Five Biggest Ways to Bungle a Trust in New York and Tips to Prevent Them

Barron’s recently published an article regarding the five of the most common ways problems arise when establishing a trust, illustrating the importance of hiring an experienced New York Trust and Estates Lawyer.

Estate planning can be intimidating because it is a complex area of law that can bring stress to and cause strife among family members. But because of the financial implications, New York estate planning and wills must be taken seriously and require exceptional detail.While some people only think about the “what am I getting” aspect of a will, much more goes into the preparation and planning. One area that must be addressed is minimizing the taxes that survivors must pay. And for the family member making such preparations, there are many questions to answer, such as whether a living trust or a will would be more beneficial and who should be appointed as executor of a New York estate.

Working with an experienced attorney that has handled countless probate matters is essential. Executors are responsible for collecting and distributing assets, paying taxes, debts and claims and handling other affairs. But the executor has many legal responsibilities and must be clear on how to proceed in accordance with New York law.

Barron’s believes it is easy to mess up the three biggest questions in trust and estate planning: Who gets what, how do you minimize taxes and who is in control of the trust. On to the tips:

  • Faulty records: Most states require trustees to provide regular accountings to the beneficiaries, which means keeping detailed records of income, assets and distributions. Failing to keep proper records could result in a lawsuit later on by a beneficiary.
  • Tip: Assemble a reliable team with a money manager, trust lawyer and tax pro.

  • Failure to diversify: Trustees may be tempted to sit on a big chunk of stock that has served the trust well for years, especially if shares are company owned or run by the dearly departed, but it’s a bad idea, the magazine says. Trustees are obligated to thoroughly diversify investments and it’s a leading cause of litigation against trustees.
  • Tip: Read and follow the guidelines in your state regarding Prudent Investment Standards.

  • Biased distributions: Trustees owe a fiduciary duty to all beneficiaries, including remaindermen, the down-the-line relatives who will receive principal once the trust has dissolved. So, making the right financial decisions is crucial.
  • Tip: Once you have made a distribution decision, set out in writing the reasons, including supporting documentation.

  • Expecting a pay day: Individual trustees tend to assume they are going to get paid a trustee fee quickly. But it takes a lot of time to be paid, and time is given to beneficiaries to object to the payment.
  • Tip: Have the fee discussion early on and settle on appropriate payments. Commissions are usually set according to state statutes.

  • False sense of safety: One may feel honored to be asked to be a trustee, but the job takes on a lot of legal risks and liabilities.

New York Probate Attorney Jules Martin Haas, Esq. has been representing clients in estate proceedings throughout the past 30 years including Suffolk and Westchester Counties. For a free consultation, please call me at (212) 355-2575.

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