Executor Duties

1. Executor Duties • Named in a valid will to serve as personal representative of testator when will is probated • Can be an individual or institution • Locate, prove, and probate decedent’s will • Collect decedent’s property

2. Executor Duties (cont’d) • Pay debts, taxes and expenses • Distribute remaining assets to beneficiaries specified in decedent’s will • Executor duties usually last between nine months and two or three years

3. Attributes of a Good Executor • Sensitivity • Competence • Understanding and appreciation of needs and circumstances of beneficiaries • Knowledge of the nature, value and extent of decedent’s assets • Experience in the administration of estates • Business and investment experience

4. Attributes of a Good Executor (cont’d) • Familiarity with decedent’s business • Ability to serve • Willingness to serve • Geographic proximity to the estate’s beneficiaries and assets • Lack of any conflict of interest • Integrity and loyalty

5. Trustee Duties • Named in a trust agreement to carry out the objectives and follow the terms of the trust • Can be an individual or corporate fiduciary or combination • Satisfaction of tax and non-tax objectives • Investment, management, and protection of trust assets • Compliance with dispositive intentions of the grantor

6. Goals of a Trust • Reduce or eliminate income or estate or GST taxes at the federal or state level • Reduce or eliminate probate costs • Create a vehicle for unified administration of both probate and nonprobate assets to facilitate attainment of other estate planning objectives • Provide for minor children with greater flexibility and customization than UTMA or UGMA allow

7. Goals of a Trust (cont’d) • Provide for recipients who reach majority but lack emotional or intellectual maturity, physical capacity, or technical training to handle large sums of money, an investment portfolio, or a family business • Postpone full ownership of trust assets until specific trigger ages or events occur • Enable investment in an asset that does not readily lend itself to fragmentation (real estate, life insurance) • Limit the parties who can obtain the assets

8. Role of Trustee vs. Role of Executor • Trustee duties commonly last for a generation or more vs. one to three years for executor • Trustee selection is tax-sensitive but executor selection is not tax-sensitive

9. Attributes of a Good Trustee • Availability • Impartiality and lack of conflict of interest • Financial security • Investment sophistication, policy, and track record • Business sophistication • Accounting and tax-planning expertise

10. Attributes of a Good Trustee (cont’d) • Recordkeeping and reporting ability • Understanding and appreciation of needs and circumstances of beneficiaries • Fees • Tax-neutral impact • Decision-making abilities • Competence

11. Attributes of a Good Trustee (cont’d) • Standard to which trustee will be held • Integrity • Flexibility to meet changing circumstances • Willingness to serve throughout the term of the trust • Experience as a trustee • Neutral state law impact

12. Trustee Powers • Powers to affect beneficial enjoyment • Administrative powers • Powers over principal • Powers to discharge legal obligations Note: Before naming the grantor or anyone with an interest in the trust as trustee, consideration must be given to income and estate tax consequences of powers held by various parties (grantor, nonadverse party, adverse party, independent third party)

13. Powers Affecting Beneficial Enjoyment • Power to distribute income to grantor or grantor’s spouse • Power to distribute income to beneficiaries other than grantor or grantor’s spouse without restriction of an ascertainable standard • Power subject to an ascertainable standard to distribute income to beneficiaries other than the grantor or grantor’s spouse • Power subject to an ascertainable standard to distribute income to a beneficiary or class of beneficiaries

14. Power to distribute income to grantor or grantor’s spouse

15. Power to distribute income to beneficiaries other than grantor or grantor’s spouse without restriction of ascertainable standard

16. Powersubject to an ascertainable standard to distribute income to beneficiaries other than the grantor or grantor’s spouse

17. Power subject to an ascertainable standard to distribute income to a beneficiary or class of beneficiaries

18. Powers Affecting Beneficial Enjoyment (cont’d) • Power to distribute principal to current income beneficiary • Power to distribute or accumulate income for current income beneficiary • Power to make mandatory distributions of income or principal to specified beneficiaries other than the grantor or grantor’s spouse

19. Power to distribute principal to current income beneficiary

20. Power to distribute or accumulate income for current income beneficiary

21. Power to make mandatory distributions of income or principal to specified beneficiaries other than the grantor or grantor’s spouse

22. Administrative Powers • Power to allocate receipts between principal and income • Power to use trust income to pay premiums on insurance insuring the life of the grantor or grantor’s spouse • Power to purchase, exchange, or otherwise deal with trust assets for less than adequate consideration

23. Power to allocate receipts between principal and income

24. Power to use trust income to pay premiums on insurance insuring the life of the grantor or grantor’s spouse

25. Power to purchase, exchange, or otherwise deal with trust assets for less than adequate consideration

26. Administrative Powers (cont’d) • Power to borrow trust income or principal without adequate interest or adequate security • Power to vote securities of a controlled corporation • Power to reacquire trust principal by substituting property of equal value

27. Power to borrow trust income or principal without adequate interest or adequate security

28. Power to vote securities of a controlled corporation

29. Power to reacquire trust principal by substituting property of equal value

30. Powers Over Principal 1. Power to revoke the trust and revest the principal in the grantor or grantor’s spouse 2. Power to terminate trust and distribute principal to beneficiaries

31. Power to revoke the trust and revest the principal in the grantor or grantor’s spouse

32. Power to terminate trust and distribute principal to beneficiaries

33. Powers to Discharge Legal Obligations • Power to discharge support obligation

34. Co-Trustees • Problem: It is impossible to select a trustee that has all of the desired advantages and none of the unwanted disadvantages • Solution: Often one or more family members and a corporate fiduciary are selected • Considerations: • Additional cost? • Tie-breakers for voting? Majority rules? • Responsibility dissenting trustee has for majority decisions?

35. Removal and Succession of Trustees The trust document should consider the following issues: • Who, if anyone should be given the power to remove trustees? • Should such power be given to • Grantor? • Beneficiaries? • Trustee(s)? • Outside party? • How narrow or broad should a removal power be?

36. Removal and Succession of Trustees (cont’d) • The trust document should consider the following issues: (cont’d) • How often may a removal power be exercised? • How will succession be determined? • What restrictions will be placed on the successor trustee? • What are the tax consequences of allowing various persons to remove a trustee and without restriction appoint a new one?

37. Estate Planning Attorney Duties • Duties depend on the client’s stage in the estate planning cycle: • Accumulation • Conservation • Distribution • The attorney must gather data about: • The client, his family and other potential beneficiaries and their circumstances • Client’s sources of wealth, income, liabilities, and expenses • Client’s financial goals and fears • Analyze client data to ascertain client’s current position

38. Estate Planning Attorney Duties (cont’d) • Identify potential areas of weakness with regard to: • Liquidity • Disposition of assets • Adequacy of capital and income • Stability and maximization of value • Excessive transfer costs • Special Needs • Communicate weaknesses and potential solutions to client to enable client to make informed decisions • Organize the estate planning team • Draft the necessary documents

39. Attributes of a Good Estate Planning Attorney • Competence Specific expertise: • CPA, CFP, CLU, ChFC • State certified specialist • Attorneys with LLM (masters) degrees in taxation • Teach estate planning in universities or law schools • Compassion • Clarity • Affordability