Make The Best Use of Trusts
Sy Goldberg, CPA, MBA, JD | June 9th, 2009Many individuals establish trusts as part of their overall estate plan. There are many valid reasons for establishing a trust such as asset protection, estate tax savings, and providing for incapacity.
However there are many reasons for avoiding a trust, if possible, if the assets involved are not significant.
There are significant compliance costs for administering and maintaining a long-term trust which can run into the tens of thousands of dollars or more after the creator of the trust passes away.
In addition, many trustees are exposed to significant liability if the trustees do not keep up-to-date with the ever changing state trust laws and violate such trust rules.
It is important that the trustee both understands the trust document and the rules of the state trust law. The trustee may have to engage knowledgeable professionals to assist him/her.
In addition, after death of the creator of the trust annual federal fiduciary income tax trust returns must be filed with the IRS and the state (where applicable) as well. The costs of preparing trust returns may be expensive. Periodic information accountings must be prepared annually in many states as well. These accountings may be time consuming and expensive to prepare as well.
Before getting involved with a long-term trust, many trustees should know the rules and be aware of the legal responsibilities of acting as a trustee.
Don’t execute a trust document just because your neighbor told you that it’s the right thing to do to avoid probate and save money. It’s too easy to fall into a trap by signing a long -winded trust agreement that is difficult for the average person to understand. Many clients that the author has inherited could not adequately interpret the 30-50 page trust document that they executed many years ago.
Be cautious and don’t do anything that you don’t fully understand.
P.S. The author is currently involved in investigating several trusts where the trustees may have breached their fiduciary duties to a significant extent. The personal liability of the trustees may be substantial.
Seymour Goldberg is the author of several books on trust accounting and taxation of retirement distributions for the American Institute of Certified Public Accountants and the American Bar Association. He is also the author of Can You Trust Your Trust: What Your Family Needs to Know, available at http://www.jklasser.com. Search downloads.
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Tags: can you trust your trust, cpa, estate plans, jklasser, long-term trust, Sy Goldberg, trustees, trusts
About the Author: Sy is a senior partner in the Jericho law firm Goldberg & Goldberg, P.C., is Professor Emeritus of Law and taxation of Long Island University. He has authored guides for the American Bar Association and the America Institute of CPAs on retirement distribution rules. In addition, you may be interested in a consumer’s version entitled “Inherited IRAs: What Your Family Needs To Know” published by JKLasser.com
