Recently there have been allegations of mismanagement, lawsuits, etc., and the trustees want to sell off the land to the renters as a settlement. This would change a trust which held real property to a trust which holds cash that can be invested.

Here’s a brief excerpt from the article:

“BOSTON (AP) — With only eight days to live, a wealthy, ailing Massachusetts merchant wrote in his will 351 years ago that he was leaving a spectacular 35-acre seafront property for the benefit of public school children, decreeing the land should never be sold or wasted.

The dying wish of William Payne, one of the state’s earliest settlers, created the nation’s oldest charitable trust and eventually led tenants to build 167 cottages — most of them used by summer vacationers — on the land he left for the seaside city of Ipswich. The rent money has generated some $2.4 million to help fund public schools over the last 25 years.

Now, the trustees want to tear up the will, convert the property into condominiums and sell them to the tenants to settle a 2006 lawsuit filed by the tenants over rent increases. But hundreds of Ipswich residents have gone to court to block the settlement, saying it violates the sacred intent of Payne’s will and shortchanges the schools.

The Massachusetts Appeals Court is considering whether to nullify the settlement and is scheduled to hear arguments in the case March 2.”

Do I have an opinion on this? You bet I do!

Generally I agree with the public administrators. A revenue stream based on a diversified portfolio is less risky, and easier to manage, than a revenue stream based only on income from real property. If a fair price is paid, they should make the deal.

This is a much different case than the one raging in San Diego’s tawny neighborhood of La Jolla, where a public benefit trust set aside a tidal basin for a children’s pool. The basin has been taken over by a pod of harbor seals, much to the consternation of some local divers. In the Children’s Pool matter, the land was used for a particular purpose. In Massachusetts, it was just used to gain revenue.

It will serve the beneficiaries much better if the Massachusetts trust property was converted to liquid assets.

I was recently asked the following question on the legal answer website AVVO.COM.  My answer was chosen as “best answer” by the questioner.

Question: My father wants a copy of my parent’s trust. He wants to request this in writing as it is difficult for him to get around. My mother claims she has misplaced the trust. My father would like to get a copy of the trust for me, but he is partially paralyzed and we had to hire full time help to assist him with his daily activities.

The trust attorney told me I would have to write a letter requesting it with the signatures of both of my parents. My father would do this, but my mother refuses. Is there any other way to get a copy of this trust? My mother constantly threatens me, telling me she is going to change the trust.  If my dad is a Trustee, can the Trust attorney legally refuse to do so? Would my dad’s request have to be notarized?

Answer (after another attorney had stated that the questioner’s mother would have to approve): I disagree. Your father, as a settlor and trustee, has a right to a copy of the trust that he and your mother hired the attorney to draft, assuming the attorney still retains a copy in the file. The request does not have to be notarized; in fact, he should simply be able to pick up the phone and call. If the attorney is skeptical about your father’s identity, then he should go to the office himself to pick it up, even if it is difficult to get around.

However, if I were you I’d talk to an estate planning attorney about this, and the underlying family issues that seem to be present. Where is the original? Was it destroyed? Lost? Is there in fact any property still in the trust? Is there a pending divorce?

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If you want to pose legal questions anonymously and have them answered by a handful of attorneys practicing in the field, consider coming to AVVO.com.  Or, just call me directly at (858) 740-4370, and I’ll answer your question myself or find someone who can.

Here are the factors that should be weighed by the trustee in establishing his or her compensation:

-  Amount of time spent 
-  Gross income of the trust 
-  Appreciation in value of trust property 
-  Unusual or special skills – attorney, accountant 
-  Degree of fidelity or disloyalty to trust 
-  Amount of risk/responsibility 
-  Fees charged by other trustees in the local community for similar services 
-  Character of trustee’s work: did it involve skill/judgment, or was it mostly ministerial
-  His own estimate of the value of his services 

A good place to start in establishing how much you will claim as trustee is to poll local professional fiduciaries to establish the ‘local community’ factor. 

But bear in mind, the Court can review the compensation, on request of a beneficiary.  The last thing you want to do is provoke a dispute with the beneficiaries.

In California, beneficiaries under a trust are entitled to annual accountings from the trustee (usually the executor of the will) unless the terms of the will stated otherwise.

Absolutely!  You do not have a right to keep funds given by mistake. Consult a local probate attorney regarding the statute of limitations on recovery of the disbursement.  If the beneficiary refuses to return the balance, the executor will sue on behalf of the trust, and the costs of suit might be added to the recovery.

Which brings me to today’s subject:  As a senior, what documents do I need to prepare in case I become incapacitated and can’t make my own financial or health care decisions?  Of course, everyone should have these documents, not just seniors – incapacity can strike at any age for a multitude of reasons: accident; illness, etc.

DURABLE POWER OF ATTORNEY

The Durable Power of Attorney (Probate Code §4022) is a document you can sign while you still have capacity, which will grant powers to another person (your agent) to handle your financial affairs.  We call it “Durable” because it can still be used if you become incapacitated (Probate Code §4124).  It “survives” the incapacity of the grantor of the powers.  A normal power of attorney will cease acting if you become incapacitated – that’s a built-in safeguard, since you wouldn’t be able to revoke the power yourself. 

So with a Durable Power of Attorney, someone you trust (someone you really  trust) can handle your affairs for you: pay your mortgage; file your taxes; re-finance your home; apply for disability benefits; etc.  Your agent won’t be able to take anything of yours as a gift with your your specific written authorization (Probate Code §4128).  If you pass away, the powers cease – at that time your Executor (under a Will) or Successor Trustee (under a Trust) would handle financial affairs of your estate.

Be absolutely certain that your named agent is both competent and trustworthy!  Seniors have lost their savings to unscrupulous agents – even to agents who are family members.

ADVANCE HEALTH CARE DIRECTIVE

With an Advance Health Care Directive, you name someone to make medical decisions for you if your primary care physician certifies that you can no longer make decisions for yourself.  Why would that happen?  It could be due to an injury or dementia (whether due to a chronic condition like Alzheimer’s or a temporary condition such as the result of medications).

Additionally, you can provide detailed instructions regarding medical care, including: life support treatment; convalescent care; organ donation; etc. 

Either of these documents can be revoked at any time, as long as you are still competent.   Give copies to your designated agents, doctor, nursing home, and family.  And if you’re admitted to a hospital, bring a copy of your advance health care directive with you.

If you don’t complete these documents, it may be necessary to appoint a Conservator to care for you in the future.  Consult an experienced attorney with any questions!

What should you put into your Letter? Here are some suggestions:

Tell where copies of your will and/or revocable living trust can be found and where the originals are kept. Also give the names, addresses and telephone numbers of all personal representatives, executors, trustees, lawyers, conservators or guardians involved, and explain any potentially puzzling provisions that the documents may contain.

List essential papers and records and tell where they can be found. What’s important?  Birth Certificate, Marriage Certificate, Citizenship Papers (if any), Judgment of Divorce, Living Trust/Wills, etc. 

You also might want to give funeral instructions (those should also be in your Advance Health Care Directive / Living Will).

List your life insurance agent.  You should also mention any medical or disability insurance that might cover medical bills charged to the estate.

I do *not* recommend you list bank accounts, but it would be useful to tell your executor where they can get quick cash — there will be some immediate expenses after death.

Give the names and addresses of your employer, and well as any fraternal organizations or unions you belong to. They may provide death benefits or burial expenses. In addition, give your Social Security Number.

If you own real estate in addition to your house, give the same information about it, along with the names of your real estate and insurance brokers.

List all your personal property and how you would like it distributed if you have not done so in your will or a Separate Written Statement authorized in your will or trust—but keep in mind that your instructions will not be binding unless specifically mentioned in the will, trust, or Separate Written Statement. 

Make a list of major debts you owe and major debts that other persons owe to you. Tell precisely how you want these matters settled, including whether you want to forgive any debts owed to you.

Tell where to locate copies of your past tax returns, where current tax information can be found, and name your CPA or tax preparer.

List any trusts under which you are named as a beneficiary, or any trusts set up by others under which your heirs are beneficiaries. Give the names and addresses of all persons involved, including attorneys.

List the names, addresses and telephone numbers of your parents, if living, and of any other relatives or close friends who should be notified of your death. Also give the names and addresses of your employer and any close associates at work.

Give the names and addresses of any lawyers, accountants, brokers and the like not already mentioned who might be helpful to your survivors.

Does this sound like a good idea?  Try drafting one for yourself!  If nothing else the exercise is bound to remind you of things you need to prepare for yourself.

Special Needs Trusts are often prepared for disabled adults with disabling conditions, such as: autism; paraplegia or quadriplegia; Alzheimer’s disease; mental illness; even chronic chemical dependency. The function of the SNT is to provide a pool of funds from which a trustee can distribute to the disabled person only so much money that they don’t imperil their ability to obtain government benefits such as SSDI (Social Security) or Medicare (Medical, here in California).

A few notes for practitioners:

(1) Many template-drafted SNTs restrict the ability to revoke, amend, or terminate. Revocation is one thing – by all means make the trust irrevocable. But the ability to amend or terminate are important tools for the trustee, and necessary flexibility every attorney should provide in the SNT.

What if the beneficiary comes into a flood of income? They may no longer want some funds tied up by the SNT.

What if the law changes, as it recently did to enable trustees to pay for clothing? If the SNT restricts the ability to pay for clothing, then the trustee can amend the trust to deal with the change in the law.

(2) It’s important to distinguish between third-party trusts and first-party trusts. A first-party trust is funded by the disabled person themselves, and should be a grantor trust. A third-party trust is funded by someone else, usually a parent or child, and remains revocable throughout the grantor’s lifetime. The rules are different regarding each, and so some investigation must take place to ensure that the source of funds really is that third party and not the beneficiary themselves. What if the client says: “My mother gave me this money, and it’s mine to do with as I please. But I feel obligated to put some of it into this trust – she wanted me to be able to care for her.” Arguably, the mother in this example transferred the money to her daughter in order to fund the trust!

(3) It’s usually a good idea to draft the Special Needs Trust as a stand-alone trust, rather than as as part of a larger AB or other living revocable trust.

It’s a common mistake by estate planning attorneys who don’t deal often with special needs situations, and it may seem more efficient to have the SNT kick in only on the death of the surviving settlor. But there’s good reason to consider drafting it as a separate trust. You can designate different trustees and successor trustees. You can give the grantors important insight as to how the trust will/must be managed by having them manage it during their lifetimes, while they can still modify or revoke it. Also, it’s likely you’ll be designating different residuary beneficiaries in the SNT than in the AB-Trust.

Just some things to think about. The most important advice, as always: consult an attorney with experience not just in drafting trusts but in advising successor trustees!

Good luck, and good planning!