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Common Estate Planning Practices Defined

1. Failing to Serve Notice of Irrevocability (Trusts Only):  Whenever a trust becomes irrevocable, either in whole or in part, a trustee is required to give notice to all beneficiaries and heirs of the settlor(s) (person/people that created the trust) pursuant to the requirements of Probate Code Section 16061.7. Failure to give notice opens the trustee to liability for damages arising from the failure to provide the notice and, perhaps more importantly, the trust remains contestable  (i.e. the trust can be declared invalid) for an extended period of time instead of limiting it to 120 days from the date the notice was mailed. The mailing of notice to all beneficiaries should be completed as soon as possible after expiration or upon the incompetency of a settelor.

This can have huge implications. If trust assets are distributed to beneficiaries and the trust is later successfully invalidated resulting in different beneficiaries, the trustee may be personally liable for property distributed to the wrong people. Probate Code§16061.7.

2.  Failing to Lodge Will at Court:  Within 30 days of deaththe custodian of the decedent’s original will must lodge the will at the court in the county where the decedent resided at the time of his or her death and must also mail a copy to the named executor. If the custodian fails to do so, he or she may be held liable for all damages arising from that failure. This rule is flavored with the fact the clerks of the court typically reject the filing until a petition for probate is filed.

3.  Failing to Secure / Insure Property:  An executor or trustee has the responsibility to collect and secure property so that it may be used to pay the decedent’s creditors or distributed to the decedent’s heirs or estate beneficiaries.  Securing property includes insuring property to protect against loss.  Failure to do so, accompanied with an insurable loss, can lead to personal liability.

4.  Failing to Account:  An accounting is a listing of the financial history of the trust or estate being administered.  In some ways, it is not unlike a checkbook register.  A basic proper accounting will show the beginning balances of all assets, the expenses paid, the distributions made, (i.e. payments to beneficiaries or heirs) and the ending balances of all assets of an estate or trust.  Trustees and executors are typically required to account annually, although sometimes it is more often. This is critical and every trustee should closely track all incoming funds as well as all bills paid. It is our practice to recommend that a trustee immediately secure the services of a reliable bookkeeper or accountant.

Failing to account or not having an account that balances will almost always result in trustee or executor liability.  Starting from the beginning, trustees and executors would be well advised to keep very good records to avoid personal liability. See Probate Code§1060 for format and contents of court accountings.

 5. Failing to Act Impartially: Trustees and executors must act impartially amongst the beneficiaries of a trust or estate, especially when the trustee or executor is also a beneficiary.  Any action taken by a trustee that benefits himself or herself that does not also benefit the beneficiaries is likely to be successfully challenged. This is a particularly sensitive issue between siblings if the slightest rivalry remains. Sometimes the spouses of siblings are the root of the problem. See Probate Code §16000 et seq.

6. Failing to Keep Trust and Estate Assets Separate:  Trustees and executors must keep trust and estate assets separate from their own. Period.  This typically means keeping assets in separate bank accounts that are not mixed with non-trust or non-estate assets.

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1 reply
  1. Charlie Higgins
    Charlie Higgins says:

    Excellent Stuff Rick. First Class.

    Especially the part about filing a will with/ in 30 days.
    Applies even if there is no known estate at all does it not, and yes indeed
    Clerks seem to have a special interest in talking you out of filing it.

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