Klitzman Law Group, PLLC

How Do Joint Accounts and Beneficiary Designations Work in Estate Planning?

“Remember that a will goes through probate, so a husband and wife typically try to avoid it by using joint ownership or beneficiary designations. However, they’re often mistaken by believing the will still controls their estate.”

Most people think a will is the most important tool in the estate planning toolbox, but in many instances, it is not even used. Assets in the will go through probate, and wills control assets in your name only. If you don’t have a will, your state laws will provide one under its law of Intestate Succession. Instead of making a will, some people just name their spouses or children on joint accounts, says the article “Protecting Your Assets: Joint Accounts and Beneficiary Designations” from The Street. however, that can lead to big problems.

Let’s look at a typical family. They own a home, an IRA, life insurance and some bank and investment accounts. They have wills that leave everything to each other, and equally to their children upon their deaths. If a child predeceases them, they want the child’s share to go to the child’s children (their grandchildren). This is called per stirpes, meaning it goes to the next generation. The husband and wife have also listed each other as joint owners and beneficiaries and then listed their children as contingent beneficiaries on all financial accounts.

When the husband dies, all his assets go to his wife. When she dies, she had named her living children as beneficiaries. If she signed a quit claim deed putting the children’s names on the house before she died, the will and probate may be bypassed altogether.

Sounds like a great plan, doesn’t it? Except like most things that sound too good to be true, this one is not a great plan. Here’s what can and very often does go wrong.

Let’s say a daughter inherits a bank account and is sued, files for bankruptcy or divorces. Her entire inheritance is vulnerable, with no protection at all.

What if you say in your will that you want everything to go equally to all three children when you die, but you only put one son as a beneficiary on your accounts? When you die, only one son inherits everything. The will does not supersede the beneficiary designation. If the son wants to keep all your assets, he can, no matter what he may have promised you and his siblings.

If the wife dies first and the husband remarries, he may want to leave everything to his new wife. He’s hoping that when she dies, she’ll distribute the assets from his first marriage to his children. He even has a will and changes the beneficiary designations on his investment accounts to make sure that happens. However, when he dies, she owns the accounts and can name whoever she wants to inherit those accounts. She has the legal right to cut out anyone she wants. The husband may have avoided probate, but his children are left with no inheritance.

We all like to believe that our spouses and children will do the right thing upon our death, but the only way to ensure that this will happen is to have an estate plan created using trusts and other planning strategies. Avoiding probate may be a popular theme but making sure your assets go where you want to them to is far more important than avoiding probate. Meet with an estate planning attorney to ensure that your family is protected, the right way.

Reference: The Street (Oct. 30, 2020) “Protecting Your Assets: Joint Accounts and Beneficiary Designations”

Stretch Out IRA Distributions, Even Without ‘Stretch’ IRA

“The SECURE Act killed the stretch IRA but instead of mourning, advisors can help clients make up the loss.”

It’s sad but true: the SECURE Act took away the long lifetime stretch that so many IRA heirs enjoyed. It was a great efficiency tool for family wealth transfer, but there are ways to fill the gap. A recent article “3 Strategies That Dry Your Stretch IRA Tears” from InsuranceNewsNet.com explains what to do now that IRAs need to be cashed out within ten years of the original owner’s death.

There are a number of tax-efficient planning opportunities, falling into three basic categories: wealth replacement with life insurance, Roth planning and charitable opportunities.

The life insurance policy is straightforward: parents buy life insurance to close the gap between what the IRA could have been, if it had been stretched out over the heir’s lifetime. For parents who are in a lower tax bracket than their children, it might make sense for parents to take distributions out of their IRA and buy insurance with after-tax dollars. This method may also present an opportunity for parents to purchase life insurance with long-term care protection, if they have not already done so.

The “Slow Roth” strategy is for families who might not think they can benefit from a Roth, but they can—just not all at once. By converting an IRA to a Roth IRA over time, only in amounts that keep parents in the same tax bracket, and paying taxes on the conversion slowly and over time, the Roth IRA can be built up so when it is inherited, even though it has to be taken out within ten years after your death, it is income tax free.

The third strategy is for families already planning on making charitable gifts. A Qualified Charitable Distribution, or QDC, lets the owner make distributions directly from their IRA to qualified charities, up to $100,000 annually. Remember that the distribution must go directly to the charity and it cannot be used for a donation to a donor-advised fund or private foundation. Your estate planning attorney will be able to help determine if your charity of choice qualifies.

Finally, you can name a Charitable Remainder Trust as an IRA Beneficiary. This is not a do-it-yourself project and mistakes can be costly. By naming a CRT as a beneficiary of your IRA, you avoid taxes on the entire lump sum when the trust liquidates the IRA. At the same time, the income beneficiary of the trust can receive income from the CRT over their lifetime or a term that you determine. It can’t be more than twenty years from the date of death, but twenty years is a long time. The payments from the trust will be treated as taxable income, so be sure that this will work for the recipient. If you accidentally push them into a higher tax bracket, they may not be quite as grateful as you wanted.

Reference: InsuranceNewsNet.com (Oct. 28, 2020) “3 Strategies That Dry Your Stretch IRA Tears”

Retirement Account Beneficiary Choices and Your Estate

“It is surprisingly easy and common to make mistakes when designating beneficiaries on retirement and investment accounts.”

A designated beneficiary is the person named on a retirement or investment account to inherit the asset if you die. That’s the simple part. What gets complicated is when people don’t think it’s such a big deal, says a recent article “5 Mistakes To Avoid With Retirement Account Beneficiary Selections” from Forbes. Mistakes made about beneficiaries can be costly and sometimes, unfixable. You could accidently disinherit a child or leave money to an ex-spouse.

Even if you have done all the right estate planning, mistakes with beneficiaries can happen. Just remember this very simple fact: your will does not control your retirement accounts and it may not control any accounts where you have been asked to name the person who inherits the asset, like a life insurance policy.

A will can also push your estate into the probate process, which can have some significant pitfalls. If you have a living trust but neglect to fund it, the assets left outside of the trust might also have to go through probate. The best way for most people to pass assets like retirement accounts is to have them go directly to a beneficiary.

Other accounts that pass via beneficiary designation are usually 401(k)s, IRAs, Roth IRAs, life insurance, annuities, and investment accounts that have Transfer on Death (TOD) options. Using beneficiary designations may allow your heirs to receive assets in a tax-efficient and fast manner.

What are the top five mistakes people make for beneficiary designations?

Forgetting to name a beneficiary. This happens very commonly when people are young adults. It’s hard to imagine needing to name an heir when you are young and healthy, but not naming anyone creates headaches.

Ignoring special circumstances. When you have an heir with an addiction problem, one who has trouble managing money or who is preparing to leave a marriage, leaving them a large sum of money can create more problems. If your loved one has special needs and receives benefits from the government, an inheritance could put all their aid at risk. An estate planning attorney can help create a Special Needs Trust and plan for their future.

Using the wrong name. It sounds silly, but it happens often. If your loved one’s name is Jane Doe, or there are family members with very similar names, you’ll need to use more information to identify them, like birthdates, Social Security numbers and even details about their relationship to you. Not providing enough clear information, could send your asset into the wrong hands.

Neglecting to update your beneficiaries. The person you name as your beneficiary when you are in your 30s, may not be the same person you want to inherit your assets in your 60s. If you have remarried, you must change all beneficiary designations to protect your current spouse. If you have had children or additional children since you first purchased a life insurance policy, you’ll need to be sure that all your children are named on that policy. Every few years, just as you need to review your estate plan, you need to update your beneficiaries.

Failing to discuss your beneficiaries with your estate planning attorney, tax, and financial advisor. There are complications that can occur with an inheritance. Being pushed into a higher bracket sounds like a nice problem to have, until the tax bill comes due. Your estate planning attorney will be able to work with you and your loved ones to protect your legacy and their future.

Reference: Forbes (Oct. 25, 2020) “5 Mistakes To Avoid With Retirement Account Beneficiary Selections”

Make Sure Your Estate Plan Protects Digital Assets

“Do you have accounts, records or information that are accessed using your mobile phone, through an internet connection, or by using a keyboard or through a touch-screen or tablet?”

Today’s estate plan needs to expressly declare an “agent” or a “fiduciary” to gain access and control of “digital assets” in case of incapacity or death. If your estate plan has not been updated in the last four or five years, it’s likely that your digital assets are unprotected, advises the article “Properly addressing digital assets on your estate plan” from Southern Nevada Business Weekly.

Digital assets have value not only to owners, but to family members, beneficiaries and heirs. Some assets have sentimental value, like videos and photos, while others, like business records, URLs and gaming accounts, have financial value. Failing to address these issues in an estate plan could result in your executor and heirs being denied access and control of digital assets during incapacity or death.

Here are some examples of digital assets:

• Email accounts–contain communications and history, including information about other digital assets.
• Social media accounts/apps: Facebook, Twitter, Pinterest, YouTube, TikTok, etc.
• Photo Sharing Accounts: Instagram, Shutterfly, Snapfish, Flickr, etc.
• Gaming and Gambling Accounts/Apps: DraftKings, Esports Entertainment
• E-Commerce Accounts/Apps: Amazon, PayPal, Etsy, PayPal, Venmo, etc.
• Financial Accounts/Apps: Banks, Scottrade, E*Trade
• Retail Accounts: Any store, online shopping that has a username and a password
• Security Information: Two factor authentication, mobile phone PIN/PW, facial recognition, etc.

Here’s a little-known fact: without the proper legal authority to access these assets, the “agent” or “fiduciary” could be committing a crime. The Consumer Fraud and Abuse Act provides that it is a federal crime to access a computer and obtain information without authorization or when exceeding authorized access.

Most states have adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA 2017). The Act contains specific language to be used in wills, trusts or power of attorney to name a “designated recipient” or “fiduciary” to access, control, transfer, or close digital assets upon incapacity or after death. RUFADDA also provides specific procedures for companies to disclose digital assets to a designated recipient or fiduciary.

If your estate planning assets do not address the issue of digital assets or do not use the specific language of RUFADDA, or generally if your estate planning documents were created before 2017, it’s time for a review that includes digital assets.

Even if all you have is a personal email account, you have digital assets to protect. It’s not a big problem to address them in your estate plan but can become a bigger program if they are neglected.

Reference: Southern Nevada Business Weekly (Sep. 17, 2020)“Properly addressing digital assets on your estate plan”

The Biggest Mistake in Trusts: Funding

“Your real estate holdings, life insurance, bank accounts and retirement savings won’t magically flow into your trust.”

Failing to put assets into trusts creates headaches for heirs and probate hassles, says the article “Once You Create a Living Trust, Don’t Forget to Fund It” from Kiplinger. It’s the last step of creating an estate plan that often gets forgotten, much to the dismay of heirs and estate planning attorneys.

Are people so relieved when their estate plan is finished, that they forget to cross the last “t” and dot the last “i”? Could be! Retitling accounts is not something we do on a regular basis, and it does take time to get done. However, without this last step, the entire estate plan can be doomed.

Here are the steps that need to be competed:

Check the deeds on all real estate property. If the intention of your estate plan is to place your primary residence, vacation home, timeshare or rental properties into the trust, all deeds need to be updated. The property is being moved from your ownership to the ownership of the trust, and the title must reflect that. If at some point you refinanced a home, the lender may have asked you to remove the name of the trust for purposes of financing the loan. In that case, you need to change the deed back into the name of the trust. If your estate planning attorney wasn’t part of that transaction, they won’t know about this extra step. Check all deeds to be certain.

Review financial statements. Gather bank statements, brokerage statements and any financial accounts. Confirm that any of the accounts you want to be owned by the trust are titled correctly. You may need to contact the institutions to make sure that the titles on the statements are correct. If there is no reference to the trust at all, then the account has not been recorded correctly and changes need to be made.

It’s also a good idea to review any accounts with named beneficiaries. Talk with your estate planning attorney about whether these accounts should be retitled. The rules regarding beneficiaries for annuities changed a few years ago, so naming the trust as a beneficiary might not work for your estate plan or your tax planning goals as it did in the past.

IRAs and other retirement accounts. These accounts need to be treated on an individual basis when deciding if they should have a trust listed as a primary or contingent beneficiary. Listing a trust as a beneficiary can, in some cases, accelerate income tax due on the account. If the trust is listed as the beneficiary, the ability to distribute assets to trust beneficiaries may be impacted.

The main reason to list a trust as a beneficiary to an IRA or retirement plan is to protect the asset from creditors, financially reckless heirs, or a beneficiary with special needs. An estate planning attorney will know the correct way to handle this.

Making sure that your assets are in the trust takes a little time, but it is up to the owner of the trust to take care of this final detail. The estate planning attorney may provide you with written directions, but unless you make specific arrangements with the office, they will expect you to take care of this. The assets don’t move themselves – you’ll need to make it happen.

Reference: Kiplinger (Oct. 26, 2020) “Once You Create a Living Trust, Don’t Forget to Fund It”

Special Needs Plans Need Regular Reviews to Protect Loved Ones

“Estate planning generally focuses primarily on lifetime protection and post-death distribution of assets. Special needs planning focuses primarily on the individual beneficiary’s lifestyle and care needs.”

Special needs planning is far more detailed than estate planning, although both require regular reviews and updates to be effective. For creating a wholly new plan or reviewing an older plan, one way to start is by writing a biography of a loved one with special needs, recommends the article “Special needs plan should be carefully considered” from The News-Enterprise.

Write down the person’s name, birth date and their age at the time of writing. Include information about favorite activities, closest friends and favorite places. Consider all of the things they like and dislike. Make detailed notes about relationships with family members, including any household pets. Think of it as creating a guide to your loved one for someone who has never met them. This guide will be useful in mapping out a plan that will best suit their needs.

Follow this by writing down what you envision for their future, in three distinct scenarios. A good future, where you are able to care for them, a not-so-great future where they are alive and well, but you are not present in their life and a bad future. You should be as specific as possible. This exercise will provide you with a clear sense of what pitfalls may occur, so you and your estate planning attorney can plan better.

Your plan needs to consider who will become the person’s guardian. You’ll need to list more than one person and put their names in order of preference. Consider the possibility that the first person may not wish to or be able to serve as a guardian and have second and third guardians. Talk to each person to be sure they are willing and able to take on this responsibility.

Next, consider living arrangements. Will your loved one be able to live independently, with regular check ins? Could they live in an accessory apartment with a guardian close at hand? Or would they need to live in a group care facility with an on-site social worker?

A special needs plan usually includes a Special Needs Trust (SNT), with comprehensive details for the trustee. Just as you need multiple guardians, you should also name several trustees. The guardian is responsible for a person and the trustee is responsible for the property.

The question is raised whether a family member or a professional should be the trustee. Having a family member manage the finances is not always the best idea. A professional fiduciary will be able to manage the funds without the emotional ties that could cloud their ability to make good decisions. This is especially important, if the beneficiary has a drug dependency problem, does not have a strong family network or if the estate is large.

Consideration should also be given to having the trustee check in on the beneficiary on a regular basis to ensure that the beneficiary’s needs are being met. The trustee should have permission to make decisions about the use of the trust funds in special circumstances. The trustee will need to be someone who is skilled with managing money and is well-organized and responsible.

Special needs planning is complex, but careful planning will give you the peace of mind of knowing that your loved one will be cared for by people you choose and trust.

Reference: The News Enterprise (Oct. 13, 2020) “Special needs plan should be carefully considered”

Does Your Inherited House have a Mortgage?

“What happens if you inherit your loved one’s home? What if they still have payments to make on their mortgage?”

When a loved one dies, there are always questions about wills, inheritances and how to manage all of their legal and financial affairs. It’s worse if there’s no will and no estate planning has been done. This recent Bankrate article, “Does the home you inherited include a mortgage?,” says that things can get even more complicated, when there’s a mortgage on the inherited house.

Heirs often inherit the family home. However, if it comes with a mortgage, you’ll want to work with an estate planning attorney. If there are family members who could become troublesome, if houses are located in different states or if there’s a lot of money in the estate, it’s better to have the help of an experienced professional.

Death does not mean the mortgage goes away. Heirs need to decide how to manage the loan payments, even if their plan is to sell the house. If there are missing payments, there may be penalties added onto the late payment. Worse, you may not know about the mortgage until after a few payments have gone unpaid.

Heirs do have several options:

If the plan is for the heirs to move into the home, they may be able to assume the mortgage and continue paying it. There is also the option to do a cash-out refinance and pay that way.

If you plan to sell the home, which might make it easier if no one in the family wants to live in the home, paying off the mortgage by using the proceeds from the sale is usually the way to go. If there is enough money in the estate account to pay the mortgage while the home is on the market, that money will come out of everyone’s share. Here again, the help of an estate planning attorney will be valuable.

Heirs have certain leverage, when dealing with a mortgage bank in an estate situation. There are certain protections available that will give you some leeway as the estate is settling. More good news—the chance of owing federal estate taxes right now is pretty small. An estate must be worth at least $11.58 million, before the federal estate tax is due.

There are still 17 states and Washington D.C. that will want payment of a state estate tax, an inheritance tax or both. There also might be capital gains tax liability from the sale of the home.

If you decide to take over the loan, the lender should be willing to work with you. The law allows heirs to assume a loan, especially when the transfer of property is to a relative, because the borrower has died. Surviving spouses have special protections to ensure that they can keep an inherited home, as long as they can afford it. In many states, this is done by holding title by “tenancy by the entireties” or “community property with right of survivorship.”

When there is a reverse mortgage on the property, options include paying off or refinancing the balance and keeping the home, selling the home for at least 95% of the appraised value, or agreeing to a deed in lieu of foreclosure. There is a window of time for the balance to be repaid, which may be extended, if the heir is actively engaged with the lender to pay the debt. However, if a year goes by and the reverse mortgage is not paid off, the lender must begin the foreclosure process.

Nothing changes if the heir is a surviving spouse, but if the borrower who dies had an unmarried partner, they have limited options, unless they are on the loan.

What if the mortgage is “underwater,” meaning that the value of the inherited home is less than the outstanding mortgage debt? If the mortgage is a non-recourse loan, meaning the borrower does not have to pay more than the value of the home, then the lender has few options outside of foreclosure. This is also true with a reverse mortgage. Heirs are fully protected, if the home isn’t worth enough to pay off the entire balance.

If there is no will, things get extremely complicated. Contact an estate planning attorney as soon as possible.

Reference: Bankrate (Oct. 22, 2020) “Does the home you inherited include a mortgage?”

How to Lower Your Medicare Premiums

“This fall, older savers who are feeling generous may want to consider using their individual retirement account to help fund their favorite charities.”

Here’s a generous incentive for older Americans who want to help their favorite charities: by giving generously from the right asset source, they could manage their Medicare premiums for 2022. The details come from the article “Feeling altruistic? This tax strategy can keep Medicare premiums in check” from CNBC.

People who are age 70½ and over are allowed to make qualified charitable distributions from their IRAs. The IRA owner directs the custodian holding the account to transfer up to $100,000 directly to a charity. The transaction must be a direct transfer, and donor-advised funds or private foundations are not eligible for this strategy.

This is a staple of year-end tax planning for many, hitting two targets at once: older savers meet their required minimum distributions without a tax hit and their favorite causes get support. This year, there is no RMD, as a result of the CARES Act, the coronavirus relief measure that went into effect in the spring. However, a qualified charitable distribution still makes sense for people who were planning on making large donations.

Keeping a lid on Medicare premiums for 2022 Medicare Part B (Medical Insurance) and Part D (Prescription Coverage) itself is worth consideration.

Giving via a Qualified Charitable Distribution will not inflate the Modified Adjusted Gross Income (MAGI) for that year, and you also won’t pay taxes on the distribution. Remember, Medicare premiums are based on the MAGI from two (2) previous years.

It’s great to support nonprofit agencies that have meaning to you. However, doing it without taking advantage of tax planning is a lost opportunity.

In 2020, single taxpayers with a 2018 MAGI up to $87,000 (or $174,000 for married and filing jointly) pay $144.60 a month for Medicare Part B. Premiums increase depending on your MAGI, all the way up to $491.60 per month for individual taxpayers with a 2018 MAGI of $500,000 or more.

This is something to work on with your estate planning attorney, as going just one dollar over your income bracket could raise your premiums by thousands. Your estate planning attorney will be able to guide you through the various brackets, which must consider any other sources of taxable income.

Charitable giving is a great tool to shave tax liability, while doing good. Donations of appreciated stock are another strategy. Just remember that for this type of giving, you’ll need to be itemizing deductions on the return, if you want to write them off. With the standard deduction so high, it may be hard to meet that hurdle.

Reference: CNBC (Oct. 23, 2020) “Feeling altruistic? This tax strategy can keep Medicare premiums in check”

Good Planning for Life Is Also Good Planning for a Pandemic

“It’s hard to plan for next week, let alone the future, when our environment, the advice from the experts and indeed the outbreak itself, seems to change on a daily basis.”

The fear of the unknown and a sense of loss of control is sending many people to estate planning attorney’s offices to have wills, advance directives and other documents prepared, reports the article “Legal lessons from a pandemic: What you can plan for” from The Press-Enterprise.

However, people are not just planning because they are worried about becoming incapacitated or dying because of COVID. High net-worth people are also planning because they are concerned about the changes the election may bring, changes to what are now historically advantageous estate tax laws and planning to take advantage of tax laws, as they stand pre-December 31, 2020.

Regardless of your income or assets, it is always good to take control of your future and protect yourself and your family, by having an up-to-date estate plan in place. Anyone who is over age 18 needs the following:

• Health Care Directive
• Power of Attorney
• HIPPA Release Form
• Last Will and Testament

Any assets without beneficiary designations should be considered for a trust, depending upon your overall estate. Trusts can be used to take assets out of a taxable estate, establish control over how the assets are distributed and to avoid probate. You don’t have to be wealthy to benefit from the use of trusts.

Preparing estate planning documents in a last-minute rush, is always a terrible idea.

If you have more free time during the pandemic, consider using some of your free time to have your estate plan implemented or updated. This should be a top priority. The state of the world right now has all of us thinking more about our mortality, our values and the legacy we want to leave behind. Most estate planning attorneys encourage clients to think about the next three to five years. What would be important to you, if something were to happen in that time frame?

Estate planning is about more than distributing assets upon death. It addresses incapacity—what would happen if you became too ill or injured to care for yourself? Who would make medical decisions for you, such as what kind of medical care would you want, who will your doctors be and where will you live in the short-term and long-term? Incapacity planning is a big part of an estate plan.

When naming people to care for you in the event of incapacity, provide your estate planning attorney with three names, in case your first or second choices are not able to act on your behalf. Most people name their spouse, but what if you were both in an accident and could not help each other?

In recent months, Advance Health Care Directives have received a lot of attention, but they are not just about ventilator use and intubation. An Advance Health Care Directive is used to state your preferences concerning life-sustaining treatment, pain relief and organ donation. The agent named in your health care directive is also the person who will carry out post-death wishes, so provide as many details as you can about your wishes for cremation, burial, religious services, etc.

Trusts are a way to preserve a family legacy. A living trust gives you the ability to decide who you want involved, in case of your death or incapacity. You decide on your beneficiaries, and if you want your assets going directly to those beneficiaries or if they should be held in trust until certain goals are met, like finishing college or reaching a certain age or life milestone.

Your estate planning attorney will help you clarify family legacy goals, whether they include a beneficiary with special needs, a supplement for children who go into public service careers, etc.

Reference: The Press-Enterprise (Oct. 18, 2020) “Legal lessons from a pandemic: What you can plan for”

What are the Responsibilities of a Trustee?

“A trustee is a manager of assets in a trust. The grantor creates the trust and appoints the trustee. A trustee has a ‘fiduciary duty’ to serve the grantor and not benefit personally.”

Before accepting the role of a trustee, it is important to have a thorough understanding of what you will need to do and for how long. Trustees are often appointed to manage trust assets for a child or adult with special needs. This responsibility could be for a lifetime, so be sure that you are up for the task. Trustee duties are outlined in a recent article, “Trustee responsibilities,” from InsuranceNewsNet.com.

When the person who set up the trust, known as the “grantor,” dies, the trustee is in charge of settling the trust. That includes tasks like:

1–Locating and reviewing all of the documents of the grantor, especially any funeral and burial instructions.

2–If the grantor owned a home or an apartment, changing the locks for security, notifying the homeowner’s insurance company, if the house will be unoccupied for an extended period of time, and checking on auto insurance policies, if there are cars or other vehicles.

3–Unless the executor is taking care of this task, the trustee needs to obtain multiple originals of the death certificate. These are usually ordered by the funeral director.

4–Listing all assets with the Date of Death (DOD) values of any assets. This determines the “cost basis” of assets that are to be transferred to beneficiaries. If assets are later sold and used to distribute proceeds, the cost-basis is used to determine income tax liability.

5–Consolidate multiple financial accounts into one account. The check register will become a register of trust activities and beneficiaries may inspect it. The trustee’s first responsibility is to protect the trust’s funds.

6–Pay outstanding bills and debts. The trustee may be personally liable, if this is not handled correctly.

7–Meet with an estate planning attorney to determine if the trust must file income tax returns or if the estate of the grantor must file income tax returns.

8–File claims for life insurance, IRAs and annuities.

9–Create an accounting for all trust financial activity from the grantor’s DOD to be distributed to the beneficiaries.

10–Transfer assets to beneficiaries according to the terms of the trust and have an estate planning attorney send each beneficiary a receipt, release and waiver for any further responsibility and liability.

The responsibilities of a trustee are similar to the responsibilities of an executor, except that wills are used in probate court and trusts are created to avoid probate court. Another benefit of trusts is that they can help avoid litigation between beneficiaries and keep the estate’s affairs private.

Reference: InsuranceNewsNet.com (Oct. 19, 2020) “Trustee responsibilities”