Life insurance is often considered a cornerstone of estate planning. It provides immediate liquidity for beneficiaries through tax-free lump-sum payments, covering final expenses, replacing lost income, and funding trusts. While essential, life insurance has limitations. Relying solely on it in your Nevada estate plan can leave gaps, creating unforeseen challenges for loved ones.
Effective estate planning requires a holistic approach. Life insurance is just one tool in a broader strategy designed to protect your legacy and provide for your beneficiaries. Anderson, Dorn & Rader Ltd. specializes in creating comprehensive estate plans that integrate life insurance with other critical elements, ensuring that your goals are met and potential risks are mitigated.
Life insurance policies, while flexible, are not without constraints. Terms and exclusions in policies can leave beneficiaries without the expected financial support. For example, term life insurance only provides coverage within a specific timeframe, and employer-provided life insurance often ends when employment ceases. Additionally, exclusions for high-risk activities or incomplete applications can nullify coverage.
Understanding these limitations is critical. Policyholders must regularly review their policies to ensure that coverage aligns with their current needs and life circumstances. Failure to address these risks may result in unintended outcomes, such as delays in payouts or no payout at all.
Integrating life insurance into a comprehensive estate plan is key to maximizing its benefits. While life insurance provides liquidity, it should work in tandem with tools like wills and trusts to avoid probate complications and minimize tax burdens.
A Nevada estate plan that includes life insurance can address various financial needs, from covering estate taxes to equalizing inheritances. For instance, life insurance proceeds can ensure a fair division of assets when property or other investments are difficult to split among heirs. By pairing life insurance with other estate planning tools, families gain financial stability and peace of mind.
Naming beneficiaries on a life insurance policy might seem straightforward, but improper designations can lead to legal challenges. Failure to name primary and contingent beneficiaries may result in the death benefit going to the estate, subjecting it to probate.
Additionally, naming minor children or individuals who lack mental capacity as beneficiaries can complicate the distribution process. Establishing a trust as a beneficiary allows the policyholder to control how the proceeds are managed, ensuring they are used as intended for education, living expenses, or other priorities.
An estate planning attorney can ensure that life insurance aligns with your broader financial goals. Whether it’s funding a trust, paying estate taxes, or supporting a surviving spouse, integrating life insurance into a comprehensive strategy provides clarity and protection.
Anderson, Dorn & Rader Ltd. works closely with clients to evaluate their life insurance policies, identify potential gaps, and create estate plans that address both short-term needs and long-term goals. With professional guidance, you can ensure that your loved ones are financially secure and that your estate reflects your wishes.
Estate planning is about more than purchasing a life insurance policy—it’s about creating a roadmap for the future. Contact Anderson, Dorn & Rader Ltd. today to schedule a consultation. Their experienced team specializes in Nevada estate planning, helping families protect their assets, reduce tax liabilities, and secure their legacy for generations to come.
Understanding the Purpose of a Special Needs Trust
A special needs trust (SNT) is a powerful tool for providing financial security to individuals with disabilities without jeopardizing their eligibility for needs-based government benefits like Supplemental Security Income (SSI) and Medicaid. These trusts are carefully structured to ensure that funds supplement—rather than replace—the support provided by government programs.
At the heart of every special needs trust is the trustee. This individual or entity has a critical role in managing the trust’s assets, adhering to complex regulations, and ensuring the funds enhance the beneficiary’s quality of life. Proper administration is key to maintaining eligibility for benefits while meeting the unique needs of the beneficiary.
Fulfilling Fiduciary Responsibilities with Special Needs Trust Management
A trustee’s fiduciary responsibility is one of the most important aspects of managing a special needs trust. This duty requires the trustee to act solely in the best interest of the beneficiary, ensuring that every decision aligns with the trust's purpose.
To meet these obligations, trustees must manage the trust’s assets prudently. This involves diversifying investments, minimizing risks, and maximizing returns to ensure the long-term sustainability of the trust. Avoiding conflicts of interest is equally essential. Trustees must maintain transparency and integrity in all actions, upholding their commitment to the beneficiary’s welfare.
Ensuring Compliance with Government Benefit Regulations
Special needs trusts are subject to stringent rules governing SSI and Medicaid benefits. Unauthorized use of trust funds can lead to penalties, reductions in benefits, or even disqualification from programs. For trustees, understanding and adhering to these regulations is crucial.
For example, SNT funds cannot be used for basic support expenses like rent or utilities, as these are considered “in-kind support and maintenance” by SSI and treated as unearned income. However, funds can cover supplemental needs such as education, entertainment, and specialized medical care. Trustees must carefully navigate these restrictions to avoid jeopardizing the beneficiary’s eligibility.
A knowledgeable trustee will also ensure that all disbursements are made directly to service providers rather than the beneficiary to maintain compliance. By managing distributions with precision, trustees preserve the trust’s purpose and the beneficiary’s benefits.
Managing Finances and Keeping Detailed Records
The financial management of a special needs trust is another critical responsibility for trustees. This involves handling investments, paying taxes, and covering trust-related expenses like legal and administrative fees. To do this effectively, trustees must maintain accurate and detailed records of all transactions.
Proper record-keeping ensures transparency and facilitates required reporting to government agencies. It also protects trustees from legal disputes or accusations of mismanagement. For beneficiaries, this level of accountability provides peace of mind, knowing the trust is being administered responsibly.
In cases where the trustee lacks financial expertise, enlisting professional guidance can help ensure the trust’s assets are managed efficiently and in compliance with applicable laws.
Personal Engagement with the Beneficiary
While financial management is vital, trustees must also engage personally with the beneficiary to understand their unique needs and preferences. This personal connection allows trustees to make informed decisions about disbursements, tailoring the trust’s support to enhance the beneficiary’s quality of life.
For example, funds might be allocated for therapeutic programs, assistive technology, or recreational activities that align with the beneficiary’s interests. Trustees should also communicate regularly with caregivers and medical professionals to stay updated on the beneficiary’s changing circumstances.
By balancing personal engagement with administrative duties, trustees ensure the trust serves its intended purpose while respecting the dignity and individuality of the beneficiary.
Why Expert Guidance Matters
The complexities of managing a special needs trust can be overwhelming, even for experienced trustees. Regulations are intricate, and mistakes can have significant consequences for the beneficiary’s financial and personal well-being.
Families in Reno can benefit from working with Anderson, Dorn & Rader Ltd., whose team specializes in helping clients establish and manage special needs trusts. Whether acting as trustees or providing advisory services, their expertise ensures that every aspect of the trust is handled with care and compliance.
Next Steps for Families and Trustees
After understanding the trustee’s role in managing a special needs trust, it’s essential to assess your current or planned trust to ensure it aligns with the beneficiary’s needs. Consulting with a professional can provide clarity, reduce stress, and help avoid costly mistakes.
Anderson, Dorn & Rader Ltd. offers expert guidance to families and trustees in Reno, providing peace of mind and confidence in managing a special needs trust. Contact our team today to learn how they can assist you in securing your loved one’s future.
Planning for the future involves making thoughtful decisions about how your assets will be distributed and ensuring that your wishes are carried out. For parents with an only child, estate planning presents unique considerations. While having one child simplifies certain aspects, it also requires tailored strategies to address potential challenges. By working with a Nevada estate planning attorney, families can create a plan that reflects their values and priorities while safeguarding their child’s future.
In recent decades, one-child families have become increasingly common. Census data shows that the average family size in the United States has decreased, with one-child households now accounting for about 22% of families. These shifts challenge traditional stereotypes, including the outdated notion of “only child syndrome.” Modern research reveals that only children develop social skills similar to those with siblings, making this family dynamic more normalized than ever.
For parents in Nevada, these societal changes underscore the importance of estate planning that aligns with modern realities. Creating a plan for an only child involves balancing practical considerations, such as inheritance, with emotional factors, like preserving family harmony.
Parents of only children often find themselves in a better position to provide for their child financially. Forgoing multiple children can mean more resources are available for education, healthcare, and long-term support. However, this economic advantage comes with its own complexities.
One key consideration is the role the child plays in managing the estate. Naming an only child as the sole decision-maker can be straightforward, but it’s not always the best option. Tasks such as acting as an executor, trustee, or power of attorney require specific skills, and overburdening a child with multiple responsibilities can lead to unnecessary stress.
Studies indicate a disconnect between parents’ estate planning intentions and their children’s expectations. For example, a Northwestern Mutual study found that while 32% of millennials and 38% of Gen Z expect an inheritance, only 22% of their parents plan to leave one. Addressing these gaps is crucial for ensuring everyone involved understands the estate plan’s goals.
Parents may also choose to use trusts or conditional gifting to protect their child’s inheritance. Trusts allow parents to distribute funds based on milestones, such as completing a degree or starting a business. These tools ensure that the inheritance serves the child’s long-term interests without overwhelming them.
One of the most critical aspects of estate planning is naming individuals to key roles, such as executor, trustee, or power of attorney. While it might seem logical to assign these responsibilities to your only child, this decision should be carefully evaluated.
Key questions to consider include:
If the answer to any of these questions is no, parents can explore alternative options. Trusted family members, close friends, or professional fiduciaries can step in to ensure the estate is managed competently. Dividing responsibilities among multiple individuals can also provide checks and balances, reducing the potential for conflict.
Parents often struggle to balance practical decisions with the unconditional love they feel for their child. This tension becomes especially apparent when creating an estate plan. While it’s natural to want to leave everything to an only child, there may be good reasons to distribute assets among other loved ones or causes.
For example, parents may choose to allocate a portion of their estate to charities or other family members. Such decisions can reflect broader values while still providing for their child’s needs. Working with a Nevada estate planning attorney helps parents navigate these choices while ensuring their plan is both fair and legally sound.
Navigating the complexities of estate planning requires professional guidance. Anderson, Dorn & Rader Ltd. offers expert advice tailored to the needs of Nevada families. By consulting with experienced attorneys, parents can create a plan that protects their assets, honors their wishes, and secures their child’s future.
Estate planning is not a one-size-fits-all process. For families with an only child, creating a thoughtful plan involves addressing unique challenges and opportunities. To get started, consult with a Nevada estate planning attorney who understands the nuances of your situation. Contact Anderson, Dorn & Rader Ltd. today to schedule a consultation and begin building a plan that works for you and your family.
James Earl Jones, a legendary actor known for iconic roles such as Darth Vader in Star Wars and Mufasa in The Lion King, passed away at age 93, leaving behind a remarkable legacy. His contributions to film, theater, and television are unforgettable, but his approach to estate planning offers valuable lessons for individuals in Nevada. While details of his estate remain private, the principles reflected in his life provide critical insights into the importance of thoughtful planning.
For Nevada residents, estate planning is not only about distributing assets but also about safeguarding privacy, addressing family dynamics, and leaving a legacy that reflects personal values. By working with an experienced Nevada estate planning attorney, such as Anderson, Dorn & Rader Ltd., families can create tailored plans to ensure their wishes are honored.
One of the most significant estate planning tools James Earl Jones likely used was a trust. Trusts offer a way to manage and transfer assets while maintaining privacy. Unlike wills, which become public record during probate, trusts keep financial matters confidential. This approach aligns with Jones’s preference for privacy, both in life and in death.
For Nevada residents, trusts provide an opportunity to bypass probate entirely. This can save time, reduce legal costs, and prevent unnecessary public scrutiny of personal finances. Whether you are protecting real estate, business interests, or personal assets, trusts are a cornerstone of effective estate planning. A Nevada estate planning attorney can guide families in establishing trusts that align with their goals and ensure seamless asset management.
James Earl Jones’s family structure, including his son Flynn and extended relatives, demonstrates the complexities that can arise when creating an estate plan. Balancing the needs of an only child, step-relatives, or other beneficiaries requires careful consideration. In Nevada, addressing these dynamics can prevent future disputes and ensure that all parties feel fairly treated.
Estate plans in Nevada often incorporate trusts and conditional gifts to address unique family circumstances. For instance, parents may establish trusts for a single child while designating other assets for extended family or charitable causes. Additionally, including clear instructions in estate planning documents minimizes ambiguity and helps loved ones navigate decisions with confidence.
Balancing family relationships in estate planning is an essential step for Nevada residents, and Anderson, Dorn & Rader Ltd. offers the expertise to navigate these complexities effectively.
James Earl Jones’s decision to accept a lump sum payment for voicing Darth Vader, rather than a share of profits, serves as a cautionary tale. This choice cost him millions of dollars in potential earnings, underscoring the importance of foresight in financial decisions. Similarly, estate planning mistakes—such as failing to account for future financial growth or not updating plans to reflect life changes—can have lasting repercussions.
In Nevada, estate plans must be dynamic, adapting to evolving family circumstances, financial situations, and legal changes. Regular reviews with a Nevada estate planning attorney ensure that plans remain effective and aligned with current goals. Avoiding costly oversights starts with seeking professional guidance to create and maintain a comprehensive plan.
James Earl Jones’s charitable spirit was evident in his support for causes like the Make-A-Wish Foundation and Habitat for Humanity. Including philanthropy in an estate plan not only reflects personal values but also offers financial benefits, such as tax deductions. For Nevada residents, charitable giving can be seamlessly integrated into estate planning strategies through mechanisms like charitable trusts, donor-advised funds, or direct bequests.
A Nevada estate planning attorney can help identify the best options for incorporating philanthropy into an estate plan, ensuring that donations benefit chosen causes while optimizing tax savings. By including charitable giving in their plans, individuals can extend their legacies beyond their families, making a lasting impact on their communities.
The life and legacy of James Earl Jones underscore the importance of comprehensive estate planning. Whether through preserving privacy, addressing family dynamics, or supporting charitable causes, estate planning ensures that personal values and priorities are honored. For Nevada residents, the stakes are no less significant.
Anderson, Dorn & Rader Ltd. specializes in helping individuals and families create tailored estate plans that reflect their unique circumstances. By working with experienced attorneys, clients gain the peace of mind that comes from knowing their wishes will be respected and their loved ones protected.
Establishing a revocable living trust is a critical step in creating a well-rounded estate plan. Many individuals assume that setting up a trust automatically helps them avoid the complexities of Nevada probate. However, this isn’t always the case. Simply creating a trust is not enough; you must also ensure that your assets are properly transferred to the trust or have appropriate beneficiary designations.
Anderson, Dorn & Rader Ltd. in Reno specializes in Nevada estate planning. This article explores the essential factors that determine whether a living trust will help you avoid probate, what types of assets are subject to probate, and the consequences of not properly funding your trust.
For a revocable living trust to function as intended and bypass probate, it must be fully funded. Funding your trust involves transferring ownership of your assets—such as real estate, bank accounts, and investments—into the trust or naming the trust as a beneficiary.
For example, if you own property, you need to re-title it in the name of your trust. Similarly, financial accounts that you wish to include in the trust must have the trust named as the owner or beneficiary. Without this step, these assets will remain outside of the trust and may be subject to probate proceedings in Nevada.
Failing to properly fund your trust can negate the primary benefit of avoiding probate, leading to potential delays and additional costs for your heirs. Anderson, Dorn & Rader Ltd. can help you ensure all necessary assets are included in your trust.
Not all assets are automatically exempt from probate simply because you have a trust. Probate is required for assets titled solely in your name without a designated beneficiary or joint ownership agreement. Examples include:
Additionally, assets owned as tenants in common with another person will need to go through probate unless explicitly included in your trust or assigned to a beneficiary. A thorough estate plan accounts for these nuances, helping you avoid unexpected probate proceedings.
Certain assets are not subject to probate and will pass directly to beneficiaries upon your death. These include:
It’s important to ensure that beneficiary designations are updated and reflect your current wishes. Anderson, Dorn & Rader Ltd. offers personalized estate planning services to help align your beneficiary designations with your overall trust strategy.
Even with a well-prepared revocable living trust, if your assets are not transferred or titled correctly, they could still end up in probate. This creates additional burdens for your loved ones, who may need to navigate the probate process while managing your estate.
To address this issue, some individuals include a pour-over will in their estate plan. This type of will directs any unfunded assets to be transferred into your trust during probate. However, relying on a pour-over will is not an ideal solution—it still involves going through probate, which can delay the distribution of assets and increase legal fees.
The best approach is to work with estate planning professionals who can help you avoid the pitfalls of unfunded trusts. Anderson, Dorn & Rader Ltd. in Reno provides guidance on properly funding your trust to ensure that your assets are transferred efficiently and according to your wishes.
At Anderson, Dorn & Rader Ltd., we understand that each estate plan is unique. We take a personalized approach to ensure that your revocable living trust is fully funded and aligned with your goals.
Proper planning reduces the risk of probate and ensures that your assets are distributed smoothly to your heirs. Our team will help you review your trust, update beneficiary designations, and transfer assets as needed to avoid probate complications.
If avoiding probate is a priority for your estate plan, setting up a revocable living trust is only the beginning. You must also ensure that your assets are correctly transferred into the trust or designated with appropriate beneficiaries.
Contact Anderson, Dorn & Rader Ltd. in Reno for expert guidance on funding your trust and avoiding probate. Our personalized estate planning services will help ensure your trust operates as intended, protecting your assets and providing peace of mind for you and your loved ones.
Planning for your child's future is an important part of Nevada estate planning. Anderson, Dorn & Rader Ltd. understands that choosing the right individuals to care for your child and manage their financial assets requires careful thought. Deciding whether the same person should serve as both the guardian and the trustee is one of the most significant decisions parents must make. This article explores the roles, benefits, and challenges to help you make an informed choice that aligns with your family’s needs.
A guardian takes on the responsibility of raising your child if you are no longer able to do so. This includes making decisions about their education, healthcare, and emotional well-being. A trustee, on the other hand, manages any financial assets or inheritance left for your child, ensuring those resources are used wisely for their benefit.
Both roles are essential, but they require different skill sets. While a guardian focuses on providing emotional and physical care, a trustee must have the ability to manage finances responsibly. Anderson, Dorn & Rader Ltd. can help parents evaluate potential candidates to ensure each role is filled by the right person.
There are situations where appointing the same person as both guardian and trustee can simplify the process. This approach streamlines decision-making by ensuring consistency between your child's care and financial management. For example, the same individual can make informed choices about education or healthcare costs without needing approval from a separate trustee.
Choosing one person to serve in both roles can also prevent disagreements between the guardian and trustee, fostering a unified approach to your child’s upbringing and financial planning. This solution works well when you have complete trust in an individual’s ability to manage both responsibilities.
Despite the advantages, assigning both roles to one person may also present challenges. Managing a child’s emotional needs while handling their financial affairs can be overwhelming for a single individual. Even a well-intentioned guardian may struggle to keep up with budgeting, investments, or legal responsibilities without prior experience in financial management.
Another risk is the possibility of conflicts of interest. A guardian might unintentionally use the child’s assets for purposes that do not align with the original financial plan. Anderson, Dorn & Rader Ltd. advises parents to carefully consider these potential challenges before deciding.
Appointing different individuals as guardian and trustee can provide important checks and balances. The trustee focuses solely on managing finances, ensuring that funds are preserved and used appropriately over time. Meanwhile, the guardian can dedicate their attention to your child’s well-being without the added pressure of financial responsibilities.
By separating the roles, families reduce the risk of conflicts and ensure that each individual is best suited to their specific responsibilities. Anderson, Dorn & Rader Ltd. recommends this approach for parents who want to create a balanced structure of care and financial management.
When it comes to securing your child’s future, there is no one-size-fits-all solution. The decision to assign the same person as both guardian and trustee—or to split the roles—depends on your family’s unique circumstances. Anderson, Dorn & Rader Ltd. can help you evaluate the pros and cons of each option to design an estate plan that provides emotional stability and financial security for your child.
When planning for the future, few topics are more important than the care of your children and the protection of your assets. If something unexpected happens, ensuring your children are raised by someone you trust is essential. At Anderson, Dorn & Rader Ltd. in Reno, we understand the complexity of these decisions. One critical step is naming a guardian for your minor children and ensuring a sound financial plan that includes leaving an inheritance to grandchildren.
This article explores the importance of naming a guardian and trustee, financial planning for children’s future needs, and strategies to ensure that your legacy benefits your grandchildren.
In Nevada, if you don’t name a guardian, the court will make this decision for you, which may lead to unwanted outcomes. Judges are required to consider the child's best interests, but they do not know your personal values, preferences, or relationships. There is a risk that your children could end up with a relative you don't approve of or, in some cases, a stranger.
By naming a guardian, you gain control over who will raise your children and ensure their upbringing aligns with your values and vision for their future. Your selected guardian will step in to provide emotional support and continuity during a challenging time, following your wishes regarding their education, well-being, and daily life. This peace of mind can be invaluable for parents thinking long-term.
Selecting a guardian requires careful thought. Factors such as the relationship between the potential guardian and your children, their parenting style, and shared values are essential considerations. Stability is also crucial—how familiar your children are with the person, whether they live nearby, and if they can maintain your children’s current school, friendships, and routines.
It is also important to consider the guardian’s health, age, and long-term ability to care for your children. While grandparents may have time and experience, they may struggle with the physical demands of raising young children. On the other hand, younger guardians, such as siblings, may not be in a stable life stage to take on the responsibility.
Before making a decision, have open conversations with your chosen guardian to ensure they are comfortable taking on this role. Naming an alternate guardian provides an extra layer of security if your first choice cannot serve.
Raising children should not impose a financial burden on the guardian. Many parents plan ahead by designating funds through savings, life insurance, or other financial assets. These resources can cover essential needs like housing, education, healthcare, and daily living expenses.
When leaving an inheritance to grandchildren, it is wise to plan how these funds will be managed. Some parents also provide additional financial support, such as helping the guardian upgrade their home or buy a larger vehicle to accommodate their children comfortably.
Ensuring financial stability is crucial for your children’s future and eases the guardian’s responsibilities, allowing them to focus on providing emotional and practical care.
In many situations, it makes sense to assign separate individuals for the roles of guardian and trustee. While the guardian provides emotional and physical care, the trustee manages financial assets for your children or grandchildren. This division of responsibilities ensures that financial resources are used correctly, reducing potential conflicts of interest.
For example, a trusted family member who loves your children may not have the financial expertise to manage investments, life insurance payouts, or property assets. Appointing a trustee with financial experience ensures that funds are managed properly and distributed according to your wishes. This structure also creates accountability, preventing misuse of the inheritance meant to benefit your children or grandchildren.
If no guardian is named in your will or estate plan, a judge will decide who raises your children. In this situation, anyone—including estranged family members—can petition the court for custody. This process can lead to disputes among relatives and result in outcomes that may not align with your preferences.
Naming a guardian as part of your estate plan ensures the court respects your wishes. It also spares your children the emotional stress of uncertainty during an already difficult time.
Proactive estate planning, including naming a guardian and trustee, ensures that your children and grandchildren are protected. While these decisions are challenging, they are essential to creating a secure future for your family.
At Anderson, Dorn & Rader Ltd., we help families in Nevada develop customized estate plans. Whether you need guidance on naming a guardian or advice on leaving an inheritance to grandchildren, our team is here to help.
Planning for the unexpected is an act of love. Naming a guardian and planning financial support through life insurance or inheritance are critical steps in protecting your children’s future. At Anderson, Dorn & Rader Ltd., we offer personalized estate planning services tailored to your family’s needs.
Take the first step toward peace of mind by contacting us for a consultation. We’ll help you navigate the complexities of estate planning, from selecting guardians to managing finances for your children and grandchildren.
As with all things, there is a time for filing taxes, and it's approaching quickly. As soon as January 31st, you'll begin receiving crucial tax documents. Whether you're submitting as an individual or managing an estate or trust, it's time to begin preparations for the April 18th, 2023 tax deadline.
Form 1040 is the one used by individuals and married couples to file their yearly income taxes. Keep an eye out for forms indicating your overall income for 2022 in your mail and online, as soon as this January. Here are some of the forms you may need to finish your Form 1040:
It's crucial to keep records of items that can lower your taxable income, such as IRA and health savings account contributions, as well as documents that support tax deductions or credits, such as charitable contributions and mortgage interest. These records will assist you in taking advantage of all the possible tax benefits for which you are eligible.
"As an executor of an estate or trustee of a trust, you are responsible for reporting any income over $600 earned by the estate or trust on Form 1041. Even if the income earned is less than $600, if a beneficiary is a nonresident alien, the form must still be filed. However, the beneficiaries, not the estate or trust, are responsible for paying the income tax on the income received. Examples of assets that may generate income for an estate or trust include mutual funds, rental property, savings accounts, stocks, or bonds."
The due date for filing a return for an estate or trust depends on whether it follows a calendar or fiscal year. For those that follow a calendar year, the return must be filed by April 18, 2023. However, for those that follow a fiscal year, the return must be filed by the 15th day of the fourth month after the end of the tax year. The executor or trustee can choose which framework to use. Many opt for a fiscal year, which starts on the date of the grantor’s death and finalizes on the last day of the month prior to the death anniversary. This schedule provides more time for tax planning. If a calendar year is chosen, the tax year starts on the date of death and ends on December 31st of the same year.
Both trustees and executors must report all income distributions given to beneficiaries on the Schedule K-1. You also have to provide a copy of the Schedule K-1 to each respective beneficiary who received an income distribution, and the beneficiaries must report the distribution amount when they file their personal income taxes. The deadlines to submit Schedule K-1 follow the same guidelines as Form 1041 and depend on whether it’s subject to a calendar or fiscal year framework. Since the beneficiaries must report this income on their personal tax returns, it is essential to send them the Schedule K-1 as soon as possible so they have ample time to report the income.
As the trustee or executor, it is important to gather and keep track of your own fees, fees paid to professionals like accountants or lawyers, any administrative expenses, and distributions given to beneficiaries. This way, you can report them on Form 1041, which supports the tax deductions claimed for the trust or estate.
It is important to take into account the impact of income taxes when it comes to estate planning and administration. This is true whether you are an individual creating / updating your own estate plan, or administering a trust or estate on behalf of a loved one. If you have any questions on how income taxes should factor into your planning or administration decisions, please contact the estate planning professionals at Anderson, Dorn & Rader.
One of the most crucial decisions within your life plan is determining who will manage the estate when you aren’t around anymore, or are no longer fit to do so. This individual is called the successor trustee.
A large amount of responsibility comes with being nominated as a successor trustee. Because of the complicated procedures, time they’ll need to dedicate, and risks that the trustee will assume, many people consider hiring a professional fiduciary (like an estate planner) to be their trustee.
When hiring a professional to carry out the duties of trustee, you’ll first need to ensure that a terms of engagement document is signed by both parties to lay out the relationship between parties. This should be a separate document from the one that identified their duties as your estate planner. You’ll also want to look for the following qualifications (and potential red flags) when deciding whether to carry out the relationship.
Even if a professional fiduciary is able to draft a thorough terms of engagement document, that doesn’t necessarily mean that they have all the resources to properly administer your trust. Don’t be afraid to ask questions. You need to make sure that the professional fiduciary takes the trustee role seriously, and that they are well-equipped to take on the job. The below functions should be well within the wheelhouse of a satisfactory candidate for a professional trustee:
Even seasoned estate planners who take on the responsibility of trustee can find it difficult to fit your estate management into their schedule. The professional that you hire should be responsive and accessible. This is especially the case when the trust requires critical decisions related to distributions, beneficiary health, maintenance, education, and support. After you are gone, your beneficiaries will also be in constant contact with your hired fiduciary, and even more so when distributions are made on a reoccurring basis.
For instance, one of your beneficiaries may request an early distribution to cover the expenses of a medical procedure. Or perhaps the period to take advantage of government benefits is drawing to a close on a distribution amount. Will your professional trustee pick up the phone or quickly respond to an email in these instances? Proper communication is paramount to deal with the intricacies of your family’s lives, and your hired trustee must be passionate about providing them service when needed.
No one can work forever, and even your hired trustee must retire at some point. Do they have a plan in place to transfer their responsibilities to another individual or firm? The terms in your trust should outline who will become your successor trustee, but in the case that your trust puts the power of designating the successor in the hands of the trustee, you’ll want to ask your professional fiduciary who will fill their place if something happens to them.
Some instances will require your professional trustee to communicate with the caregivers of your beneficiaries. This could be due to the beneficiaries being minors, or perhaps because they are disabled.
In the case that a beneficiary is not able to manage the assets they’re gifted in the trust, it’s vital that your professional trustee can communicate with caregivers to understand their needs and translate them into actionable estate management duties.
After applying these suggestions when considering a third party trustee, notify them of your decision to nominate them. Even though they won’t assume trustee duties until you are unfit or no longer around, being proactive benefits the planning of your affairs.
Your nominated professional trustee does not necessarily have to accept the position. But by finding out if they’d like to take on the responsibilities sooner than later, you’ll have ample time to make an educated decision if you need to select another individual.
If you have any questions about selecting a professional estate planner to be your trustee, the knowledgeable attorneys at Anderson, Dorn & Rader can help. We offer Trustee Services to help guide you in the process of choosing an adequate trustee to carry out your wishes and preserve your family’s wealth.
Schedule a FREE consultation to discover the benefits of choosing Anderson, Dorn & Rader as your professional corporate trustee. We look forward to serving your needs with a high level of professionalism, experience, and dignity to match the values of your family.
Trust laws exist not only to safeguard the trust and trustor, but to also set guidelines for trustees to abide by. A trustee has a duty under the law to communicate with beneficiaries and inform them of progress or changes in the trust administration. Some duties of the trustee include giving beneficiaries a copy of trust documents, providing information and timelines of the trust administration, and preparing an annual accounting synopsis of the trust’s income and expenses.
It’s not uncommon for trustees to leave beneficiaries in the dark regarding new trust information. Some trustees are unaware of their duties under the law and believe they can do what they please with the trust. However, this is typically not the case, and if your trustee is unresponsive to your requests for information, you have every right to seek further action. Below are some things for you to consider when wondering how to handle an unresponsive trustee.
How do you try to contact your trustee? Is it through email? Do you try to call? Have you sent a letter through the mail? It could be very possible that your trustee simply isn’t checking in on all of their inboxes all the time. A trustee who simply doesn’t check their email regularly may respond quicker to a phone call or text message. If you’re not getting response through phone or texts, you could try sending them a formal letter.
You should also consider the relationship you and the trustee have with each other. If communication typically escalates into hostility between you two, it’s possible that the trustee may be avoiding you on purpose, even though this goes against their duties to keep all beneficiaries informed. If you cannot speak civilly in person or over the phone, it’s important that you keep all communication in writing. Just be sure to ask your questions very clearly and request information without accusations. If this still doesn’t work and your trustee remains unresponsive, it may be time to seek legal assistance.
An attorney may be involved in trust communication between beneficiaries and trustees in one of two ways. Most trustees have attorneys who represent them. If you’re having a hard time getting a hold of the trustee, try contacting their lawyer instead. If a trustee is oblivious to their duties under law, an attorney can ensure they are made aware of their responsibilities and encourage the trustee to comply. Some trustees may not want to directly communicate with beneficiaries of the trust, in which case their attorney may be the direct point of contact. To get information via a trustee’s attorney, be sure to follow up your initial call or text with the requests you wish to receive and any attempts you have made to contact the trustee.
If you feel a lack of proper representation in a situation like this, you may also seek out your own attorney. They’ll be able to clearly identify your rights as a beneficiary, and will give you the backup you need to enforce them. It’s always a good idea to have an objective intermediary that can assist in getting you the information you are rightfully entitled to.
If you and your attorney are still being met with no response, then your last option is to file a petition with your local court. Before you do this though, you should confirm that your attorney is familiar with trust laws and administration. This can make or break your petition’s success. If the trustee fails to respond to the petition, the court can then remove the trustee from the trust. This might also make the trustee liable for any losses or damages the beneficiaries experienced as a result of their lack of communication and ability to perform their duties. A court petition gives additional resources like subpoenas, depositions, and requests for documents to help you get the information you’re seeking. This should be used as the last method for handling an unresponsive trustee, as it can be costly and emotionally messy.
Trustees can conjure various reasons for being unresponsive, but they are legally obligated to communicate with and provide beneficiaries with certain information regarding the trust. Before you go filing a petition right away, try another method of contacting the trustee. If a phone call isn’t working, try an email or maybe send a letter instead. If this still doesn’t garner any results, involve an attorney. They will help get the ball rolling and will likely encourage the trustee to come forward with their information. Only as a last result should a petition be filed with your local court.
If you have any questions regarding how to contact an unresponsive trustee, be sure to reach out to the reliable and experienced trust attorneys at Anderson, Dorn & Rader. We’re happy to help you get the information from the trust administration that you are entitled to, and are dedicated to providing the highest quality estate planning resources available.
When a loved one suffers from a mental illness, one small comfort can be knowing that your trust can take care of them through thick and thin. There are some ways this can happen, ranging from the funding of various types of treatment to providing structure and support during his or her times of greatest need.
Let’s explore a few ways you can help take care of a loved one struggling with mental illness with the help of your estate planning attorney:
Trusts can be disbursed in many ways. If your loved one is involved in an inpatient care facility or an ongoing outpatient program, you can structure your trust so that its disbursements cover the costs of that treatment as time goes on. This also helps your loved one because it relieves them of the responsibility of managing large sums of money on their own. They can rest easier knowing that their care is covered without having to set up a complicated payment plan on their own.
In some cases, the person suffering from mental illness doesn’t have the capacity to enroll themselves in the right type of care. If an intervention of care is needed, your trust can also help encourage involuntary treatment that ultimately serves your loved one’s best interests in the long run.
Selecting a trustee isn’t always an easy feat. That’s one of many decision-making areas where we’re more than happy to step in and walk you through the process. When you have a loved one battling mental illness, your choice of a trustee becomes even more of a nuanced decision.
We’ll help you deduce the perfect person to not only manage the wealth contained within the trust but also keep a compassionate watchful eye on your loved one benefitting from the trust. An astute trustee can look for early warning signs surrounding your loved one’s mental health issue and make sure to get them connected to the care and services they need in no time.
Most people don’t think of large inheritances as a burden. But this can be the case when an individual is dealing with depression, anxiety, hoarding, or diseases like schizophrenia. Lifetime trusts are an excellent way to take care of your loved one without saddling them with a challenge on top of what they are already experiencing.
A discretionary lifetime trust can be drafted in such a way that its funds can only be used to go toward certain goods and services — such as outpatient mental health care, housing, or other “necessaries” of life. Likewise, it can also prohibit spending in areas that would cause more harm than good — gambling or compulsive shopping, for example. The discretionary nature of these types of trusts makes it so your loved one doesn’t have to worry about their own potential missteps when it comes to using the wealth contained within the trust.
Do you have a family member or other loved one who could use the financial flexibility and structural support of a trust? Give us a call today, and together we’ll figure out the best ways to enhance your loved one’s life by finding the right estate planning tools to offer the most help.
When you find out all the facts about last wills, you will probably be interested in alternatives. What’s wrong with a will as an asset transfer vehicle? The short answer is that that a will must be admitted to probate, which is a costly, time-consuming legal process. You can also add in a number of other drawbacks that we will cover in a future post.
A revocable living trust would be a better choice for most people. If you are concerned about losing control of assets that you convey into a trust, you can set them aside. You can act as the trustee and the beneficiary while you are living if you create this type of trust, so you call the shots.
In a very real sense, the situation is the same as it would be if you still had all the assets in your own name. Yes, you sign them over to the trust, but you are the trustee with unlimited latitude to do whatever you want to do with the resources. You also have the power to revoke the trust at any time.
For these reasons, a living trust would not be the right choice for people that want to separate themselves from personal possession of the assets for one reason or another. This is done through the utilization of irrevocable trusts of different kinds.
The ultimate point of the trust is to serve as an estate planning device, so you have to account for the events that will take place after you are gone. To this end, you name a successor trustee, and you name your heirs as the successor beneficiaries. Postmortem asset transfers would not be subject to probate, so the drawbacks that we touched upon would be avoided.
Many people would say this is the major benefit, but there are a number of others. When assets have been conveyed into a living trust, the estate administration process is simplified, because the resources are conveniently consolidated.
To elaborate on the consolidation factor, even if you intend to convey assets that will be part of your estate into the trust, you may still have property in your direct possession at the time of your passing. You can account for this through the inclusion of a pour over will. This type of will allows the trust to absorb these assets; they are “poured over” into the living trust.
You can empower a disability trustee to assume the role if you ever become incapacitated, and this is a key feature, because incapacity strikes a very significant percentage of elders. Another benefit is the ability to add a spendthrift clause to protect a beneficiary that may be prone to irresponsible spending.
Like everything else within the realm of estate planning, there is no single answer to questions that people typically ask, because it all depends on the circumstances. When it comes to choosing a living trust trustee, the details make a difference. However, we will provide generalities here.
Legally speaking, the trustee can be any adult that is of sound mind that is willing to assume the role. However, administering a trust is going to require a significant level of financial acumen.
The trustee must have the time that it takes to do the job, and the commitment can be considerable in some cases. You also have to be concerned about conflicts of interest and anticipated longevity. There are certain rules that must be followed under the laws of the state of Nevada, and this is another consideration.
If you don’t know a willing, suitable candidate, or if the administration of your trust is going to be an ongoing, complex task, there is a solution. You could use a corporate trustee like a trust company or the trust section of a bank. When you go this route, a licensed financial professional will be at the helm to manage the trust effectively, and there will be inherent oversight.
We are here to help if you would like to discuss your estate planning goals with a licensed attorney. You can send us a message to request a consultation appointment, and we can be reached by phone at 775-823-9455.
Often, clients want to continue to control their beneficiaries after death, just as they’ve done during their lifetime. They want to etch in stone the exact circumstances under which distributions should be made to the beneficiaries. Sometimes they think the beneficiary will have to go to the tombstone like a confessional or ATM.
The problem is the client doesn’t know what may happen in the intervening years. Here are just a few of the several things that regularly change after a plan has been drafted:
Rather than trying to precisely anticipate every possible future scenario, which is a fool’s errand, it’s better to put that in the hands of the trustee. The trustee can be given discretion to withhold distributions based on pre-set factors such as:
That’s not to say you shouldn’t set forth your general wishes. But, most of the specifics should be left for the trustee to decide.
For example, a client in San Francisco in 1990 might have decided to provide for a beneficiary’s rent and set forth a specific dollar amount of $1,000 to cover it, expecting that would be ample. It would be much better to give the trustee discretion to pay for the beneficiary’s support, in the trustee’s discretion. Imagine how the average rents have changed over two decades in San Francisco, where the rent of even a studio apartment is now over $2400. If a specific dollar amount were used, even inflation-adjusted, it would not allow the flexibility to respond to the changing world. Giving the trustee discretion achieves the desired result: to pay for the beneficiary’s rent.
The trustee selected by the client is in a much better position to judge when a distribution should be made, for rent in the prior example. The first five letters say exactly what you should do with them: t-r-u-s-t them. Trust that the trustee will make the right decision. If you don’t trust that person, put someone in that role whom you do trust.
The client can only gaze into a crystal ball and wonder what might happen in the world and in the beneficiary’s life. Trustees have the benefit of 20/20 hindsight. They know what has happened since the client drafted their estate plan and died. They know the beneficiary’s circumstances and they know the current state of the world. They are in a far better position to make a decision.
If you would like to learn more about wills and trusts or other estate planning matters, attend one of our upcoming Webinars. They are free to attend, and you can get all the details if you visit our Webinar information page. Or you can call us to arrange a free consultation to discuss living trusts, or other estate planning matters, at (775) 823-9455.
When you establish a revocable living trust, you are also generally the initial Trustee of the trust, administering the trust assets for your own benefit as a beneficiary of the trust. If you are married, your spouse can be a trustee with you. This way, if either of you become incapacitated or die, the other can continue to handle your financial affairs without interruption. What happens if you and your spouse are unable to serve as trustees due to incapacity or death? Generally, your revocable living trust will provide for a Successor Trustee to manage your trust assets for your benefit. The Trustee should be prepared to manage your financial affairs by collecting income, paying bills/taxes, selecting health-care professionals if needed, providing for your well-being, providing for dependents if any, and keeping accurate records.
Some people choose an adult son or daughter, a trusted friend or another relative. Some like having the experience and investment skills of a professional or corporate trustee (e.g., a bank trust department, trust company, or law firm). Naming someone else as trustee or co-trustee with you does not mean you lose control. The trustee you name must follow the instructions in your trust and report to you. You can even replace your trustee in your revocable living trust should you change your mind.
At death your assets can be left outright or continuing sub-trust for asset protection of your heirs/beneficiaries. Sub-trusts provide asset protection to your beneficiaries from their own creditors, or potential x-spouses. If you leave your assets in sub-trust for asset protection of your beneficiaries, consider if each heir should be their own trustee or if a professional trustee, or another person would be a better choice. For special needs beneficiaries, or a spendthrift beneficiary, often a professional trustee is helpful.
You may be elderly, widowed, or in declining health and have no children or other trusted relatives living nearby. Or your candidates may not have the time or ability to manage your trust. You may simply not have the time, desire or experience to manage your investments by yourself. Also, certain irrevocable trusts will not allow you to be trustee due to restrictions in the tax laws. In these situations, a professional or corporate trustee may be exactly what you need: they have the experience, time and resources to manage your trust and help you meet your investment goals.
Professional or corporate trustees will charge a fee to manage your trust, but generally the fee is quite reasonable, especially when you consider their experience, the services provided, and the investment returns that a professional trustee can deliver.
We can help you select, educate, and advise your successor trustees so they will have support and know what to do next to carry out your wishes. Give us a call today at (775) 823-9455 to schedule a consultation.
Once the world began to get over the shock of the death of music legend and golden girl Whitney Houston, reports began to surface that there was trouble brewing with regard to her estate. Houston was found dead in her Beverly Hills hotel room at the age of 48 and left behind only one heir -- 18 year old Bobbi Kristina. While fans rushed to buy anything related to Houston, Houston’s family was already poised for a fight over her estate with Houston’s ex-husband Bobby Brown. With the news this week that Houston left behind a trust, everyone in Houston’s camp can breath a sigh of relief.
Despite unprecedented success in her professional career throughout the 90s, Houston was plagued with personal problems as a result of a battle with drug and alcohol addiction as well as a stormy relationship with Bobbi Kristina’s father, singer Bobby Brown. After finally divorcing Brown in 2007, Houston appeared to be on the road to a comeback when she was found dead last month.
While Houston’s daughter is of age to inherit directly, she allegedly battles her own issues with drugs and alcohol, making her susceptible to a claim that she is unable to handle her own finances and in need of a conservator. Houston’s family was reportedly worried that Brown would petition a court to become her conservator, effectively gaining control of Houston’s fortune. Houston, however, apparently thought ahead and created a trust for Bobbi Kristina. By creating a trust, Houston put a stop to any attempts to gain control of the money and put control of the money in the hands of someone she hand picked as trustee.
When you create a trust, one of the most important decisions you must make is who to appoint to succeed you as your trustee. Although each trust is unique, there are some basic considerations that you may wish to take into account before making a decision regarding the appointment of a trustee.
