing that Margaret won’t get her hands on your estate.

Len & Rosie