Three Warning Signs That You May Need a Professional Trustee

Sometimes a parent or relative of a person with special needs will establish a special needs trust for their family member and decide to serve as the sole trustee of the trust. In other cases, a parent won't want to serve as trustee, but will ask a close friend or family member to serve without explaining what the job entails. These are very common scenarios, and they are often followed -- months after the trust has been created, when tax returns are due and it's time to file financial statements with various government agencies -- by the discovery that the trustee is in over his or her head.

Does this sound like you? If so, it may be time to enlist the services of a professional trustee. While hiring a professional trustee may not always be the best solution, it is almost always better to have a professional with experience managing special needs trusts serve in place of an unqualified or overwhelmed non-professional trustee. Here are some warning signs that may indicate that a change is in order:

The Trustee Doesn't Have Enough Time

Every special needs trust is different, but in most cases serving as the trustee of an active special needs trust can seem like a full-time job. Depending on a beneficiary's needs, the trustee of a special needs trust could spend a good deal of time paying bills, monitoring government benefits, helping to secure housing, paying for medical care and serving as a link between the beneficiary and a variety of service providers. If a trustee finds that she can't perform all of these tasks when needed, or if she is sacrificing her family life or other professional obligations in order to work as a trustee, then it may be time to look for a professional trustee.

Trouble Keeping Track of Government Benefit Rules

A special needs trust is a wonderful tool because it allows a beneficiary to maintain access to potentially life-saving government benefits while still providing supplemental assistance where needed. However, like many useful tools, a special needs trust only works when it is used correctly, and it can sometimes be dangerous if operated improperly. Many government benefits, like Supplemental Security Income (SSI) and Section 8 housing, have very complicated and sometimes contradictory rules governing special needs trusts. The trustee of a special needs trust must know these rules well, or, at the very least, work very closely with a special needs planner who can explain the ramifications of his actions as trustee. A professional trustee with experience already knows the rules and will make decisions with them in mind, saving you the hassle of having to consult with your planner before every trust distribution.

The Beneficiary Is Making Life Complicated

When the beneficiary of a special needs trust is aware of its existence and is mentally capable of interacting with the trustee (as opposed to a beneficiary whose disability limits his cognitive functions to the point where he either doesn't understand the trust or is not conscious at all), he can sometimes make the trustee's life very difficult, especially if the beneficiary feels entitled to the money in the trust. This often happens when an otherwise capable beneficiary receives a settlement from a personal injury lawsuit that must be managed in a trust in order to preserve health insurance benefits. Sometimes, the strains of a beneficiary's demands can cause significant problems for family members and can pit relatives against each other. These intrafamily complications can be avoided through the use of a professional trustee.

If you feel that any of these scenarios applies to you, then you should immediately discuss the matter with your special needs planner. You may be able to work with your planner to devise a plan that allows you to remain as the trustee of the trust with added support from a professional, or you may decide that a professional trustee is needed now. In many cases, your special needs planner may be able to fill the role of trustee. Remember: the worst thing a trustee can do is recognize a problem but do nothing to solve it, so if you're thinking about hiring a professional, get started today.

 

Contact us

Elise Lampert, Esq.

Law Office of Elise Lampert

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: (818) 905-0601 / Email: elise@elampertlaw.com

https://www.eliselampert.com

 

The Tax Consequences of Selling a House After the Death of a Spouse

If your spouse dies, you may have to decide whether or when to sell your house. There are some tax considerations that go into that decision. 

The biggest concern when selling property is capital gains taxes.  A capital gain is the difference between the "basis" in property and its selling price. The basis is usually the purchase price of property. So, if you purchased a house for $250,000 and sold it for $450,000 you would have $200,000 of gain ($450,000 - $250,000 = $200,000).

Couples who are married and file taxes jointly can sell their main residence and exclude up to $500,000 of the gain from the sale from their gross income. Single individuals can exclude only $250,000. Surviving spouses get the full $500,000 exclusion if they sell their house within two years of the date of the spouse's death, and if other ownership and use requirements have been met. The result is that widows or widowers who sell within two years may not have to pay any capital gains tax on the sale of the home.

If it has been more than two years after the spouse’s death, the surviving spouse can exclude only $250,000 of capital gains. However, the surviving spouse does not automatically owe taxes on the rest of any gain. 

When a property owner dies, the cost basis of the property is "stepped up." This means the current value of the property becomes the basis. When a joint owner dies, half of the value of the property is stepped up. For example, suppose a husband and wife buy property for $200,000, and then the husband dies when the property has a fair market value of $300,000. The new cost basis of the property for the wife will be $250,000 ($100,000 for the wife's original 50 percent interest and $150,000 for the other half passed to her at the husband's death). In community property states, where property acquired during marriage is the community property of both spouses, the property’s entire basis is stepped up when one spouse dies. 

To understand the tax consequences of selling property after the death of a spouse, contact your attorney. 

Contact us

Elise Lampert, Esq.

Law Office of Elise Lampert

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: (818) 905-0601 / Email: elise@elampertlaw.com

https://www.eliselampert.com

 

How Community Property Affects Estate and Tax Planning

In most states, spouses can purchase and own property separately from one another. However, in certain states – called community property states – if one spouse purchases property, it is considered the property of both spouses. How marital property is owned has implications for both estate and tax planning. 

There are currently nine community property states. They are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. A few other states (for example, Alaska) allow couples to opt into community property arrangements. 

Community property is property acquired by a husband and wife during marriage. In community property states, property held in only one spouse’s name can still be community property. For example, the paycheck that a spouse brings home every week is community property even though only one spouse’s name is on the check. If that check is used to buy an asset, then that asset is community property, regardless of whose name is on the account or the asset. 

Property that is not community property is property that one spouse brings to the marriage, inherits, or is gifted. A spouse can turn separate property into community property by putting an asset owned by one spouse into both spouses’ names. 

Depending on the state, partners may be able to change whether property is separate or community via pre-nuptial agreement, post-nuptial agreement, or exceptions in the law. Changing community property into separate property may be appropriate in second marriages or when one spouse is bringing significant separate property into the marriage. For example, if, at the time of the marriage, one spouse receives significant income from owning a business, the spouses may decide that it is appropriate that the business remain that spouse’s separate property and the income from that property will remain that spouse’s separate property. 

One advantage of community property is with regard to capital gains taxes. If one spouse dies, the cost basis of the community property gets “stepped up.” The current value of the property becomes the cost basis. This means that if, for example, the couples’ house was purchased years ago for $150,000 and it is now worth $600,000. The surviving spouse will receive a step up from the original cost basis from $150,000 to $600,000. If the spouse sells the property right away, he or she will not owe any capital gains taxes. In non-community property states, if one spouse dies, only the deceased spouse’s interest (usually 50 percent of the value) is stepped up. 

When estate planning in a community property state, it is important to fully review assets to determine which assets are community property and which are separate property. A surviving spouse in a community property state is entitled by law to half of the community property, regardless of what the spouses may have wanted to do with the property (such as pass it on to children). Community property can be a factor even in non-community property states if the couple owns property in a community property state. 

If spouses move from one type of state to another, it is especially important that they have their estate plan reviewed by an attorney in the new state to make sure the plan still does what they want. 

Contact us

Elise Lampert, Esq.

Law Office of Elise Lampert

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: (818) 905-0601 / Email: elise@elampertlaw.com

https://www.eliselampert.com

 

What to Do If You Want to Leave Your Children Unequal Inheritances

Parents usually want to leave their children equal shares of their estate, but equal isn’t always fair. If you plan to provide more (or less) for one child in your estate plan, preparation is important. 

It is natural for parents to want to treat their children equally in their estate plan, but there are some circumstances in which a parent might want to leave children unequal shares. If one child is providing all the caregiving, the parent might want to reward that child. If one child is substantially better off than another child, then the parent might want to provide more for the child who has a greater need for the funds. 

Other factors that can influence how much to give each child is if one child has special needs or if there is a family business that only one child wants to run. It’s also possible that the parents have already provided more for one child during their lifetime, maybe by paying for graduate school or helping them buy a house. 

Whatever the reason for leaving your children unequal shares, the important thing is to discuss your reasoning with the children. Sit down with them and explain your decision-making process. If you feel like the conversation could be difficult and contentious, you could hire a mediator to help facilitate the discussion. 

Your children may be understanding of your decision, but if you are worried about one child challenging your will after you die, you may want to take additional steps: 

• Draft your will and estate plan with the assistance of an attorney and make sure it is properly executed. To avoid accusations of undue influence, do not involve any of your children in the process. 

• Explain in detail your reasoning in your estate planning document and make it clear that it is your decision and not the influence of the child who is receiving more. 

• Include a no-contest clause (also called an "in terrorem clause") in your will. A no-contest clause provides that if an heir challenges the will and loses, then he or she will get nothing. You must leave the heir enough so that a challenge is not worth the risk of losing the inheritance.

 

Contact us

 

Elise Lampert, Esq.

Law Office of Elise Lampert 

9595 Wilshire Blvd. | Suite 900 | Beverly Hills , CA 90212

Phone: (818) 905-0601 / Email: elise@elampertlaw.com

https://www.eliselampert.com