A Trustee’s Challenges in Administering DIY Trust Documents
If you are named as Trustee of a ‘do-it-yourself’ (“DIY”) Trust, you need to be on the alert for errors or omissions often found in such Trusts. This is especially true if the deceased failed to seek good legal advice before completing the form s/he may have obtained from an office supply store or some on-line source.
Key problem areas you may encounter:
• Incomplete documents
• Important provisions omitted
• Unfunded assets
Missing Information
For example, the Trustee may find that the Trust documents are incomplete, or pages may be missing. If the pages contain handwritten markings, even if signed and dated when added, those instructions cannot be enforced. In one recent matter, a later-drawn handwritten list that would have changed the distribution of the Trust wound up needing to go before a judge, and was not allowed. The deceased might have avoided these issues by consulting an attorney. Now, as the Trustee, that would be your required next step.
Ready-Made Forms
Online forms are easily available and may be suitable for the simplest of family situations. Unfortunately, life is amazingly complex when it comes to our family and financial affairs. How many of us have been married more than once, and have children from previous relationships? Generic forms (such as the California Statutory Will form) don’t cover all the provisions needed in this complicated age. If you’re the Trustee of such a document, chances are you may need to go before a judge for a ruling on who can receive all or what part of the trust estate.
If the document is incomplete or outdated, the state law of intestate succession may decide the beneficiaries. Federal ERISA laws require a surviving spouse’s written consent if you wish to name someone else as the beneficiary to receive ongoing retirement benefits.
The law regarding Trusts may change over time; long after an online form was created and printed. The do-it-yourselfer would likely be unaware of such changes and not take them into account. Nor is the average consumer going to be aware of the many types of Trusts.
Unfunded Assets
By far the most common challenge is finding that assets were not properly titled in the Trust. If it wasn’t mentioned in the Trust, property may require the Trustee to obtain a Probate Court order to confirm it is covered. If bank accounts or investments total more than $150,000 – the small estates limit in California – you may have to file a court petition or follow a full probate proceeding.
Something to Consider
It’s true that by using online or store-purchased ‘do-it-yourself’ forms, you can avoid the cost of working with an estate planning professional to draw up a Will or Trust. But an experienced attorney will discuss the unique needs of your family and circumstances of your estate, and help you determine the best way to achieve your wishes, while protecting heirs and avoiding unnecessary expenses and taxes. In the long run that fee may be less than the Trustee having to pay even more money later to correct errors or omissions in court that may result from doing-it-yourself. And – the real bottom line is that you want to ensure that your wishes to protect your family are carried out.
Here to Help
If you are a Trustee struggling to interpret or execute a confusing or incomplete Trust document, please contact my office. We’ve been working with Trusts and other forms of estate planning for more than thirty years, and will be happy to help.