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California Trust Administration

All trustee responsibilities, legal duties, liabilities, and common administrative problems at your fingertips.

All trustee responsibilities, legal duties, liabilities, and common administrative problems at your fingertips.

  • Trustee’s duties, standards, and powers
  • Rejection of trust; resignation and removal of trustee
  • Investments and management of trust assets
  • Record keeping and accounting
  • Trustee compensation and attorney fees
  • Creditor’s rights against trust and beneficiaries
  • Income taxation of trusts and estate tax returns
  • Administering single-person trust after settlor’s death
  • Marital subtrust funding and long-term trust administration
  • Administering moderate married settlor trust on first spouse's death
  • Court proceedings
  • Modification, revocation, and termination of trust

Read CEB exclusive commentary from Author David Gaw on the Gaw Spreadsheet System.

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All trustee responsibilities, legal duties, liabilities, and common administrative problems at your fingertips.

  • Trustee’s duties, standards, and powers
  • Rejection of trust; resignation and removal of trustee
  • Investments and management of trust assets
  • Record keeping and accounting
  • Trustee compensation and attorney fees
  • Creditor’s rights against trust and beneficiaries
  • Income taxation of trusts and estate tax returns
  • Administering single-person trust after settlor’s death
  • Marital subtrust funding and long-term trust administration
  • Administering moderate married settlor trust on first spouse's death
  • Court proceedings
  • Modification, revocation, and termination of trust

Read CEB exclusive commentary from Author David Gaw on the Gaw Spreadsheet System.

1

The Role of the Attorney

CEB Staff

  • I.  ATTORNEY ACTING AS TRUSTEE  1.1
    • A.  Practical Considerations
      • 1.  Interference With Legal Practice  1.2
      • 2.  Liability to Other Members of Law Firm  1.3
      • 3.  Level of Expertise Required  1.4
    • B.  Ethical Considerations and Other Restrictions
      • 1.  Importance of Full Disclosure to Client  1.5
      • 2.  When Drafting Attorney May Serve as Sole Trustee  1.6
      • 3.  Prohibition Against Dual Compensation  1.7
      • 4.  Potential for Conflicting Duties or Interests  1.8
  • II.  ATTORNEY FOR TRUSTEE
    • A.  Selecting the Attorney: The Trustee’s Choice  1.9
    • B.  Determining Who Is the Client and Establishing the Attorney-Client Relationship  1.10
    • C.  Existence of Attorney-Client Relationship in Absence of Formal Agreement  1.11
    • D.  Responsibilities of Attorney for Trustee  1.12
    • E.  Role of Attorney for Trustee if Litigation Arises  1.13
      • 1.  Association of Other Counsel  1.14
      • 2.  Referral to Other Counsel  1.15
    • F.  Representing Cotrustees  1.16
    • G.  Conflicts of Interest in Multiple Representation  1.17
      • 1.  Rules on Multiple Representation When Clients’ Interests Potentially Conflict  1.18
        • a.  When Actual Conflicts Arise  1.18A
        • b.  When Informed Written Consent Is Required  1.19
      • 2.  Practical Problems of Representing Multiple Parties  1.20
      • 3.  Additional Rules on Multiple Representation  1.21
    • H.  Arbitration of Trust Disputes  1.22

2

Overview of Trustee’s Duties, Standards, and Powers

Paul J. Barulich

  • I.  TRUSTEE’S DUTIES AND STANDARD OF CARE
    • A.  Trustee’s Relationship to Beneficiary  2.1
    • B.  Duty to Administer Trust According to Its Terms
      • 1.  Determining Settlor’s Intent From Trust Instrument  2.2
      • 2.  Extrinsic Evidence of Settlor’s Intent  2.3
      • 3.  Settlor’s Letter of Instructions  2.3A
      • 4.  Duty to Follow Written Directions From Settlor of Revocable Trust  2.3B
    • C.  Duties to Account and Furnish Information
      • 1.  Duty to Account  2.4
        • a.  Waiver of Accounting  2.4A
        • b.  Trusts Created by Instruments Executed Before July 1, 1987  2.4B
        • c.  Trusts Funded by Court Order  2.4C
        • d.  No Duty While Trust Is Revocable  2.4D
      • 2.  Duty to Furnish Information
        • a.  Duty to Keep Beneficiaries Informed and Furnish Copy of Trust Terms on Request  2.5
        • b.  Duty to Furnish Report of Information to Beneficiary on Reasonable Request  2.6
        • c.  When Notification Required  2.7
          • (1)  Who Is Entitled to Notification  2.8
          • (2)  How and When Notification Must Be Served  2.9
          • (3)  Required Contents of Notification  2.10
          • (4)  Penalty for Failure to Serve Notification  2.11
          • (5)  Limitations on Actions When Notification Served  2.12
          • (6)  Limitations on Actions When Notification Not Served  2.12A
    • D.  Duty of Confidentiality
      • 1.  Application of Duty Not to Disclose  2.13
      • 2.  Financial Code Guidelines  2.14
        • a.  When Disclosure Permitted by Corporate Trustee of Private Trust  2.14A
        • b.  When Disclosure Necessary in Administration of Trust  2.14B
      • 3.  Exceptions to Duty of Confidentiality
        • a.  Litigation Exception  2.15
        • b.  Duty Suspended by Government Regulations  2.16
      • 4.  Statutory Disclosure of Trust Terms  2.17
    • E.  Delegation of Duties
      • 1.  Duty Not to Delegate Noninvestment and Nonmanagement Functions  2.18
      • 2.  Delegation of Investment and Management Functions  2.19
      • 3.  Consequences of Improper Delegation  2.20
    • F.  Duty of Loyalty
      • 1.  Avoiding Conflicts of Interest  2.21
        • a.  Self-Dealing  2.22
          • (1)  Purchase or Lease of Trust Assets by Trustee  2.23
          • (2)  Sale or Lease of Trustee’s Assets to Trust  2.24
          • (3)  Business Competition With Trust  2.25
          • (4)  Loans From Trustee  2.26
            • (a)  Protection for Trustee  2.27
            • (b)  Loans From Corporate Fiduciary  2.28
            • (c)  Problem of Defaulting Trustee  2.29
          • (5)  Loans From Trust to Trustee  2.30
          • (6)  Reimbursement for Other Services  2.31
        • b.  When Appointed Trustee is Person Subject to Presumption of Fraud or Undue Influence  2.32
        • c.  Special Problems of Corporate Trustees  2.33
          • (1)  The “Wall” Concept  2.33A
          • (2)  Securities Transactions With Corporate Trustee
            • (a)  Purchase of Securities of Trustee  2.34
            • (b)  Retention of Trustee’s Own Stock  2.35
            • (c)  Voting of Trustee Securities  2.36
          • (3)  Deposits in the Corporate Trustee’s Banking Department  2.37
          • (4)  National Bank Trustees  2.37A
        • d.  Problems of Multiple Trusteeships  2.38
          • (1)  When Trusts Have Same Investment Goals  2.38A
          • (2)  When Trusts Have Business Transactions  2.38B
      • 2.  Curing Conflicts of Interest
        • a.  Possible Methods of Curing Conflicts  2.39
          • (1)  Consent of Settlor or Beneficiaries  2.39A
          • (2)  Release or Affirmance  2.39B
          • (3)  Express Authorization  2.39C
        • b.  Obtaining Consent of Unascertainable, Minor, or Incapacitated Beneficiary  2.40
      • 3.  No Relief of Liability for Required Distributions  2.40A
    • G.  Duty of Impartiality  2.41
      • 1.  Modification by Language in Trust Instrument  2.42
      • 2.  Problems in Exercising Impartiality
        • a.  Trustee’s Personal Relationships; Avoiding Favoritism  2.43
        • b.  Competing Interests Among Beneficiaries
          • (1)  Making Investment Decisions
            • (a)  Income Versus Remainder Beneficiaries  2.44
            • (b)  Investment Decisions and Individual Beneficiary Needs  2.45
            • (c)  Division of Securities on Termination  2.46
          • (2)  Beneficiary’s Use of Assets  2.47
          • (3)  Allocation of Receipts and Disbursements  2.48
  • II.  TRUSTEE’S STANDARD OF CARE
    • A.  Measure of Trustee’s Duties  2.49
    • B.  California Basic Standard of Care  2.50
    • C.  “Expert Trustee” Standard in California  2.51
    • D.  Prudent Investor Standard of Care  2.52
  • III.  TRUSTEE’S POWERS
    • A.  Powers Necessary to Carry Out Trust Purpose
      • 1.  Powers Granted by Statute  2.53
        • a.  Table of Trustee Powers  2.53A
        • b.  Exercise of Trustee Powers  2.53B
      • 2.  Conflicts Between Statutory Powers and Trust Instrument Powers  2.54
      • 3.  Inclusion of Powers in Trust Instrument  2.55
        • a.  Trustee’s Power to Incur Debts  2.55A
        • b.  Trustee’s Advances  2.55B
          • (1)  Costs Must Be Reasonable  2.55C
          • (2)  Trustee Must Avoid Fiduciary Abuse  2.55D
        • c.  Trustee Not Personally Liable on Contract  2.55E
          • (1)  Form: Contract Clause Disclosing Fiduciary Status  2.55F
          • (2)  Form: Trustee Signature Line for Contracts  2.55G
      • 4.  Express Powers
        • a.  Standard Powers Itemized in Trust Instrument  2.56
        • b.  Omnibus Clause  2.57
      • 5.  Implied Powers  2.58
      • 6.  Statutory Powers Incorporated by Reference  2.59
      • 7.  Notice of Proposed Action
        • a.  When Notice May Be Used  2.59A
        • b.  Notice Procedure  2.59B
    • B.  Petitioning Court for Powers Not in Trust Instrument
      • 1.  Powers Obtainable; Conditions and Limitations  2.60
      • 2.  Procedure for Obtaining Additional Powers  2.61
      • 3.  Forms for Obtaining Additional Powers
        • a.  Form: Petition for Additional Trustee Powers  2.62
        • b.  Form: Order Granting Petition for Additional Trustee Powers  2.63
    • C.  Providing Documentation of Authority to Third Parties
      • 1.  Certification of Trust  2.64
      • 2.  Form: Certification of Trust  2.65
    • D.  Discretionary Powers in General  2.66
    • E.  Power to Make Discretionary Distributions
      • 1.  Power to Invade Principal  2.67
        • a.  Invasion for “Health, Education, Support, or Maintenance”  2.68
          • (1)  Definition of “Education”  2.68A
          • (2)  Payment of Income Taxes  2.68B
        • b.  Avoiding Depletion of Trust  2.69
      • 2.  Distributions That Discharge Parent’s Duty to Support Minor Children  2.70
      • 3.  Distributions of Income to Powerholder  2.71
      • 4.  Distributions That Discharge Personal Legal Obligations of Powerholder  2.71A
      • 5.  Extent to Which Beneficiary’s Outside Resources Must Be Considered
        • a.  Ascertaining Settlor’s Intent  2.72
        • b.  Determining Availability of Beneficiary’s Own Resources  2.73
        • c.  Impact of Trustee’s Denial of Distribution; Waste or Forced Sale of Illiquid Assets  2.74
        • d.  Beneficiary’s Ability to Seek Employment  2.75
      • 6.  Distribution From Illiquid Trust  2.76
  • IV.  TRUSTEE QUALIFICATIONS  2.77
    • A.  Nonprofessional Unlicensed Trustee  2.78
      • 1.  Limitation on Nonprofessional Unlicensed Trustees  2.79
      • 2.  Exclusions From Limitation on Unlicensed Trustees  2.80
    • B.  Professional Licensed Trustee  2.81
      • 1.  Prerequisites for Licensure  2.82
      • 2.  Professional Fiduciaries Bureau  2.83
    • C.  Professional Unlicensed Trustees  2.84
      • 1.  Attorneys  2.85
      • 2.  Accountants  2.86
      • 3.  Enrolled Agents  2.87
    • D.  Banks and Trust Companies as Trustees  2.88
      • 1.  Department of Business Oversight  2.89
        • a.  Application Process  2.90
        • b.  Trust Supervision  2.91
      • 2.  Exemptions From Department Regulation  2.92
        • a.  Individuals  2.93
        • b.  Professionals  2.94
        • c.  Nonprofit Corporations  2.95
        • d.  Court-Appointed Trustees  2.96
        • e.  Professional Fiduciaries  2.97

3

Cotrustees and Shared Fiduciary Powers

CEB Staff

  • I.  ALLOCATION OF TRUSTEE POWERS  3.1
    • A.  Holder of the Power  3.1A
    • B.  Trust Protector  3.1B
  • II.  COTRUSTEES’ DUTY TO ACT JOINTLY  3.2
    • A.  Acts to Bind Trust Property  3.3
    • B.  Administration of Trust
      • 1.  Day-to-Day Activities; Delegable Duties  3.4
      • 2.  When Cotrustee Is Unavailable  3.5
      • 3.  Disagreements Among Cotrustees  3.6
  • III.  UNEQUAL ALLOCATIONS OF FIDUCIARY RESPONSIBILITIES  3.7
    • A.  Persons to Whom Power Can Be Allocated
      • 1.  Powers Allocated Among Cotrustees  3.8
      • 2.  Powers Allocated to Beneficiaries  3.9
      • 3.  Settlor’s Retained Powers  3.10
      • 4.  Powers Allocated to Third Parties; Special Trustees  3.11
    • B.  Holding Trust Powers in Fiduciary or Beneficial Capacity  3.12
    • C.  Capacity of Powerholder  3.13
      • 1.  Trustee Discretion to Determine Capacity  3.13A
      • 2.  Use of Medical Opinion to Determine Capacity  3.13B
  • IV.  ALLOCATING INVESTMENT AUTHORITY  3.14
    • A.  Administrative Issues in Unequal Power Situations  3.15
      • 1.  Establish Compatible Working Relationship  3.15A
      • 2.  Trustee Should Accept Only Written Instructions  3.15B
    • B.  Power to Direct Investments
      • 1.  Scope of Power to Direct Investments  3.16
        • a.  Exercise of Partial Investment Power  3.16A
        • b.  Proper Use of Investment Counselor  3.16B
      • 2.  Protecting the Nonpowerholding Trustee  3.17
    • C.  Veto Power  3.18
      • 1.  Scope of Veto Power  3.19
      • 2.  Protecting the Nonpowerholding Trustee  3.20
    • D.  Consultation Power  3.21
      • 1.  Exercise of Consultation Power  3.21A
      • 2.  Scope of Consultation Power  3.21B
    • E.  Investment Power Allocated Entirely to Powerholder  3.22
  • V.  COTRUSTEE LIABILITY  3.23

4

Rejection of Trust; Resignation and Removal of Trustee

Elizabeth Anne Bird

Sandra J. Chan

Bart J. Schenone

  • I.  REJECTION OF TRUST
    • A.  Named Trustee May Decline to Serve  4.1
    • B.  Timing of Rejection Decision  4.2
      • 1.  Need to Review Trustee Duties and Obligations  4.2A
      • 2.  Decision Delayed for Testamentary Trusts  4.2B
    • C.  Rejection Procedure; Response  4.3
      • 1.  Form: Letter Declining to Serve as Trustee  4.4
      • 2.  Form: Formal Declination to Serve as Trustee of Testamentary Trust  4.5
  • II.  RESIGNATION OF TRUSTEE
    • A.  Reasons for Resignation  4.6
    • B.  Letter of Resignation to Beneficiaries  4.7
    • C.  Resignation Procedure
      • 1.  As Provided in Trust Instrument  4.8
        • a.  Trustee Must Resign in Good Faith  4.8A
        • b.  When Resignation Procedures Incomplete  4.8B
      • 2.  Trust Silent: Methods of Resignation  4.9
        • a.  Irrevocable Trusts: Consent of Beneficiaries or Court Approval  4.10
        • b.  Revocable Trusts: Consent of Power Holder or Court Approval  4.11
        • c.  Court Approval of Resignation  4.12
          • (1)  Content of Petition for Approval of Resignation; Notice of Hearing  4.13
          • (2)  Form: Petition for Order Accepting Resignation of Trustee and for Appointment of Successor Trustee or Temporary Trustee for Unsupervised Trust  4.14
          • (3)  Form: Nomination of Successor Trustee  4.15
          • (4)  Form: Consent to Act as Successor Trustee  4.16
          • (5)  Form: Consent to Act as Temporary Trustee  4.16A
          • (6)  Form: Order Accepting Resignation of Trustee and for Appointment of Successor Trustee or Temporary Trustee for Unsupervised Trust  4.17
          • (7)  Form: Petition for Order Accepting Resignation of Trustee and for Appointment of Successor Trustee or Temporary Trustee for Court-Supervised Trust  4.17A
          • (8)  Form: Order Accepting Resignation of Trustee and for Appointment of Successor Trustee or Temporary Trustee for Court-Supervised Trust  4.17B
    • D.  Form: Letter of Resignation to Beneficiaries  4.18
  • III.  REMOVAL OF TRUSTEE
    • A.  Power to Remove Trustee  4.19
    • B.  Removal Procedure
      • 1.  In Accordance With Trust Instrument  4.20
      • 2.  Removal by Court  4.21
      • 3.  Identify Reasons for Removal  4.22
        • a.  Breach of Duty of Loyalty  4.23
        • b.  Breach of Other Fiduciary Duties  4.24
        • c.  Lack of Capacity; Inability to Resist Fraud or Undue Influence  4.25
        • d.  Hostility Between Trustee and Beneficiary  4.26
        • e.  Hostility Between Trustee and Attorney Not Ground for Removal  4.26A
        • f.  Hostility Between Cotrustees  4.27
        • g.  When Sole Trustee Is Prohibited Transferee  4.28
        • h.  Changed Circumstances Require Removal of Current Trustee  4.29
        • i.   Current Trustee Too Expensive  4.30
      • 4.  Request for Attorney Fees  4.31
      • 5.  Petition for Removal
        • a.  Who May Petition for Removal  4.32
        • b.  When Bond May Be Required  4.32A
        • c.  Venue; Notice of Petition for Removal  4.33
        • d.  Form: Petition of Beneficiary to Remove Trustee  4.34
        • e.  Response of Trustee to Petition  4.35
        • f.  Hearing and Order on Petition  4.36
        • g.  Form: Order Removing Trustee  4.37
  • IV.  POWER OF REMAINING TRUSTEE ON RESIGNATION OR REMOVAL OF COTRUSTEE  4.38
    • A.  When Successor Cotrustee Not Required  4.38A
    • B.  When Successor Cotrustee May Be Appointed  4.38B
  • V.  FILLING VACANCIES  4.39
    • A.  Trust Does Not Fail Due to Lack of Trustee  4.40
    • B.  Vacancy Filled by Terms of Trust  4.41
    • C.  Vacancy Filled by Agreement of Beneficiaries and Trust Company  4.42
    • D.  Vacancy Filled by Court  4.43
    • E.  Bond for Trustee  4.44
  • VI.  DUTIES OF TRUSTEE ON RESIGNATION OR REMOVAL
    • A.  Completion of Resignation or Removal  4.45
    • B.  Management of Trust Assets  4.46
      • 1.  When Trustee Attempts to Resign  4.46A
      • 2.  When Trustee Fails to Transfer Assets  4.46B
    • C.  Preparation of Accounting  4.47
  • VII.  SUCCESSOR TRUSTEE
    • A.  Decision to Accept Appointment  4.48
    • B.  Bond for Successor Trustee  4.49
    • C.  Duties of Successor Trustee
      • 1.  Review Trust Instrument and Notify Beneficiaries  4.50
      • 2.  Take Charge of Assets  4.51
      • 3.  Investigate Predecessor Trustee’s Acts  4.52
        • a.  Protect Against Liability  4.53
        • b.  Review All Records and Documents  4.54
      • 4.  Take Action Against Predecessor Trustee  4.55
    • D.  Powers of Successor Trustee  4.56
  • VIII.  AFFIDAVIT OF CHANGE OF TRUSTEE
    • A.  Content and Effect of Affidavit  4.57
    • B.  Use of Affidavit of Change of Trustee  4.58
    • C.  Form: Affidavit of Change of Trustee  4.59

5

Investments and Management of Assets

Bart J. Schenone

  • I.  GOVERNING PRINCIPLES OF INVESTMENT  5.1
    • A.  Investment Standard of Care  5.2
      • 1.  Prudent Investor Rule of UPIA  5.3
      • 2.  General Duty to Use Skills  5.4
      • 3.  Former Prudent Person Rule  5.5
    • B.  Trustee’s Duties
      • 1.  Duty to Review Assets and Develop Investment Strategy  5.6
      • 2.  Duty to Invest and Make Property Productive  5.7
      • 3.  Duty to Diversify  5.8
      • 4.  Duty to Consider Beneficiaries’ Needs  5.9
      • 5.  Duty to Keep Beneficiaries Informed  5.10
      • 6.  Duty to Avoid Self-Dealing, Impropriety, and Conflicts of Interest
        • a.  Buying or Selling Assets  5.11
        • b.  Assets Owned by Trust and Beneficiary  5.12
      • 7.  Duty to Dispose of Unproductive Assets  5.13
        • a.  When Unproductive Assets Must Be Held  5.13A
        • b.  When Unproductive Assets May Be Held  5.13B
    • C.  Investment and Management Powers  5.14
      • 1.  Powers Conferred by Trust Instrument
        • a.  Trust Instrument Language Following Former Statute  5.15
        • b.  Broad Investment Powers  5.16
        • c.  Limited Investment Power  5.17
      • 2.  Powers Conferred by Statute  5.18
      • 3.  Power to Delegate Investment Functions  5.19
    • D.  Trustee Liability
      • 1.  Liability for Trustee’s Own Actions  5.20
      • 2.  Trustee Liability for Agent’s Actions  5.21
      • 3.  Trustee Reliance on Broker Representations  5.21A
  • II.  PRACTICAL ASPECTS OF INVESTMENT AND MANAGEMENT OF ASSETS: AN OVERVIEW
    • A.  Initial Responsibilities  5.22
    • B.  Developing an Investment Strategy  5.23
      • 1.  Standard of Care When Making Investment Decisions
        • a.  Uniform Prudent Investor Act  5.24
        • b.  Restatement (Third) of Trusts  5.25
      • 2.  Suitable Investment Strategies  5.26
      • 3.  Considerations Regarding Retaining Assets
        • a.  Power to Retain Assets  5.27
        • b.  Required Retention  5.28
      • 4.  Considerations Regarding Diversification
        • a.  Risk Management  5.29
        • b.  Factors Relevant in Assessing Adequacy of Diversification  5.30
        • c.  When Diversification May Be Limited or Unnecessary  5.31
        • d.  Effect of Nondiversification Clause in Trust  5.32
    • C.  Delegating Investment Functions  5.33
      • 1.  Prepare Written Guidelines  5.33A
      • 2.  Delegation to Mutual Fund Manager  5.33B
    • D.  Balancing the Interests of Different Classes of Beneficiaries  5.34
      • 1.  Total Return Trusts  5.34A
      • 2.  Unitrust Approach  5.34B
    • E.  Periodically Reviewing Investments
      • 1.  Purpose of Periodic Review  5.35
      • 2.  Method of Review  5.36
    • F.  Loans and Collateral  5.37
      • 1.  Deeds of Trust  5.37A
      • 2.  Loans to Beneficiary or Trustee  5.38
      • 3.  Term Insurance if Loan Unsecured or Inadequately Insured  5.39
      • 4.  Loan Terms  5.40
    • G.  Borrowing for Trust Purpose  5.41
      • 1.  Deciding Whether to Sell or Borrow  5.42
      • 2.  Factors in Borrowing  5.43

6

Managing Specific Trust Assets

CEB Staff

  • I.  SPECIFIC TYPES OF INVESTMENTS  6.1
    • A.  Cash or Cash Equivalents  6.2
      • 1.  Bank Trust Department as Trustee  6.3
      • 2.  Public Guardian or Administrator as Trustee  6.4
    • B.  Securities Investments  6.5
      • 1.  Purchases and Sales of Securities  6.6
      • 2.  Trustee’s Assumption of Shareholder Responsibilities  6.7
    • C.  Mutual Funds, Investment Trusts, and Other Group Instruments  6.8
    • D.  Common Trust Funds Operated by Corporate Trustees
      • 1.  Definition and Statutory Authority  6.9
      • 2.  Limitations and Drawbacks of Common Trust Funds  6.10
      • 3.  Income Tax Consequences of Common Trust Funds  6.10A
  • II.  REAL PROPERTY  6.11
    • A.  Ongoing Management Duties  6.12
    • B.  Purchases and Sales of Real Property
      • 1.  Power of Sale  6.13
      • 2.  Trustee’s Decision to Sell  6.14
        • a.  Valid Reasons for Sale  6.15
        • b.  Tax Considerations  6.16
        • c.  Costs of Sale  6.17
        • d.  Sentiment of Beneficiaries  6.18
    • C.  Methods of Sale  6.19
      • 1.  Exclusive Listings  6.20
        • a.  Terms of Listing Agreement  6.20A
        • b.  Using Exclusive Listing Agreement  6.20B
      • 2.  Nonexclusive Listings  6.21
      • 3.  Selling Without a Broker
        • a.  Corporate Trustees  6.22
        • b.  Inexperienced Trustees  6.23
    • D.  Installment Sales  6.24
      • 1.  Trustee as Lender  6.24A
      • 2.  Trustee’s Tax Withholding Obligation  6.24B
    • E.  Tax-Deferred Exchanges  6.25
    • F.  Sale at Auction  6.26
    • G.  When Property May Be Contaminated
      • 1.  Liability for Cleanup of Trust Property Contaminated With Hazardous Waste  6.27
        • a.  Federal Environmental Laws  6.27A
        • b.  California Environmental Statutes  6.27B
        • c.  Liability Scheme for Cleanup of Hazardous Waste Under Environmental Law  6.28
          • (1)  Potentially Responsible Party  6.29
          • (2)  Retroactivity  6.30
          • (3)  Strict Liability; Joint and Several Liability  6.31
        • d.  Potential Liability for Environmental Costs Under Trust Fund Theory
          • (1)  Development of Trust Fund Theory in Case Law  6.32
          • (2)  Possible Strategies for Proposed Trustee  6.33
      • 2.  Limitations on Liability
        • a.  Exemption of Innocent Trustees From Personal Liability  6.34
          • (1)  Federal Exemption Provisions  6.34A
          • (2)  California Fiduciary Exemption  6.35
          • (3)  Case Law: Scope of Fiduciary Exemption  6.36
        • b.  The “Heir or Beneficiary” Defense Under CERCLA Has Severe Limitations  6.37
        • c.  Use of Creditors’ Claim Statutes to Protect Trustee
          • (1)  Case Law Interpretation of Relevant Statutes  6.38
          • (2)  Strategy for the Trustee  6.39
        • d.  Limiting Liability When Trust Property Will Be Leased to Third Parties  6.40
      • 3.  Environmental Audit, Investigation, and Cleanup
        • a.  The “Innocent Landowner” Defense Under CERCLA  6.41
        • b.  Initiating an Environmental Audit: The Threshold Review  6.42
          • (1)  Relevant Information  6.43
          • (2)  Types of Real Property Uses and Businesses With Potential for Environmental Liability  6.44
        • c.  Phase I Investigation of Trust Property  6.45
        • d.  Phase II Investigation of Trust Property  6.46
        • e.  Cleanup of Contaminated Property: Site Remediation  6.47
        • f.  Selection of Environmental Consulting Firm  6.48
      • 4.  Underground Storage Tanks: A Common Environmental Problem
        • a.  The Storage Tank Problem  6.49
        • b.  Possible Sources of Financial Assistance for Investigation and Cleanup Costs  6.50
      • 5.  Allocation of Environmental Expenses Under the Uniform Principal and Income Act (UPAIA)
        • a.  Application of UPAIA  6.50A
        • b.  Discretionary Powers Under UPAIA  6.50B
      • 6.  Tax Issues Related to Contaminated Property
        • a.  Valuation of Contaminated Property  6.50C
        • b.  Income Tax Treatment of Environmental Expenses  6.50D
  • III.  PARTNERSHIP AND OTHER BUSINESS INTERESTS  6.51
    • A.  Owning Business Interests  6.51A
    • B.  Partnerships
      • 1.  General or Limited Partnership Interest  6.52
      • 2.  Disposing of a Partnership Interest  6.53
    • C.  Closely Held Corporations
      • 1.  Corporate Characteristics  6.54
      • 2.  Effect of Family Member Participation  6.55
    • D.  Management Issues in Sole Proprietorships, Partnerships, and Closely Held Corporations  6.56
    • E.  Determining Whether to Continue or Dispose of the Business  6.57
      • 1.  Analyzing the Business  6.58
      • 2.  Valuing the Business  6.59
      • 3.  Finding a Buyer  6.60
      • 4.  Assessing the Tax Impact of Sale  6.61
      • 5.  Considering the Impact on the Family  6.62
    • F.  Oil, Gas, Water, and Mineral Interests  6.63
    • G.  Liquidating Assets: Leaseholds, Patents, Trademarks, Copyrights, and Royalties  6.64
  • IV.  TANGIBLE PERSONAL PROPERTY  6.65
    • A.  Storage of Personal Property  6.66
    • B.  Appraisal and Insurance  6.67
    • C.  Proof of Ownership  6.68
    • D.  Sales of Personal Property
      • 1.  Reasons for Sale  6.69
      • 2.  Methods of Sale  6.70
        • a.  Furniture Sale
          • (1)  Household Furnishings  6.71
          • (2)  Antique Furniture  6.72
          • (3)  Sale by Auction House  6.73
          • (4)  Auction Contract  6.74
        • b.  Jewelry and Gems  6.75
        • c.  Stamps and Coins  6.76
        • d.  Works of Art  6.77
        • e.  Other Collectibles  6.78

7

Recordkeeping and Accounting

Karen E. Anderson

Christine L. Craig

Dibby Allan Green

  • I.  TRUSTEE’S DUTY TO KEEP AND RENDER ACCOUNTS AND FURNISH INFORMATION
    • A.  Statutory Information Requirements  7.1
    • B.  Consequences of Failure to Keep and Render Accounts  7.2
      • 1.  Presumptions Arising From Failure to Keep Records  7.2A
      • 2.  Discovery of Records  7.2B
    • C.  Attorney’s Role in Recordkeeping and Accounting  7.3
    • D.  Shared Duties of Cotrustees
      • 1.  Individuals Acting as Cotrustees  7.4
        • a.  Anticipating Disagreements  7.5
        • b.  Form: Agreement Between Cotrustees on Recordkeeping and Accounting Responsibilities  7.6
      • 2.  Corporate Trustee Acting With Individual Cotrustee
        • a.  Responsibilities of Corporate Trustee  7.7
        • b.  Ministerial Functions of Corporate Trustee  7.8
    • E.  Delegation of Duties to Keep and Render Accounts  7.9
      • 1.  Agents for Investment Management  7.10
      • 2.  Agents for Property Management  7.11
      • 3.  Agents for Custody of Assets  7.12
    • F.  Indemnification of Trustee for Expenses Incurred in Completing and Defending Accounts  7.12A
  • II.  RECORDKEEPING
    • A.  Advising Client to Establish Recordkeeping System  7.13
      • 1.  Trust Records  7.13A
      • 2.  Folder System  7.13B
    • B.  Form: Letter Advising Trustee What Records to Keep  7.14
    • C.  Documents and Other Information to Keep
      • 1.  Trust Terms and Other Documents
        • a.  Original Trust Instrument  7.15
        • b.  Testamentary Trust: Decree of Distribution  7.16
        • c.  Resignations, Acceptances of Trustees  7.17
        • d.  Court Orders Changing Trust Terms  7.18
      • 2.  Trust Synopsis  7.19
        • a.  Summary of Trust Terms  7.19A
        • b.  Beneficiary Information  7.20
        • c.  Form: Letter to Beneficiary Requesting Information  7.21
        • d.  Notice-of-Events Provision  7.22
        • e.  Form: Trust Provisions for Notice to Trustee of Births, Deaths, and Other Events Affecting Interests  7.23
      • 3.  Asset and Liability Information  7.24
        • a.  Identification of Trust Assets  7.24A
        • b.  Market Value of Trust Assets  7.25
        • c.  Cost Basis of Trust Assets  7.26
          • (1)  Sources of Information for Determining Basis
            • (a)  Securities Cost Information  7.27
            • (b)  Real Estate Cost Information  7.28
            • (c)  Other Sources of Information  7.29
          • (2)  Property Acquired From a Decedent  7.30
          • (3)  Income in Respect of a Decedent  7.30A
          • (4)  Property Acquired by Gifts and Transfers to Trust  7.31
          • (5)  Alternatives When Basis Information Is Unavailable  7.32
        • d.  Known and Potential Liabilities  7.32A
      • 4.  Record of Discretionary Actions
        • a.  Importance of Documenting Discretionary Actions  7.33
        • b.  Form: Record of Trustee’s Discretionary Actions  7.34
      • 5.  Principal and Income Adjustments
        • a.  Trustee’s Power and Duty to Make Principal and Income Adjustments  7.35
          • (1)  Allocation of Payments From “Separate Shares”  7.35A
          • (2)  Adjustments to Offset Shifting of Tax Benefits  7.35B
        • b.  Form: Notice of Proposed Action: Adjustment Between Principal and Income  7.36
        • c.  Form: Letter to Trustee Objecting to Investment Strategy  7.36A
      • 6.  Documenting Compliance With Uniform Prudent Investor Act  7.37
      • 7.  Tax Treatment Information  7.37A
      • 8.  Miscellaneous Administrative Records  7.38
    • D.  Recordkeeping Involving Multiple Interests
      • 1.  One Trust, Separate Shares  7.39
      • 2.  One Instrument, Separate Trusts  7.40
    • E.  Receipts and Disbursements  7.41
      • 1.  Allocation of Receipts and Disbursements to Principal and Income  7.42
        • a.  Receipts From Entities  7.42A
        • b.  Accounting Separately for a Business  7.42B
        • c.  Payments From Annuities, IRAs, Pension and Profit-Sharing Plans, and Stock Plans  7.42C
      • 2.  Practical Difficulties in Allocating Expenditures to Principal  7.42D
      • 3.  Table: Allocating Receipts and Disbursements Under the California Uniform Principal and Income Act (UPAIA) During Administration of Trust  7.43
      • 4.  Receipts and Disbursements Ledger  7.44
      • 5.  Computerized Recordkeeping  7.45
        • a.  Online Banking  7.46
          • (1)  Downloading Information From Banks and Brokerages  7.47
          • (2)  Automated Checking  7.48
        • b.  Fiduciary Accounting and Spreadsheet Programs  7.49
    • F.  Tax Preparation Considerations  7.50
    • G.  Records Subject to the Attorney-Client Privilege  7.51
    • H.  Retention and Disposition of Records  7.52
  • III.  ACCOUNTING TO BENEFICIARIES
    • A.  Accounting Requirements  7.53
    • B.  To Whom to Account  7.54
      • 1.  Accounting to Contingent and Remainder Beneficiaries  7.54A
      • 2.  Accounting to Beneficiaries of Revocable Trust  7.54B
      • 3.  Accounting for Trustee Actions in Nonfiduciary Capacity  7.54C
      • 4.  Form: Notice of Accounting for Trustee Actions in Nonfiduciary Capacity  7.54D
      • 5.  Accounting to Conservator or Durable Power Agent  7.54E
      • 6.  Accounting to Beneficiary Trust  7.54F
    • C.  Who Should Prepare the Account  7.55
      • 1.  Trustee Prepares Account  7.55A
      • 2.  Attorney Prepares Account  7.55B
      • 3.  Accountant or Other Agent Prepares Account  7.55C
    • D.  When to Account  7.56
      • 1.  Petitioning Court to Compel Report or Account  7.56A
      • 2.  Petitioning Court to Approve Report or Account  7.56B
    • E.  Exceptions to Accounting Requirements  7.57
      • 1.  Waiver of Account in Trust Instrument  7.57A
      • 2.  Beneficiary Waiver of Account  7.58
      • 3.  Form: Waiver of Account  7.59
    • F.  Contents of Account  7.60
      • 1.  Form: Letter to Beneficiary About Account  7.61
      • 2.  Format of Account  7.62
      • 3.  Use of Categories in Account  7.63
      • 4.  Incorporating Reports by Agents in Account  7.64
    • G.  Liability Protection Afforded by Account
      • 1.  Shortened 3-Year Statute of Limitations  7.64A
      • 2.  Table: Notice Protection  7.64B
      • 3.  Limitation of Liability in Trust Instrument  7.65
    • H.  Court Account Versus Account to Beneficiaries
      • 1.  Balancing of Interests  7.65A
      • 2.  Minimizing Trustee’s Liability Exposure in Noncourt Accounts  7.65B
        • a.  Protecting Against Claims of Remainder and Contingent Beneficiaries  7.65C
        • b.  Protecting Against Claims of Minors and Incapacitated or Incarcerated Persons  7.65D
        • c.  Availability of 180-Day Notice Period on Noncourt Account to Minors and Incapacitated Persons  7.65E
        • d.  Other Liability Limitations and Exculpation of Trustee  7.65F
        • e.  Form: Beneficiary Release of Trustee  7.65G
  • IV.  COURT ACCOUNTS  7.66
    • A.  When Court Account Required  7.67
      • 1.  Court Approval of Accounts  7.67A
      • 2.  Waiver of Court Account  7.68
      • 3.  Form: Waiver of Court Account  7.69
    • B.  Venue for Court Account  7.70
    • C.  Contents and Form of Court Account
      • 1.  Summary of Account  7.71
        • a.  Form: Summary of Account  7.72
        • b.  Problems With Balancing  7.73
      • 2.  Required Schedules  7.74
        • a.  Beginning Assets
          • (1)  Property on Hand at Beginning of Account  7.75
            • (a)  Assets Received From Decedent  7.76
            • (b)  Assets Received From Settlor or Predecessor Trustee  7.77
            • (c)  Assets Purchased During Trust Administration  7.78
            • (d)  Adjustments to Carry Value of Beginning Assets  7.79
          • (2)  Form: Schedule: Beginning Assets  7.80
          • (3)  Additional Assets Received  7.81
          • (4)  Form: Schedule: Additional Assets Received  7.82
        • b.  Receipts
          • (1)  Cash Items  7.83
          • (2)  Noncash Items  7.84
            • (a)  Spinoffs  7.85
            • (b)  Rights  7.86
            • (c)  Options  7.87
            • (d)  Calls  7.88
          • (3)  Form: Schedule: Receipts  7.89
          • (4)  Net Income or Loss From Trade or Business  7.90
          • (5)  Form: Schedule: Net Income or Loss From Trade or Business  7.91
          • (6)  Gains or Losses on Sales  7.92
          • (7)  Form: Schedule: Gain (Loss) on Sales  7.93
        • c.  Disbursements  7.94
          • (1)  Form: Schedule: Disbursements  7.95
          • (2)  Distributions: Specific Devises, Cash, and Assets  7.96
          • (3)  Form: Schedule: Distributions of Specific Devises, Cash, and Assets  7.97
        • d.  Ending Assets
          • (1)  Property on Hand at End of Account  7.98
          • (2)  Form: Schedule: Ending Assets  7.99
      • 3.  Additional Required Schedules  7.100
        • a.  Market Values of Assets at Beginning and End of Accounting Period  7.101
        • b.  Liabilities at End of Accounting Period  7.102
        • c.  Form: Schedule: Liabilities  7.103
        • d.  Changes in Form of Assets  7.104
        • e.  Form: Schedule: Changes in Form of Assets  7.105
        • f.  Net Income Trust Cash Summary  7.106
        • g.  Form: Schedule: Cash Summary  7.107
        • h.  Specifically Devised Property  7.108
        • i.  Interest Calculations for Distributions  7.109
        • j.  Proposed Distributions  7.110
        • k.  Form: Schedule: Proposed Distributions  7.111
    • D.  Petition for Settlement of Account
      • 1.  Required Contents of Petition  7.112
        • a.  Consulting Local Rules for Account  7.113
        • b.  Form: Petition for Settlement of Account and Approval of Compensation and Fees  7.114
        • c.  Verification of Petition  7.115
        • d.  Form: Verification of Petition  7.116
      • 2.  Setting Hearing on Account  7.117
        • a.  Notice Requirements  7.118
        • b.  Service of Notice  7.118A
        • c.  Notice to Minors, Incompetents, Missing Persons, and Unascertained Beneficiaries  7.119
        • d.  Notice to Remainder Beneficiaries  7.120
        • e.  Form: Waiver of Notice of Hearing and Consent to Petition  7.120A
      • 3.  Hearing on Account  7.121
      • 4.  Burden of Proof  7.121A
      • 5.  Order Settling Account  7.122
        • a.  Form: Order Settling Account  7.123
        • b.  Effect of Order Settling Account  7.124
  • V.  POSTACCOUNTING TRANSACTIONS  7.125
  • VI.  USING THE ACCOUNTING SPREADSHEETS  7.126

8

Principal and Income

Michael Antin

Michael L. Taylor

  • I.  TRUSTEE POWERS AND DUTIES UNDER UNIFORM PRINCIPAL AND INCOME ACT
    • A.  Purposes of Uniform Principal and Income Act (UPAIA) (Prob C §§16320–16375)  8.1
    • B.  Subordination of UPAIA to Terms of Trust Instrument
      • 1.  Trustee Must Follow Directions  8.2
      • 2.  Trustee May Exercise Discretion  8.3
    • C.  Consequences of Definition of Trust Income Under Treas Reg §1.643(b)–1  8.3A
      • 1.  Equitable Adjustments Between Principal and Income Respected  8.3B
      • 2.  Allocation of Capital Gains to Income Allowed  8.3C
      • 3.  Distribution in Kind Treated as Sale of Property  8.3D
      • 4.  When Unitrust Amount May Be Treated as Income Under State Law  8.3E
    • D.  Unitrust Conversion Power  8.3F
    • E.  Power to Adjust Between Principal and Income  8.4
      • 1.  When Adjustment Allowed  8.5
      • 2.  When Adjustment Not Allowed  8.6
      • 3.  Release of Power to Make Adjustment  8.7
      • 4.  Factors to Consider in Deciding Whether to Exercise Adjustment Power  8.8
    • F.  When Adjustment or Unitrust Conversion Does Not Result in Taxable Gift  8.8A
    • G.  Notice of Proposed Action for Adjustment or Unitrust Conversion  8.9
    • H.  Remedy for Exercise of Adjustment Power and Unitrust Conversion Power  8.10
  • II.  RULES APPLICABLE TO TERMINATING INCOME INTERESTS UNDER TRUSTS
    • A.  Determination and Distribution of Income and Principal  8.11
      • 1.  When Property Specifically Given to Beneficiary  8.11A
      • 2.  When Beneficiary Receives Pecuniary Amount  8.11B
    • B.  Distribution of Income to Residuary and Remainder Beneficiaries  8.12
  • III.  APPORTIONMENT AT BEGINNING AND END OF INCOME INTEREST
    • A.  When Right to Income Begins and Ends  8.13
    • B.  Apportionment of Receipts and Disbursements When Decedent Dies or Income Interest Begins  8.14
    • C.  Apportionment When Income Interest Ends  8.15
  • IV.  ALLOCATION OF RECEIPTS DURING ADMINISTRATION
    • A.  When Default Rules Apply to Receipts  8.15A
    • B.  Receipts From Entities
      • 1.  Character of Receipts  8.16
        • a.  Distribution Received as Return of Capital  8.16A
        • b.  Capital Gain Dividend  8.16B
      • 2.  Distribution From Trust or Estate  8.17
      • 3.  Businesses Conducted by Trustee  8.18
    • C.  Receipts Not Normally Apportioned
      • 1.  Principal Receipts  8.19
      • 2.  Rental Property  8.20
      • 3.  Obligation to Pay Money  8.21
      • 4.  Insurance Policies and Similar Contracts  8.22
    • D.  Receipts Normally Apportioned
      • 1.  Insubstantial Allocations Not Required  8.23
      • 2.  Deferred Compensation, Annuities, and Similar Payments  8.24
        • a.  Payments Not Received by QTIP Trust  8.24A
        • b.  Payments Received by QTIP Trust  8.24B
      • 3.  Liquidating Asset  8.25
      • 4.  Minerals, Water, and Other Natural Resources  8.26
      • 5.  Timber  8.27
      • 6.  Nonproductive Property  8.28
      • 7.  Derivatives and Options  8.29
      • 8.  Asset-Backed Securities  8.30
  • V.  ALLOCATION OF DISBURSEMENTS DURING ADMINISTRATION OF TRUST
    • A.  When Default Rules Apply to Disbursements  8.30A
    • B.  Disbursements From Income  8.31
    • C.  Disbursements From Principal  8.32
    • D.  Transfers From Income to Principal for Depreciation  8.33
    • E.  Transfers From Income to Reimburse Principal  8.34
    • F.  Allocation of Income Taxes  8.35
    • G.  Adjustments Between Principal and Income Because of Taxes  8.36

9

Trustee Compensation, Attorney Fees, and Other Administrative Costs

Robert S. Tippett

  • I.  COMPENSATION OF TRUSTEE
    • A.  Determining Amount of Trustee Fee  9.1
      • 1.  Compensation Specified in Governing Instrument
        • a.  Ordinary Compensation  9.2
          • (1)  Types of Compensation Clauses  9.2A
          • (2)  Definition of Ordinary Services  9.2B
        • b.  Extraordinary Compensation  9.3
      • 2.  Compensation Not Specified in Governing Instrument  9.4
        • a.  Factors in Determining Reasonable Compensation  9.5
        • b.  Trustee Compensation in Practice  9.6
          • (1)  Corporate Trustees  9.6A
          • (2)  Private Professional Trustees   9.6B
          • (3)  Nonprofessional Trustees   9.6C
        • c.  Basic Fee Schedule
          • (1)  Fees Calculated as a Percentage of Principal  9.7
          • (2)  Lower Fees for Directed Accounts  9.8
          • (3)  Timing of Fees; Date for Calculating Fair Market Value  9.9
          • (4)  Services Included in Basic Fees  9.10
        • d.  Fees for Managing Common Trust Funds and Individual Securities
          • (1)  Corporate Trustees  9.11
          • (2)  Private Professional Trustees  9.12
        • e.  Fees for Managing Real Estate
          • (1)  Investment Real Estate  9.13
          • (2)  Personal Residence  9.14
          • (3)  Purchases, Sales, and Transfers  9.15
        • f.  Fees for Managing Other Assets  9.16
        • g.  Consulting Local Rules and Court Guidelines  9.17
      • 3.  Compensation of Cotrustees  9.18
      • 4.  Compensation of Public Guardian or Administrator Appointed as Trustee  9.19
    • B.  Reimbursement of Trustee for Costs  9.20
    • C.  Procedure for Taking Trustee’s Fee
      • 1.  Fee Procedure for Unsupervised Trusts  9.21
      • 2.  Fee Procedure for Court-Supervised Trusts
        • a.  Obtaining Court Approval  9.22
        • b.  Taking Periodic Compensation  9.23
        • c.  Requesting Extraordinary Compensation  9.24
      • 3.  Changes in Trustee’s Fee  9.25
      • 4.  Modification of Compensation Provisions in Governing Instrument  9.26
      • 5.  Waiver of Trustee Fees  9.27
    • D.  Allocation of Compensation to Principal and Income
      • 1.  Payment From Source Specified in Governing Instrument  9.28
        • a.  When Trust Instrument Specifies Method of Allocation  9.28A
        • b.  When Source of Payment Not Specified in Trust Instrument  9.28B
      • 2.  Allocation of Extraordinary Compensation  9.29
    • E.  Tax Considerations in Fee Structure  9.30
    • F.  Compensation Limitations When Attorney Is Trustee  9.31
      • 1.  Limitation on Dual Compensation  9.31A
      • 2.  Approval of Dual Compensation  9.31B
    • G.  Effect of Breach of Trust on Compensation  9.32
    • H.  Resolving Compensation Disputes  9.33
  • II.  COMPENSATION OF ATTORNEYS AND OTHER PROFESSIONALS
    • A.  Attorney Fees
      • 1.  When Compensation Provisions in Governing Instrument  9.34
      • 2.  When No Compensation Provisions in Governing Instrument  9.35
      • 3.  Compensation in Court-Supervised Trusts  9.35A
      • 4.  Fees Specified in Engagement Letters  9.36
      • 5.  Ordinary and Extraordinary Fees  9.37
      • 6.  Resolving Fee Disputes  9.38
      • 7.  Separate Counsel for Cotrustees  9.39
      • 8.  Source of Payment of Attorney Fees  9.40
    • B.  Compensation of Professionals Other Than Attorneys
      • 1.  Compensation Provisions in Governing Instrument  9.41
      • 2.  No Compensation Provisions in Governing Instrument  9.42
    • C.  Procedure for Compensating Attorneys and Other Professionals
      • 1.  Fee Procedure for Unsupervised Trusts  9.43
      • 2.  Fee Procedure for Court-Supervised Trusts  9.44
    • D.  Allocation of Compensation of Attorneys and Other Professionals to Principal and Income  9.45
    • E.  Deductibility of Investment Advisory Fees  9.45A
  • III.  TRUSTEE COMPENSATION AND ATTORNEY FEES IN LITIGATION
    • A.  Trustee Sued or Suing in Fiduciary Capacity  9.46
      • 1.  Trustee Compensation in Third Party Litigation Against Trust  9.47
      • 2.  Attorney Fees and Other Expenses in Litigation Against Trust  9.48
    • B.  Relief Sought by Beneficiaries Against Trustee  9.49
      • 1.  When Trustee Prevails
        • a.  Trustee Compensation in Litigation With Favorable Result  9.50
        • b.  Attorney Fees and Other Expenses in Litigation With Favorable Result  9.51
        • c.  Fees Incurred in Requesting Fees and Expenses  9.51A
      • 2.  When Trustee Loses
        • a.  Trustee Compensation in Litigation With Unfavorable Result  9.52
        • b.  Attorney Fees and Other Expenses in Litigation With Unfavorable Result  9.53
        • c.  Compensation for Attorney Representing Beneficiary-Plaintiff  9.54
        • d.  Beneficiary Contest of Accounting  9.54A
      • 3.  Attorney Fees and Other Expenses in Settlement Agreements  9.55
      • 4.  Allocating Litigation Expenses to Principal and Income  9.56
  • IV.  PETITION AND ORDER TO APPROVE COMPENSATION
    • A.  Form: Petition to Approve Trustee Compensation and Attorney Fees  9.57
    • B.  Form: Additional Petition Clauses for Cotrustees  9.58
    • C.  Form: Order Approving Trustee Compensation and Attorney Fees  9.59
    • D.  Form: Additional Order Clauses for Cotrustees  9.60

10

Creditors’ Rights Against the Trust

Margaret M. Hand

Michael Patiky Miller

  • I.  SCOPE OF CHAPTER  10.1
  • II.  BASIC STATUTORY SCHEME
    • A.  Three Statutes Limit Period for Making and Paying Claims  10.2
      • 1.  Statute of Limitations in CCP §366.2
        • a.  General 1-Year Limitations Period for Actions on Liability of Decedent Under CCP §366.2  10.3
        • b.  Tolling of CCP §366.2  10.4
        • c.  Preemption of CCP §366.2  10.5
      • 2.  Special 1-Year Limitations Period for Actions Based on Decedent’s Promise Under CCP §366.3  10.6
      • 3.  Preview of Optional Claims Procedure and Time Limitations  10.7
    • B.  Impact of No-Contest Clauses  10.8
    • C.  Interplay Between Claims in Decedent Estate and Trust Administration
      • 1.  Trust Property May Be Liable for Claims and Expenses of Probate Administration  10.9
      • 2.  Prior to Judgment, Trustee Has No Duty to Creditors  10.10
      • 3.  Trustee Must Pay Judgments in Course of Administration  10.11
      • 4.  Distributee Liability  10.12
  • III.  TRUSTEES: THRESHOLD CONSIDERATIONS
    • A.  Review Trust Instrument  10.13
    • B.  Considerations When There Is or Will Be a Probate
      • 1.  Trust Claims Procedure Unavailable  10.14
      • 2.  Speedy Trust Administration May Be Advisable  10.15
    • C.  Considerations When There Will Be No Probate  10.16
      • 1.  Factors Suggesting Trustee Should Not Use Optional Trust Claims Procedure  10.17
      • 2.  Factors Favoring Use of Optional Trust Claims Procedure  10.18
    • D.  Certain Entitles Entitled to Notice, Regardless of Trust Claims Procedure  10.19
      • 1.  Notice to Director of Health Care Services  10.20
      • 2.  Notice to Director of California Victim Compensation Board  10.21
      • 3.  Claims of California Tax Authorities  10.22
      • 4.  Other California Public Creditors  10.23
    • E.  Consider Benefits and Burdens of Probate  10.24
      • 1.  Benefits of Probate  10.25
      • 2.  Burdens of Probate  10.26
    • F.  Considerations When Trustee Is Also Creditor  10.27
  • IV.  OPTIONAL TRUST CLAIMS PROCEDURE
    • A.  First Steps for Trustees  10.28
    • B.  Commence Trust Claims Procedure
      • 1.  File Notice and Pay Fee  10.29
      • 2.  Venue  10.30
      • 3.  Form: Notice to Creditors  10.31
      • 4.  Publication of Notice  10.32
      • 5.  Actual Notice to Known Creditors  10.33
      • 6.  Method of Giving Actual Notice  10.34
      • 7.  Time Requirements for Notice  10.35
    • C.  Trustee’s Counsel Should Not Aid Creditors With Their Claims  10.36
    • D.  Creditor’s Response to Notice  10.37
      • 1.  If Creditor Is Beneficiary and Trust Has No-Contest Clause  10.38
      • 2.  Quickly File Claim  10.39
      • 3.  Petition to File Late Claim  10.40
      • 4.  Contents of Claim  10.41
      • 5.  Form of Claim  10.42
      • 6.  Filing and Service of Claim  10.43
      • 7.  Amendment or Revision of Claims  10.44
      • 8.  Election to Treat Claim as if Trustee Had Rejected It  10.45
      • 9.  Secured Claims  10.46
    • E.  Trustee’s Response to Claim  10.47
      • 1.  Allowance of Timely Claims, Informal Claims  10.48
      • 2.  Rejection of Late-Filed Claims  10.49
      • 3.  Filing and Notice of Allowance or Rejection  10.50
      • 4.  Form of Allowance or Rejection of Claim  10.51
    • F.  Petition for Allowance, Compromise, or Settlement of Claims  10.52
      • 1.  Service of Notice and Copy of Petition  10.53
      • 2.  Form: Petition for Approval and Settlement of Claims  10.54
      • 3.  Court Action on Petition for Approval and Settlement of Claims  10.55
      • 4.  Form: Order for Approval and Settlement of Claims  10.56
    • G.  Creditor’s Response to Rejection  10.57
      • 1.  Time and Place to File Suit  10.58
      • 2.  Notice of Pendency of Action in Trust Proceeding or Personal Service on Trustee  10.59
        • a.  Personal Service of Summons and Complaint  10.60
        • b.  Form: Notice of Pendency of Action  10.61
        • c.  Form: Complaint Against Trustee  10.62
      • 3.  Judgment on Rejected Claim  10.63
      • 4.  Costs to Prevailing Party  10.64
      • 5.  Action on Time-Barred Claims
        • a.  Equitable Estoppel  10.65
        • b.  Relation-Back Doctrine  10.66
        • c.  Trustee’s Likely Response to Action on Time-Barred Claim  10.67
    • H.  Petition to Allocate Debts Between Two or More Trusts  10.68
    • I.  Petition to Allocate Decedent’s Debts Between Trust Estate, Surviving Spouse, and Probate Estate (If Any)  10.69
      • 1.  Allocating Debts by Agreement  10.70
      • 2.  Allocating Debts by Petition  10.71
        • a.  Contents of Petition  10.72
        • b.  Hearing; Notice  10.73
        • c.  OSC to Determine Value of Nontrust Assets  10.74
        • d.  Orders to Allocate Debts  10.75
        • e.  Enforcement of Order to Allocate Debts  10.76
  • V.  CREDITORS REMEDIES
    • A.  Creditor’s Rights Against Settlor, While Settlor Is Living
      • 1.  Liability of Trust to Extent of Settlor’s Power to Revoke  10.77
      • 2.  Restraint on Transfer of Self-Settled Trust Invalid  10.78
    • B.  Claims Against Settlor After Settlor’s Death  10.79
      • 1.  When Probate Has Been Opened
        • a.  File Claim and Request Special Notice  10.80
        • b.  If Probate Estate Is Inadequate to Pay Claims  10.81
      • 2.  When No Probate Has Been Opened
        • a.  Open a Probate  10.82
          • (1)  Look for Will  10.83
          • (2)  Nominate as Personal Representative Someone Likely to Be Appointed  10.84
          • (3)  Petition for Probate or Special Administration  10.85
        • b.  File Claim and Request Special Notice  10.86
        • c.  Look for Estate Assets  10.87
      • 3.  Chasing Assets Held in Trust  10.88
    • C.  Claim Against Trustee, Personally  10.89
    • D.  Request Special Notice in Trust Proceeding  10.90
    • E.  Claims Against Beneficiaries
      • 1.  Distributee Liability if No Probate and Trustee Does Not Use Optional Claims Procedure  10.91
      • 2.  Distributee Liability When Trustee Uses Claims Procedure But Fails to Notify Creditor  10.92
      • 3.  Limits on Distributee Liability Under Trust Law  10.93
      • 4.  Distributee Liability for Federal Tax Claims  10.94
  • VI.  TRUSTEES: PAYING CLAIMS FROM TRUST ESTATE
    • A.  As Required by Trust Instrument  10.95
    • B.  On Demand of Personal Representative  10.96
    • C.  Priority of Claims  10.97
    • D.  Abatement of Claims  10.98
    • E.  Reimbursement When Probate Delayed  10.99

10A

Beneficiary’s Creditor’s Rights Against the Trust

Margaret M. Hand

  • I.  SPENDTHRIFT PROTECTIONS
    • A.  Restrictions on Beneficiary’s Interest  10A.1
    • B.  When Settlor Is Beneficiary  10A.2
    • C.  Restrictions on Transfers of Beneficiary’s Interest
      • 1.  Spendthrift Trusts  10A.3
      • 2.  Education and Support Trusts  10A.4
      • 3.  Discretionary Trusts  10A.5
    • D.  When Protections Are Not Absolute  10A.6
  • II.  BENEFICIARY INITIATES OR CONSENTS TO TRANSFER
    • A.  Trust Does Not Contain Spendthrift Clause  10A.7
      • 1.  Transferable Interests
        • a.  Mandatory Distributions Not Limited to Support or Education  10A.8
        • b.  Form: Request for Transfer to Creditor  10A.9
        • c.  Form: Assignment by Beneficiary  10A.10
        • d.  Form: Notice to Trustee of Assignment  10A.11
      • 2.  Nontransferable Interests
        • a.  Distributions Limited to Support or Education  10A.12
        • b.  Discretionary Trusts  10A.13
    • B.  Trust Contains Spendthrift Clause  10A.14
  • III.  CREDITOR SEEKS PAYMENT FROM TRUST
    • A.  Creditor Makes Demand on Trustee  10A.15
      • 1.  When Creditor is IRS  10A.16
      • 2.  California Tax Authorities  10A.17
    • B.  Action to Enforce Against Trust Property Money Judgment Obtained Against Beneficiary  10A.18
      • 1.  Which Department Should Hear Petition Under CCP §709.010  10A.19
      • 2.  Trustee’s Response to Notice of Petition Under CCP §709.010  10A.20
      • 3.  Form: Petition to Enforce Money Judgment  10A.21
      • 4.  Form: Order Enforcing Judgment  10A.22
    • C.  Limits on Effectiveness of Spendthrift Protection  10A.23
      • 1.  Judgment for Child or Spousal Support  10A.24
      • 2.  Restitution Claims for Commission of Felony  10A.25
      • 3.  Liability for Public Support  10A.26
      • 4.  General Creditors and 25 Percent Limitation  10A.27
      • 5.  Trust for Education and Support  10A.28
    • D.  Effect of Payments to Creditors  10A.29
  • IV.  BANKRUPTCY TRUSTEE SEEKS PAYMENT FROM TRUST
    • A.  Bankruptcy Estate  10A.30
    • B.  Spendthrift Trusts Other Than Self-Settled Trusts  10A.31
    • C.  Self-Settled Trusts and Bankruptcy Estate  10A.32
  • V.  USE OF DISCLAIMERS  10A.33
  • VI.  CREDITOR’S RIGHTS IN POWER OF APPOINTMENT TRUSTS
    • A.  General Power of Appointment  10A.34
      • 1.  Lifetime Power of Appointment  10A.35
      • 2.  Testamentary Power of Appointment  10A.36
    • B.  Special Power of Appointment  10A.37
  • VII.  SELF-SETTLED SPENDTHRIFT TRUSTS IN OTHER JURISDICTIONS  10A.38
  • VIII.  REMAINDER BENEFICIARIES  10A.39

11

Income Taxation of Trusts

Marc M. Stern

Robert S. Tippett

  • I.  BASIC CONCEPTS AND FILING REQUIREMENTS  11.1
  • II.  RESPONSIBILITY FOR PREPARING TAX RETURNS AND FURNISHING INFORMATION TO BENEFICIARIES  11.2
    • A.  Trustee’s Responsibility When Someone Else Prepares Return  11.3
    • B.  Return Preparer Penalties Under IRC §6694  11.3A
    • C.  Attorney’s Role When Trustee’s Office Becomes Vacant  11.4
    • D.  Successor Trustee’s Liability for Unpaid Taxes  11.5
    • E.  Furnishing Information to Beneficiaries  11.6
    • F.  Compensation for Tax Return Preparation  11.7
  • III.  INITIAL REQUIRED TAX FORMS
    • A.  IRS Form 56: Notice Concerning Fiduciary Relationship
      • 1.  Filing Notice With Internal Revenue Service  11.8
      • 2.  Filing Notice With Franchise Tax Board  11.9
    • B.  IRS Form SS-4: Application for Taxpayer Identification Number
      • 1.  Initial Application Procedure  11.10
      • 2.  Alternative Procedures for Obtaining Taxpayer Identification Numbers  11.11
      • 3.  When Additional or New Taxpayer Identification Numbers Are Needed  11.12
      • 4.  Multiple Trusts Treated as One Trust  11.12A
  • IV.  BASIC CONCEPTS OF INCOME TAXATION OF TRUSTS
    • A.  Trust as Taxpayer or Conduit  11.13
    • B.  Important Definitions  11.14
    • C.  Governing Law
      • 1.  Internal Revenue Code  11.15
      • 2.  California Law Incorporates Federal Statutes  11.16
    • D.  Determining Taxable Income
      • 1.  Calculation Process  11.17
      • 2.  Determining Gross Income  11.18
      • 3.  Deductions from Trust Income
        • a.  Deductibility of Losses and Expenses  11.19
        • b.  Above-the-Line Deductions  11.20
        • c.  Below-the-Line Deductions  11.21
        • d.  Net Operating Losses  11.22
        • e.  Charitable Contribution Deduction  11.23
        • f.  Trust Income Exemption  11.24
        • g.  Deduction for Estate Tax Attributable to Income in Respect of a Decedent  11.25
          • (1)  Taxation of Income in Respect of a Decedent  11.25A
          • (2)  Calculation of Income Tax Deduction  11.25B
        • h.  Deduction for Capital Losses  11.26
        • i.  Income Versus Estate Tax Deduction  11.27
        • j.  Deductions in the Year of Termination  11.28
      • 4.  Distribution Deduction  11.29
        • a.  Definition of DNI  11.29A
        • b.  Computing Distributable Net Income  11.30
      • 5.  Calculating Taxable Income  11.31
    • E.  Computing Tax Due
      • 1.  Tax Rate Schedules  11.32
      • 2.  Effect of Tax Rate Schedules on Trust Distribution and Investment Strategies  11.33
      • 3.  Credits Against Tax  11.34
      • 4.  Alternative Minimum Tax  11.35
      • 5.  Net Investment Income Tax  11.35A
    • F.  Treatment of Distributions to Beneficiaries
      • 1.  Taxation of Beneficiaries of a Simple Trust
        • a.  Simple Trust Defined  11.36
        • b.  Beneficiary’s Reportable Income  11.37
        • c.  Character of Income  11.38
        • d.  Character and Allocation of Deductions  11.39
        • e.  Allocation of Income  11.40
      • 2.  Taxation of Beneficiaries of a Complex Trust
        • a.  Tier System  11.41
        • b.  First-Tier Distributions and Beneficiaries  11.42
        • c.  Second-Tier Distributions and Beneficiaries  11.43
        • d.  Taxation of Distributions  11.44
          • (1)  When First-Tier Distributions Equal or Exceed DNI  11.44A
          • (2)  When Total Distributions Exceed DNI  11.44B
          • (3)  When All Distributions Are Second-Tier Distributions  11.44C
        • e.  Allocation of Income and Deductions  11.45
        • f.  Separate Share Rule  11.46
      • 3.  Beneficiary Tax Return Issues  11.47
      • 4.  Foreign Trust Reporting Issues  11.47A
    • G.  Capital Gains and Losses  11.48
      • 1.  When Gains and Losses on Sale of Capital Asset by Trust Included in DNI  11.49
        • a.  Gains Allocated to Income Under Local Law or Trust Instrument  11.49A
        • b.  Gains Actually Distributed to Beneficiary  11.49B
        • c.  Gains Paid for Charitable Purposes  11.49C
        • d.  Gains Consistently Treated as Distributed to Beneficiary  11.49D
      • 2.  When Gain or Loss on In-Kind Distributions Recognized by Trust  11.50
      • 3.  Gain or Loss Passed Through to Beneficiary in Distributions on Termination of Trust  11.51
    • H.  Taxable Year of Trust  11.52
      • 1.  IRC §645 Election  11.53
        • a.  Planning Opportunities Using IRC §645 Election  11.53A
        • b.  Procedure for Making IRC §645 Election  11.53B
        • c.  Time for Making IRC §645 Election  11.53C
        • d.  Extension of Time for Making IRC §645 Election  11.53D
      • 2.  IRC §663(b) 65-Day Election  11.54
    • I.  Final Fiduciary Returns  11.55
    • J.  Trapped Income: Trust Accounting Income Versus Taxable Income of the Trust  11.56
    • K.  Special Rules Applicable to Grantor Trusts  11.57
      • 1.  When Grantor May Be Considered Owner of Trust  11.57A
      • 2.  When Other Person May Be Considered Owner of Trust  11.57B
    • L.  Trusts Holding S Corporation Stock  11.57C
  • V.  CALIFORNIA TRUST TAXATION RULES
    • A.  Taxation of Income From California Sources and Trusts With Resident Trustees or Beneficiaries  11.58
      • 1.  Residence of Corporate Fiduciary  11.58A
      • 2.  Allocating Non-California Source Income  11.58B
    • B.  Taxation of Resident Beneficiary  11.59
    • C.  Determining Source of Income  11.60
    • D.  Double Taxation of Trust Income  11.60A
  • VI.  REQUIREMENTS FOR FILING FIDUCIARY INCOME TAX RETURNS AND PAYMENT OF TAX
    • A.  When Return Must Be Filed  11.61
    • B.  Time for Filing Returns and Payment of Tax  11.62
    • C.  Extensions of Time for Filing Returns and Payment of Tax
      • 1.  Federal Returns and Tax Payments  11.63
        • a.  Extension for Filing Return  11.64
        • b.  Extension for Payment of Tax  11.65
      • 2.  California Returns and Tax Payments  11.66
    • D.  Penalties and Interest
      • 1.  Penalty for Late Filing  11.67
      • 2.  Penalty for Failure to Pay Tax When Due  11.68
      • 3.  Interest on Late Payment of Tax  11.69
      • 4.  Additional Penalties  11.70
    • E.  Required Fiduciary Tax Forms
      • 1.  United States Fiduciary Income Tax Return: Form 1041  11.71
        • a.  Supplemental Schedules to Form 1041  11.72
        • b.  Additional Schedules and Forms  11.72A
      • 2.  California Fiduciary Income Tax Return: FTB Form 541  11.73
    • F.  Estimated Tax Payments  11.74
    • G.  Special Filing Requirements for Grantor Trusts  11.75
      • 1.  Portion of Trust Income Taxed to Grantor  11.76
      • 2.  Form: Portion of Trust Income Taxed to Grantor  11.77
      • 3.  All Trust Income Taxed to Grantor
        • a.  Trust Is Owned by One Grantor or One Other Person  11.78
        • b.  Required Information Statement  11.78A
        • c.  Trust Is Owned by Two or More Grantors or Other Persons  11.79
        • d.  Grantor Ceases to Be Owner  11.80
        • e.  Changing Trust Reporting Methods  11.81
    • H.  Income Tax Refund Procedure  11.82

12

Estate Tax Returns

Ann C. Harris

Sandra Price

  • I.  ADVISING TRUSTEE AND PREPARING RETURNS
    • A.  Understanding Estate Tax System  12.1
    • B.  Federal Estate Tax  12.2
      • 1.  Estate Tax Under TRA-2010 and ATRA-2012  12.2A
      • 2.  Gift Tax Under TRA-2010 and ATRA-2012  12.2B
      • 3.  Portability of DSUE Amount  12.2C
      • 4.  Basis Consistency Rules  12.2D
    • C.  California Estate Tax  12.3
    • D.  Generation-Skipping Transfer (GST) Tax  12.4
    • E.  Initial Meeting With Trustee  12.5
    • F.  Who Will Prepare Estate Tax Return  12.5A
    • G.  Using Checklists  12.6
  • II.  FEDERAL ESTATE TAX PROCEDURE
    • A.  Tax Forms to Be Filed Immediately  12.7
    • B.  Federal Estate Tax Return
      • 1.  Form to Use (IRS Form 706)  12.8
      • 2.  Filing Requirements
        • a.  Which Estates Must File Return  12.9
        • b.  Who Should File Return  12.10
        • c.  When to File Return  12.11
          • (1)  Extension of Time to File Return; Timely Payment Required  12.12
            • (a)  Extension of Time to Pay Tax  12.12A
            • (b)  Failure-to-Pay Penalty  12.12B
          • (2)  Late-Filing Penalty  12.13
            • (a)  Reasonable Cause Exception to Late-Filing Penalty  12.13A
            • (b)  Maximum Penalty  12.13B
        • d.  Where to File Return  12.14
    • C.  Estate Tax Valuation
      • 1.  Appraising Estate Assets  12.15
      • 2.  Accuracy-Related Penalties  12.16
        • a.  Substantial Valuation Understatement  12.16A
        • b.  Reasonable Cause Exception to Underpayment Penalty  12.16B
        • c.  Substantial Valuation Misstatement  12.16C
      • 3.  Revaluation of Previously Reported Gifts  12.17
    • D.  When Estate Includes Community Property  12.18
    • E.  Analysis of Form 706  12.19
      • 1.  Format of Form 706  12.20
      • 2.  Elections by Representative
        • a.  Alternate Valuation Date Election  12.21
        • b.  Special Use Valuation Election
          • (1)  Purpose of Special Use Valuation Election  12.21A
          • (2)  Special Use Valuation Election Requirements  12.22
          • (3)  Making Special Use Valuation Election  12.23
          • (4)  Schedule A-1 (IRC §2032A Valuation); Recapture Provisions  12.24
          • (5)  Protective Election  12.24A
        • c.  Qualified Family-Owned Business Interests (IRC §2057)  12.25
        • d.  Qualified Terminable Interest Property (QTIP) Election  12.26
          • (1)  Making QTIP Election on Late or Supplemental Return  12.26A
          • (2)  Inclusion of QTIP Property in Estate of Surviving Spouse  12.26B
          • (3)  Recovery of Tax on QTIP Property  12.26C
        • e.  Election to Pay Tax in Installments Under IRC §6166  12.27
          • (1)  Purpose of §6166 Election  12.27A
          • (2)  Making the §6166 Election  12.27B
        • f.  Election to Postpone Payment of Tax on Reversionary or Remainder Interests Under IRC §6163  12.28
        • g.  Land Subject to Qualified Conservation Easement Election  12.29
        • h.  Portability Election  12.29A
      • 3.  General Information (Part 4)  12.30
      • 4.  Schedules for Estate Assets
        • a.  Schedule A: Real Estate  12.31
        • b.  Schedule B: Stocks and Bonds  12.32
        • c.  Schedule C: Mortgages, Notes, and Cash  12.33
        • d.  Schedule D: Insurance on Decedent’s Life  12.34
        • e.  Schedule E: Jointly Owned Property  12.35
        • f.  Schedule F: Other Miscellaneous Property  12.36
        • g.  Schedule G: Lifetime Transfers  12.37
          • (1)  Treatment of Transfer Made by Decedent to Revocable Trust  12.37A
          • (2)  Treatment of “Split Gifts”  12.37B
          • (3)  Transfers Within 3 Years of Death  12.37C
        • h.  Schedule H: Powers of Appointment  12.38
        • i.  Schedule I: Annuities  12.39
      • 5.  Schedules for Deductions Against Gross Estate
        • a.  Reporting Deductions  12.40
        • b.  Schedule J: Funeral and Administration Expenses  12.41
          • (1)  Funeral Expenses  12.41A
          • (2)  Contingent and Unpaid Expenses  12.41B
          • (3)  Litigation Expenses  12.41C
          • (4)  Income Tax Deduction Versus Estate Tax Deduction  12.42
          • (5)  Interest on Graegin Loans  12.42A
        • c.  Schedule K: Debts, Mortgages, and Liens  12.43
          • (1)  When Postdeath Events Considered  12.43A
          • (2)  Claims Founded on Promise or Agreement  12.43B
        • d.  Schedule L: Losses During Administration and Expenses Incurred in Administering Property Not Subject to Claims  12.44
        • e.  Schedule M: Bequests to Surviving Spouse (Marital Deduction)
          • (1)  U.S. Citizen Spouses  12.45
          • (2)  Non-U.S. Citizen Spouses  12.46
          • (3)  “Savings Clauses” in Probate Code  12.47
        • f.  Schedule O: Charitable Deductions  12.48
        • g.  Charitable Remainder Trusts  12.49
      • 6.  Schedules for Credits Against Tax
        • a.  Schedule P: Credit for Foreign Death Taxes  12.50
        • b.  Schedule Q: Credit for Tax on Prior Transfers  12.51
        • c.  Credit for Pre-1977 Gift Taxes   12.52
      • 7.  Schedule U: Qualified Conservation Easement Exclusion  12.53
      • 8.  Recapitulation: Gross Estate and Allowable Deductions  12.54
      • 9.  Estate Tax Computation
        • a.  Determining Estate Tax  12.55
        • b.  Unified Rates and Credits Against Tax  12.56
          • (1)  Unified Credit  12.57
          • (2)  State Death Tax Credit  12.58
          • (3)  Other Credits Against Tax  12.59
        • c.  Schedules R and R-1: GST Tax Payable  12.60
    • F.  Payment of Estate Tax
      • 1.  When and Where to Pay Tax  12.61
      • 2.  Extension of Time to Pay Tax  12.62
      • 3.  Interest and Penalties on Late Payment of Tax
        • a.  Penalty for Late Payment of Tax  12.63
        • b.  Interest on Late Payment of Tax  12.64
      • 4.  Recovery of Estate Tax Attributable to Inclusion of QTIP Assets  12.65
      • 5.  Refund on Overpayment of Tax  12.66
        • a.  Interest on Refund Paid  12.67
        • b.  Suspension of Limitations Period  12.68
    • G.  Request for Discharge from Personal Liability  12.69
    • H.  Cutback on Estate Tax Closing Letters  12.69A
  • III.  GENERATION-SKIPPING TRANSFER TAX
    • A.  Imposition of Generation-Skipping Transfer Tax  12.70
    • B.  Definitions for Generation-Skipping Transfer Tax  12.71
      • 1.  Taxable Termination Defined  12.71A
      • 2.  Reverse QTIP Election  12.71B
      • 3.  Inclusion Ratio  12.71C
      • 4.  Estate Tax Inclusion Period  12.71D
    • C.  Generation Assignments  12.72
    • D.  Predeceased Ancestor Exception  12.72A
    • E.  Generation-Skipping Transfer Taxable Amount  12.73
      • 1.  Taxable Distribution Amount  12.73A
      • 2.  Taxable Termination Amount  12.73B
      • 3.  Direct Skip Amount  12.73C
    • F.  Allocating GST Exemption and Computing GST Tax
      • 1.  Allocating GST Exemption  12.74
      • 2.  Computing Generation-Skipping Transfer Tax  12.74A
      • 3.  Dividing Trust Into Exempt and Nonexempt Trusts  12.74B
      • 4.  GST Exemption Amount  12.74C
      • 5.  Simplified Exemption Allocation Rules  12.74D
      • 6.  Example of GST Exemption Allocation  12.74E
    • G.  Other Exemptions From Generation-Skipping Transfer Tax  12.75
    • H.  Identification of Generation-Skipping Transfers  12.76
    • I.  Tracking Transfers and Filing Returns  12.77
    • J.  Effective Dates for Generation-Skipping Transfers  12.78
  • IV.  CHECKLIST: ESTATE TAX CONSIDERATIONS IN TRUST ADMINISTRATION  12.79
  • V.  PROCEDURAL GUIDE: FILING ESTATE TAX FORMS  12.80

13

Administering Single-Person Trust After Settlor’s Death

David B. Gaw

  • I.  SYSTEMATIC APPROACH TO ADMINISTRATION  13.1
  • II.  COMPREHENSIVE PROCEDURAL CHECKLIST  13.2
  • III.  STEP ONE: PREPARATION FOR FIRST MEETING WITH CLIENT
    • A.  Initial Contact and Conflict Check  13.3
    • B.  Review Estate Planning Documents and Prepare Summaries  13.4
      • 1.  Trust Instrument  13.4A
        • a.  General Dispositive Provisions  13.5
        • b.  Powers of Appointment  13.6
        • c.  Prorata or Nonprorata Distribution  13.7
        • d.  Disclaimers  13.8
        • e.  Estate Tax Clause  13.9
        • f.  Administrative Trust Clause  13.10
        • g.  Allocation Between Principal and Income  13.11
        • h.  Prudent Investor Clause  13.11A
        • i.  Reporting and Accounting Clause  13.12
        • j.  Trustee Provisions  13.13
        • k.  S Corporation Issues  13.14
        • l.  Generation-Skipping Transfer (GST) Tax Issues  13.15
        • m.  Power to Divide Trusts  13.15A
        • n.  Payment of Interest  13.15B
        • o.  Gift Provisions  13.15C
        • p.  Presumption of Fraud or Undue Influence  13.16
        • q.  Ambiguities and Drafting Errors  13.17
        • r.  Asset Schedule  13.18
        • s.  Trust Amendments  13.18A
      • 2.  Pourover Will  13.19
  • IV.  STEP TWO: FIRST MEETING WITH CLIENT
    • A.  Have Documents Ready for First Meeting  13.20
    • B.  Identify Client and Ethical Issues  13.21
    • C.  Connect With the Client  13.22
    • D.  Begin to Educate Client About Realities of Trust Administration  13.23
    • E.  Summarize Trust Provisions and Administration Process for Client  13.24
    • F.  Collect Preliminary Asset Information  13.25
      • 1.  Title to Assets
        • a.  Assets in the Trust  13.26
        • b.  Assets Outside Trust Subject to Distribution by Will  13.27
        • c.  Assets Outside Trust Not Subject to Distribution by Will  13.28
        • d.  Revocable TOD Deed  13.28A
      • 2.  Other Basic Information Concerning Assets  13.29
    • G.  Collect Liability Information and Consider Use of Trust Claims Procedure  13.30
    • H.  Discuss Fiduciary Duties  13.31
      • 1.  Duty of Notification  13.32
      • 2.  Duty to Report, Account, and Furnish Information  13.33
        • a.  Duty to Account  13.33A
        • b.  Duty to Report  13.33B
    • I.  Discuss Trust Checking Account, Expenses, and Liquidity Needs  13.34
    • J.  Discuss Estate Tax Issues
      • 1.  IRS Form 706 and State Tax Returns  13.35
      • 2.  Alternate Valuation Date Election  13.35A
      • 3.  Special Use Valuation Election and Other Estate Tax Elections  13.36
      • 4.  Prior Transfer Property Credit  13.37
      • 5.  Taxable Gifts  13.38
      • 6.  Disclaimer Planning  13.39
      • 7.  Generation-Skipping Transfer (GST) Tax  13.40
      • 8.  Coordinating With Insurance Trust  13.41
    • K.  Discuss Income Tax Issues
      • 1.  Responsibility for Tax Returns  13.42
      • 2.  Use of Administrative Trust  13.43
        • a.  Factors to Consider  13.44
        • b.  Election to Treat Revocable Trust as Part of Estate  13.45
        • c.  Obtain Taxpayer Identification Number  13.46
      • 3.  Returns to Be Filed; Estimated Taxes  13.47
      • 4.  Explain Basis Step-Up  13.48
      • 5.  Consequences of Funding Gifts  13.49
      • 6.  Trust Income During Administration Period  13.50
      • 7.  Other Income Tax Issues  13.51
    • L.  Discuss Real Property Tax Issues
      • 1.  Change in Ownership for Property Tax Purposes  13.52
      • 2.  Parent-Child or Grandparent-Grandchild Exclusion  13.53
      • 3.  Domestic Partner Exclusion  13.53A
      • 4.  Cotenant Exclusion  13.53B
    • M.  Discuss Trustee Compensation and Time Records  13.54
    • N.  Discuss Attorney Fees and Costs
      • 1.  Discuss Fees and Billings With Client  13.55
      • 2.  Form: Hybrid Fee Agreement Provision  13.56
    • O.  Schedule Next Meeting  13.57
  • V.  STEP THREE: IMMEDIATE ACTIONS FOLLOWING FIRST MEETING
    • A.  Create Case Management Files and Prepare Agreements  13.58
    • B.  Calendar Critical Dates  13.59
    • C.  Lodge Pourover Will With County Clerk  13.60
    • D.  Prepare Letters, Notices, and Forms
      • 1.  Medi-Cal Notice and Other Notices  13.61
      • 2.  Certification of Trust and Affidavit of Death  13.62
        • a.  Form: Certification of Trust  13.62A
        • b.  Form: Affidavit of Death of Trustee  13.62B
      • 3.  Forms for County Assessor’s Office  13.63
      • 4.  Asset and Liability Information  13.64
      • 5.  Notification Letter and Attorney Letter to Beneficiaries and Heirs  13.65
      • 6.  CPA Designation Form and Letter  13.66
      • 7.  Preliminary Inventory  13.67
      • 8.  Cancel Credit Cards and Notify Credit Reporting Agencies  13.67A
  • VI.  STEP FOUR: FURTHER ACTIONS FOLLOWING FIRST MEETING
    • A.  Verify Title to Real Property  13.68
    • B.  Obtain Appraisals  13.69
    • C.  Initiate Trust Claims Procedure  13.70
    • D.  Other Actions to Take  13.71
  • VII.  STEP FIVE: SUBSEQUENT MEETINGS WITH CLIENT AND ACCOUNTANT  13.72
    • A.  Discuss Sales of Assets  13.73
    • B.  Consider Preliminary Distributions  13.74
  • VIII.  STEP SIX: PREPARE FOR FINAL DISTRIBUTION
    • A.  Finalize Fiduciary Accounting Schedules, Prepare Report and Account  13.75
    • B.  Finalize Tax Returns  13.76
    • C.  Considerations Before Selecting Distribution Date  13.77
    • D.  Actions Following Selection of Distribution Date  13.78
  • IX.  STEP SEVEN: PREPARE TRANSFER DOCUMENTS FOR FUNDING DISTRIBUTIONS  13.79
  • X.  STEP EIGHT: SEND CLOSING DOCUMENTS  13.80
  • XI.  SINGLE-SETTLOR HYPOTHETICAL AND EXHIBITS BASED ON HYPOTHETICAL
    • A.  Single-Settlor Hypothetical  13.81
    • B.  Exhibits
      • 1.  Client Information Tracking Sheet  13.82
      • 2.  Form: Letter Confirming Appointment  13.83
      • 3.  Form: Information and Documents Needed  13.84
      • 4.  Form: Client Conflict Information Request  13.85
      • 5.  Form: Trust Summary: One-Person Trust  13.86
      • 6.  Form: Petition for Determination of Proration of Estate Tax  13.86A
      • 7.  Form: Authorization to Disclose Information  13.87
      • 8.  Form: Beneficiary and Heir List  13.88
      • 9.  Form: Asset Collection  13.89
      • 10.  Form: Trust Liabilities  13.90
      • 11.  Form: Instructions Regarding Medical, Funeral, Administration, and Personal Expenses  13.91
      • 12.  Form: Last Illness, Funeral, and Administration Expenses  13.92
      • 13.  Form: Trustee Time Report  13.93
      • 14.  Form: Environmental Questionnaire  13.94
      • 15.  Sample Letter to Clients and Notification by Trustee  13.95
      • 16.  Asset Information
        • a.  Form: Real Property  13.96
        • b.  Form: Traded Securities  13.97
        • c.  Form: Mutual Funds  13.98
        • d.  Form: U.S. Bonds  13.99
        • e.  Form: Other Securities  13.100
        • f.  Form: Bank, Savings and Loan, and Credit Union Accounts  13.101
        • g.  Form: Life Insurance  13.102
        • h.  Form: Annuities, IRAs, and Retirement Benefits  13.103
        • i.  Form: Promissory Notes, Mortgages, and Deeds of Trust  13.104
      • 17.  Form: Election to Have CPA Prepare Income Tax Returns  13.105
      • 18.  Sample Trustee’s Letter to CPA  13.106
      • 19.  Form: Letter of Instructions for Completing Asset Collection Sheet  13.107
      • 20.  Form: Attorney’s Letter to Appraiser  13.108
      • 21.  Form: Attorney’s Letter Requesting Copy of Gift Tax Return  13.108A
      • 22.  Form: Trust Administration Memorandum  13.109
      • 23.  Form: Liquidity/Cash Needs Analysis  13.110
      • 24.  Form: Trustee’s Letter to IRS  13.111
      • 25.  Form: Distribution Table  13.112
      • 26.  Form: Grant Deed for Transferring Single-Settlor Trust Property to Child  13.112A
      • 27.  Form: Closing Letter to CPA  13.113
      • 28.  Form: Sample Termination of Engagement Letter  13.114
      • 29.  Form: Client Survey  13.115

13A

Administering Moderate Married Settlor Trust on the Death of the First Spouse

David B. Gaw

James P. Lamping

  • I.  WHEN NO TAX IS EXPECTED ON SECOND DEATH  13A.1
    • A.  Similarities of Probate and Trust Administration  13A.2
    • B.  System for Married Settlor Trust Administration  13A.3
    • C.  Portability of Deceased Spouse’s Unused Exclusion (DSUE) Amount  13A.3A
  • II.  ADMINISTRATION OF JOINT REVOCABLE TRUST  13A.4
    • A.  Step One: Prepare for First Meeting
      • 1.  First Telephone Call  13A.5
      • 2.  Pre-Appointment Documents  13A.6
      • 3.  Review Trust Instrument  13A.7
        • a.  Identify Subtrusts Established at First Death  13A.8
        • b.  Watch for Second Marriage Situations  13A.9
        • c.  Look for Subchapter S Issues  13A.10
        • d.  Look for Limited Powers of Appointment  13A.11
        • e.  Prorata or Nonprorata Distribution  13A.12
        • f.  Disclaimer Opportunities  13A.13
        • g.  “Administrative Trust” Clause  13A.14
        • h.  QTIPable Bypass/Credit Trust Provisions  13A.14A
        • i.  Allocation Between Principal and Income  13A.15
        • j.  Reporting and Accounting Clause  13A.16
        • k.  Payment of Interest  13A.17
        • l.  Annual Exclusion Gifts  13A.18
        • m.  Trustee Provisions  13A.19
        • n.  Asset Schedule  13A.20
        • o.  Ambiguities and Drafting Errors  13A.21
        • p.  Prohibited Transferees  13A.22
        • q.  Specific Gifts  13A.23
      • 4.  Review Pourover Will  13A.24
      • 5.  Review Other Documents  13A.25
      • 6.  Prepare Trust Summary  13A.26
    • B.  Step Two: First Meeting With Client  13A.27
      • 1.  Connect With the Client  13A.28
      • 2.  Breaking the Living Trust Myth  13A.29
      • 3.  Identify Client and Determine Scope of Representation  13A.30
      • 4.  Documents Used at First Meeting  13A.31
      • 5.  Educate Client About Trust Administration  13A.32
      • 6.  Summarize Trust Provisions  13A.33
      • 7.  Collect Asset Information  13A.34
      • 8.  Collect Liability Information  13A.35
      • 9.  Discuss Payment of Trust Expenses  13A.36
      • 10.  Collect Beneficiary Information  13A.37
      • 11.  Review Document List  13A.38
      • 12.  Discuss Fiduciary Duties  13A.39
      • 13.  Discuss Trust Checking Account  13A.40
      • 14.  Discuss Estate Tax Issues  13A.41
      • 15.  Discuss Income Tax Issues  13A.42
        • a.  Basis Step-Up (or Step-Down) on Trust Assets  13A.43
        • b.  Pass-Through Approach Versus Administrative Trust  13A.44
        • c.  Nonprorata Allocation of Community Property  13A.45
        • d.  Simple Trust Versus Complex Trust  13A.46
      • 16.  Discuss Real Property Tax Issues  13A.47
      • 17.  Trustee Compensation and Attorney Fees  13A.48
      • 18.  Liquidity Analysis  13A.49
      • 19.  Stale Trust Issues  13A.50
      • 20.  Calendar Next Meeting  13A.51
    • C.  Step Three: Immediate Action Following First Meeting  13A.52
      • 1.  Collect Asset Information  13A.53
        • a.  Letters to Financial Institutions  13A.54
        • b.  Letters of Instructions to Brokers  13A.55
      • 2.  Set Up New Case Management Files  13A.56
      • 3.  Lodge Pourover Will  13A.57
      • 4.  Prepare Certifications, Notices, and Forms  13A.58
      • 5.  Send Letters to Beneficiaries and Accountant  13A.59
    • D.  Step Four: Activities Following First Meeting (Second Stage)  13A.60
    • E.  Step Five: Activities Following First Meeting (Third Stage)  13A.61
    • F.  Step Six: Second Meeting With Client and Accountant  13A.62
    • G.  Step Seven: Prepare for Final Distribution  13A.63
      • 1.  Determine Expense Deductions  13A.64
      • 2.  Plan Asset Allocation  13A.65
      • 3.  Segregate Trust Assets  13A.66
      • 4.  Create Spreadsheet  13A.67
  • III.  ESTABLISHING TARGETS FOR ASSET ALLOCATION BETWEEN CREDIT AND SURVIVOR’S TRUST
    • A.  Necessity of Targets  13A.68
    • B.  Tracing Transactions Between Trust and Surviving Spouse  13A.69
    • C.  Making Adjustments Between Decedent’s Share and Survivor’s Share of Trust Estate  13A.70
    • D.  Making Adjustments Between Credit Trust and Survivor’s Trust  13A.71
    • E.  Adjustment for Estate Tax Deductions  13A.72
  • IV.  ALLOCATING ASSETS BETWEEN CREDIT TRUST AND SURVIVOR’S TRUST
    • A.  Appreciating Assets  13A.73
    • B.  Family Residence  13A.74
    • C.  S Corporation Stock  13A.75
    • D.  Retirement Benefits  13A.76
    • E.  Unmatured Life Insurance  13A.77
    • F.  Prepare Asset Allocation Agreement  13A.78
    • G.  Terminating Rather Than Funding Credit Trust  13A.79
    • H.  Administering Credit Trust  13A.79A
  • V.  STEPS FOR IMPLEMENTING SUBTRUST ALLOCATION AND COMPLETION OF ADMINISTRATION  13A.80
  • VI.  MODERATE MARRIED SETTLOR HYPOTHETICAL  13A.81
    • A.  Form: Sample Trust Asset Allocation Agreement  13A.82
    • B.  Form: Table Showing Allocation to Various Subtrusts  13A.83
    • C.  Form: Trust Administration Memorandum  13A.84
    • D.  Form: Letter to CPA Confirming Responsibilities  13A.85
    • E.  Form: Client Letter Concerning Portability Election (Used in Situations With Credit/Survivor’s Trust Allocation)  13A.86
    • F.  Form: Client Letter Concerning Portability Election (Used With No Credit/Survivor’s Trust Allocation)  13A.87
    • G.  Form: Client Letter (When Portability Election Made)  13A.88
    • H.  Form: Client Letter (When Portability Election Not Made and No Credit Trust Created)  13A.89
    • I.  Form: Client Letter (When Client Does Not Desire to Make Portability Election But Credit Trust Has Been Created)  13A.90

14

Subtrust Allocation and Funding on the Death of the First Spouse

David B. Gaw

  • I.  STEP-BY-STEP APPROACH TO TRUST ADMINISTRATION AND SUBTRUST FUNDING PROCESS  14.1
    • A.  Steps in Trust Administration  14.1A
    • B.  Importance of Trust Administration  14.1B
  • II.  PASS-THROUGH ANALYSIS VERSUS ADMINISTRATIVE TRUST  14.2
    • A.  Arguments for Administrative Trust Approach
      • 1.  Law of Trusts May Require Administrative Trust  14.3
      • 2.  Treasury Regulations Favor Administrative Trust Approach  14.4
    • B.  Practical Considerations for and Against Administrative Trust Approach  14.5
    • C.  Tax Reporting for Administrative Trust  14.6
      • 1.  Administrative Trust Usually Complex Trust  14.6A
      • 2.  Administrative Trust May Be Simple Trust  14.6B
  • III.  INITIAL STEPS
    • A.  Make Outright Nonprorata Distributions From Trust  14.7
    • B.  Identify Subtrusts to Be Funded at First Death  14.8
      • 1.  Survivor’s Trust  14.9
      • 2.  Disclaimer Trust  14.10
      • 3.  Credit Trust  14.11
      • 4.  Marital Trust  14.12
      • 5.  QTIPable Bypass Trust  14.12A
      • 6.  Qualified Subchapter S Trust  14.13
    • C.  Sample Forms
      • 1.  Form: Sample Letter to IRS Regarding Extension of Time to File  14.13A
      • 2.  Form: Sample Letter to Insurance Company  14.13B
      • 3.  Form: Sample Letter to Beneficiary  14.13C
      • 4.  Form: Sample Letter to CPA Requesting Information  14.13D
  • IV.  SUBTRUST FUNDING: STEP-BY-STEP METHOD
    • A.  Create Spreadsheet and List All Assets  14.14
    • B.  Married Couple Hypothetical  14.15
    • C.  Form: Trust Summary: Two-Person Trust at First Death  14.15A
    • D.  Form: Trust Administration Memorandum  14.15B
    • E.  Checklist: Creating and Using Spreadsheet  14.16
    • F.  Establish Targets for Allocation Between Each Subtrust or Share
      • 1.  Necessity of Targets  14.17
        • a.  Consequences of Overfunded Credit Trust  14.17A
        • b.  Exception to Overfunded Credit Trust  14.17B
      • 2.  Seven-Step Process in Determining Targets  14.18
        • a.  Step One: Make Adjustments Between Surviving Spouse and Administrative (Family) Trust
          • (1)  Trace Transactions  14.19
          • (2)  Establish System for Tracing  14.19A
            • (a)  Expenses Improperly Paid From Family Trust  14.20
            • (b)  Trust Income or Receipts From Family Trust Assets Improperly Paid to Surviving Spouse  14.21
            • (c)  Loans From Surviving Spouse to Family Trust  14.22
            • (d)  Surviving Spouse’s Personal Income or Receipts Improperly Placed in Family Trust  14.23
            • (e)  Expenses Paid Personally That Are Chargeable Entirely to Decedent’s Share of Family Trust  14.24
            • (f)  Expenses Paid Personally That Are Chargeable Equally to Decedent’s Share of Family Trust and Survivor’s Share  14.25
          • (3)  Form: Where to Put Receipts and From Where to Pay Expenses  14.25A
          • (4)  Calculate and Enter Net Adjustments on Spreadsheet  14.26
        • b.  Step Two: Make Adjustments Between Decedent’s Share and Survivor’s Share of Trust Estate  14.27
        • c.  Step Three: Make Adjustments Between Credit and Marital Shares  14.28
          • (1)  Adjustments Based on Type of Marital Deduction Formula Used  14.29
          • (2)  Adjustments Based on Funding Formula Used
            • (a)  Revenue Procedure 64–19  14.30
              • (i)  Allowable Formulas  14.30A
              • (ii)  When Rev Proc 64–19 Does Not Apply  14.30B
            • (b)  True Worth Funding
              • (i)  Postdeath Appreciation  14.31
              • (ii)  Postdeath Depreciation  14.32
            • (c)  “Fairly Representative” Funding  14.33
            • (d)  Minimum Worth Funding  14.34
            • (e)  Fractional Shares  14.34A
          • (3)  Calculate Which Subtrusts Receive Appreciation or Bear Depreciation  14.35
          • (4)  Ascertain Where Various Deductions Were Taken  14.36
            • (a)  Administration Expenses  14.37
              • (i)  Payment of Administration Expenses From Fiduciary Accounting Income  14.38
              • (ii)  Factors in Deciding Where to Deduct Administration Expenses  14.39
              • (iii)  General Rules for Deducting Administration Expenses  14.40
            • (b)  Expenses of Last Illness  14.41
              • (i)  Factors in Deciding Where to Deduct Expenses of Last Illness  14.42
              • (ii)  Application of General Deduction Rules to Expenses of Last Illness  14.43
          • (5)  Determine Interest Payments, Based on Marital Deduction Pecuniary Formula  14.44
        • d.  Steps Four and Five: Make Adjustments Between Exempt and Nonexempt Credit Trust or Marital Trust  14.45
          • (1)  Identify GST Tax Formula  14.46
          • (2)  When to Consider Allocation  14.47
          • (3)  Automatic Allocation Rules  14.48
          • (4)  Reverse QTIP Election  14.49
            • (a)  Example of Reverse QTIP Election  14.50
            • (b)  Extension to Make Reverse QTIP Election  14.51
            • (c)  Partial Reverse Election Not Permitted  14.52
            • (d)  Dividing QTIP Trust for Reverse Election or Credit Trust Into Exempt and Nonexempt Trusts  14.53
              • (i)  Payment of Appropriate Interest on Pecuniary Amount  14.53A
              • (ii)  Court Petition to Divide QTIP Trust or Credit Trust  14.54
          • (5)  Allocate Appreciation and Depreciation  14.55
          • (6)  Determine Whether Interest Must Be Paid on GST Exempt or Nonexempt Pecuniary Share  14.56
        • e.  Step Six: Determine Which Trusts Receive Net Trust Accounting Income During Administration  14.56A
        • f.  Step Seven: Determine Which Trusts Receive Net Principal Change During Administration  14.56B
      • 3.  Using Spreadsheets to Establish Target Amounts  14.56C
        • a.  Instructions for Using Spreadsheets to Establish Target Amounts  14.56D
        • b.  Example of Using Spreadsheets to Establish Target Amounts for Pecuniary Marital/Residuary Credit Formula With Date-of-Distribution Funding  14.56E
        • c.  Mathematical Analysis of Target Calculations  14.56F
    • G.  Allocate Assets Between Subtrusts or Shares  14.57
      • 1.  Nonprorata Allocation of Community Property Assets  14.58
      • 2.  Specific Types of Assets
        • a.  Family Residence and Vacation Home  14.59
        • b.  Loans to Children  14.60
        • c.  Assets Subject to Guaranties  14.61
        • d.  IRD Items  14.62
          • (1)  Definition of IRD  14.63
          • (2)  Examples of IRD  14.64
          • (3)  Retirement Benefits  14.65
        • e.  Special Use Valuation Property  14.66
        • f.  Other Assets  14.67
      • 3.  Discount Planning  14.68
        • a.  Reporting on IRS Form 706 Return  14.69
          • (1)  Discount on Community Property Interest  14.70
          • (2)  Practicality of Discounting  14.71
          • (3)  Basis Consistency Requirement  14.72
        • b.  Value for Basis Calculation  14.73
          • (1)  Shortened Life Expectancy  14.73A
          • (2)  Market Decline  14.73B
        • c.  Value for Funding Subtrusts at First Death
          • (1)  Particular Asset to Subtrust  14.74
          • (2)  Effect on Marital Deduction Funding  14.75
          • (3)  Self-Adjustment by Formula  14.76
          • (4)  Guidelines on Use of Discounts  14.77
        • d.  Aggregation of Interests  14.78
      • 4.  Estate Freezing  14.79
    • H.  Select Allocation (Distribution) Date  14.80
    • I.  Select Asset Allocation Method: Segregated Trusts or Bookkeeping Entries  14.81
    • J.  Pay Unpaid Expenses From Credit Trust or Marital Trust  14.81A
    • K.  File Change-in-Ownership Statement for Real Property Allocated to Subtrust  14.81B
  • V.  PREPARE ASSET ALLOCATION AGREEMENT AND DIAGRAM  14.82
  • VI.  CHECKLIST FOR IMPLEMENTING SUBTRUST ALLOCATION AND COMPLETION OF ADMINISTRATION  14.83
  • VII.  FORM: SAMPLE TRUST ASSET ALLOCATION AGREEMENT AND ACCOMPANYING SCHEDULES  14.84
  • VIII.  EXHIBITS
    • A.  Form: Spreadsheet Listing Trust and Nontrust Assets With Separate Columns Based on Character of Assets  14.85
    • B.  Form: Spreadsheet Listing Trust and Nontrust Assets With Separate Columns for Title and Date-of-Death Values  14.86
    • C.  Form: Augmented Spreadsheet Showing Debts for Each Asset  14.87
    • D.  Form: Augmented Spreadsheet Showing Net Value  14.88
    • E.  Form: Augmented Spreadsheet Showing Allocation Dates  14.89
    • F.  Form: Augmented Spreadsheet Showing Allocation Values  14.90
    • G.  Form: Augmented Spreadsheet Showing Net Change From Date of Death to Date of Allocation  14.91
    • H.  Form: Augmented Spreadsheet Showing Value of Assets Passing Outside Trust  14.92
    • I.  Form: Alternative Spreadsheet Showing Shares and Subtrusts Receiving Assets in Survivor’s Trust/Disclaimer Trust Plan  14.93
    • J.  Form: Alternative Spreadsheet for Survivor’s Trust/Credit Trust Plan (Without Marital Share)  14.94
    • K.  Form: Alternative Spreadsheet for Survivor’s Trust/Credit Trust Plan (With Marital Share)  14.95
    • L.  Form: Alternative Spreadsheet for Credit Trust/Marital Trust (Without GST Division) Plan  14.96
    • M.  Form: Alternative Spreadsheet for Credit Trust/Marital Trust (With GST Division) Plan  14.97
    • N.  Form: Alternative Spreadsheet for Credit Trust (With GST Division)/Marital Trust Plan  14.98
    • O.  Form: Alternative Spreadsheet Showing Shares and Subtrusts Receiving Assets in Unusual Situations  14.99
    • P.  Form: Completed Allocation Spreadsheet Showing Shares and Subtrusts Receiving Assets, With Comments  14.100
    • Q.  Form: Table Showing Expanded View of How Targets Were Calculated  14.101
    • R.  Flowchart Showing Adjustments for Expenses Improperly Paid From Family Trust, Trust Income Improperly Paid to Survivor, and Survivor’s Loans to Trust  14.102
    • S.  Form: Completed Allocation Spreadsheets Showing Shares and Subtrusts Receiving Assets, With Formulas  14.103
    • T.  Form: Table Showing Allocation to Various Subtrusts  14.104
    • U.  Form: Decedent and Surviving Spouse’s Target Calculation Worksheet  14.104A
    • V.  Form: Subtrust Allocation Worksheet for Pecuniary Marital/Residuary Credit Formula With Date-of-Distribution Funding  14.104B
    • W.  Form: Subtrust Allocation Worksheet for Pecuniary Credit/Residuary Marital Formula With Date-of-Distribution Funding  14.104C
    • X.  Form: Subtrust Allocation Worksheet for Fractional Share Formula  14.104D
    • Y.  Form: Completed Decedent and Surviving Spouse’s Target Calculation Worksheet  14.104E
    • Z.  Form: Completed Subtrust Allocation Worksheet for Pecuniary Marital/Residuary Credit Formula  14.104F
    • AA.  Form: Completed Subtrust Allocation Worksheet for Pecuniary Credit/Residuary Marital Formula  14.104G
    • AB.  Form: Completed Subtrust Allocation Worksheet for Fractional Share Formula  14.104H
  • IX.  CERTIFICATIONS OF TRUST
    • A.  Form: Certification of Trust for Family Trust  14.105
    • B.  Form: Certification of Trust for Credit Trust  14.106
    • C.  Form: Certification of Trust for Survivor’s Trust  14.107
  • X.  FORM: AFFIDAVIT OF DEATH OF TRUSTEE  14.108
  • XI.  FORM: GRANT DEED FOR TRANSFERRING ASSETS OUT OF FAMILY TRUST  14.109
  • XII.  COMPREHENSIVE PROCEDURAL CHECKLIST: TWO-PERSON TRUST—FIRST DEATH  14.110

14A

Further Steps After the Death of the First Spouse

David B. Gaw

James P. Lamping

  • I.  AFTER INITIAL TRUST ADMINISTRATION  14A.1
  • II.  DURING THE LIFETIME OF THE SURVIVING SPOUSE
    • A.  Unitrust Conversion of Marital Trust  14A.2
      • 1.  Unitrust Conversion Procedure  14A.3
      • 2.  Form: Notice of Proposed Action (Prob C §§16500–16504)  14A.4
      • 3.  Form: Sample Prob C §17200 Petition  14A.5
      • 4.  Form: Memorandum in Support of Prob C §17200 Petition  14A.5A
    • B.  Lifetime Gift of Marital Trust  14A.6
      • 1.  Calculation of Gift Tax on Marital Trust  14A.7
      • 2.  Partial Gift of Marital Trust  14A.8
    • C.  Creating Qualified Personal Residence Trust (QPRT) for Survivor’s Trust Property  14A.9
      • 1.  Purpose of QPRT  14A.9A
      • 2.  When QPRT Should Not Be Used  14A.9B
  • III.  ON THE DEATH OF THE SURVIVING SPOUSE
    • A.  Division of Survivor’s Trust Into Exempt and Nonexempt Trusts  14A.10
    • B.  Combining and Dividing Exempt and Nonexempt Trusts  14A.11
    • C.  Using Insurance Trusts to Purchase Trusts Assets  14A.12
    • D.  Special Use Valuation Election on Second Death  14A.13
    • E.  Duty of Consistency on Second Death  14A.14
      • 1.  Avoiding Inclusion of Marital Trust Property  14A.15
      • 2.  Estate Tax Valuation as Basis  14A.16
    • F.  Administering Trusts After Second Death  14A.16A
    • G.  Credit Trust With Basis Harvesting Provision  14A.16B
    • H.  Modification or Termination of Trusts  14A.16C
  • IV.  FUNDING STALE TRUSTS  14A.17
    • A.  Overview of Stale Trust Funding  14A.17A
    • B.  Estate Tax Issues  14A.18
      • 1.  Inclusion of Credit Trust Property in Survivor’s Estate  14A.19
      • 2.  Lost Opportunity to Remove Additional Trust Property From Survivor’s Estate  14A.20
        • a.  Depletion of Credit Trust  14A.21
        • b.  Unnecessary Allocation of Appreciated Assets to Marital Trust  14A.22
      • 3.  Consequences of Delayed Funding  14A.22A
    • C.  Income Tax Issues  14A.23
    • D.  Liability Concerns  14A.24
    • E.  Example of Stale Trust Funding  14A.25
    • F.  Impact of Formulas on Funding Trusts  14A.26
      • 1.  Effect of “Bad Formula”  14A.27
        • a.  Three-Trust Division  14A.27A
        • b.  Two-Trust Division  14A.27B
      • 2.  Allocating Depreciation  14A.28
      • 3.  Tracing Appreciation  14A.29

15

Court Proceedings

Ruth A. Phelps

  • I.  WHEN PROCEEDINGS MAY BE INITIATED  15.1
  • II.  JURISDICTION AND VENUE
    • A.  Trusts Under Continuing Court Jurisdiction
      • 1.  Supervised Versus Unsupervised Trusts  15.2
      • 2.  Certain Trusts Funded by Court Order  15.2A
      • 3.  Removal From Continuing Court Jurisdiction  15.3
        • a.  Mandatory Removal for Trust With Corporate Trustee  15.3A
        • b.  Discretionary Removal for Trust With Individual Trustee  15.3B
      • 4.  Consequences of Removal  15.4
    • B.  Subject Matter Jurisdiction
      • 1.  Reach of Court’s Power  15.5
      • 2.  Exclusive Jurisdiction Over Trust’s Internal Affairs  15.6
      • 3.  Diversity Jurisdiction  15.6A
      • 4.  Concurrent Jurisdiction  15.7
      • 5.  When Case May Be Brought as Civil Action or Action Under Trust Law
        • a.  Beneficiary’s Litigation Strategy  15.8
        • b.  Right to Jury Trial  15.9
    • C.  Venue
      • 1.  Proper Venue  15.10
      • 2.  Change of Venue  15.11
    • D.  Principal Place of Administration  15.12
  • III.  PARTIES IN LITIGATION
    • A.  Who Can Sue or Be Sued  15.13
      • 1.  When Trustee Is Proper Party  15.13A
      • 2.  When Beneficiary May Have Standing  15.13B
    • B.  Indispensable Parties  15.14
      • 1.  When Beneficiary Is Indispensable Party  15.14A
      • 2.  When Beneficiary Is Not Indispensable Party  15.14B
    • C.  Beneficiaries Under Disability; Unascertained Beneficiaries  15.15
    • D.  Guardians ad Litem  15.16
      • 1.  Who Can Be Appointed   15.17
      • 2.  Appointment Procedure  15.18
      • 3.  Form: Petition for Appointment of Guardian ad Litem—Probate (Judicial Council Form DE-350)  15.19
      • 4.  Form: Order Appointing Guardian ad Litem—Probate (Judicial Council Form DE-351)  15.19A
      • 5.  Termination of Appointment  15.20
      • 6.  Compensation of Guardian ad Litem  15.21
  • IV.  TRUST BENEFICIARIES AND NOTICE PROVISIONS
    • A.  Chart: Trust Beneficiaries  15.21A
    • B.  Chart: Notice Provisions  15.21B
  • V.  PETITIONS UNDER PROB C §17200 OR §850  15.22
    • A.  Standing to File Petition  15.23
    • B.  Grounds for Prob C §17200 Petition  15.23A
      • 1.  Determining Validity of Entire Trust  15.24
        • a.  Elements of Valid Trust  15.24A
        • b.  Rescission of Trust  15.24B
      • 2.  Determining Validity of a Trust Provision  15.25
      • 3.  Instructing the Trustee  15.26
      • 4.  Determining Questions of Construction of Trust Instrument  15.27
      • 5.  Passing on the Exercise of Discretionary Powers  15.28
      • 6.  Compelling an Account  15.29
      • 7.  Objecting to an Account  15.30
      • 8.  Redressing Breach of Fiduciary Duty
        • a.  Grounds for Claim of Breach of Trust  15.31
        • b.  Standard of Care  15.32
        • c.  Elements of Cause of Action Against Trustee  15.33
        • d.  Trustee’s Affirmative Defenses  15.34
          • (1)  Consent or Affirmation by Beneficiaries  15.35
          • (2)  Statute of Limitations  15.36
          • (3)  Res Judicata  15.37
          • (4)  Laches  15.38
        • e.  Aiding or Abetting Breach of Trust  15.39
    • C.  Grounds for Prob C §850(a)(3) Petition  15.39A
    • D.  Petition Procedure
      • 1.  Procedure for Prob C §17200 Petition  15.40
      • 2.  Procedure for Prob C §850(a)(3) Petition  15.40A
    • E.  Form: Sample Petition for Order Confirming Trust Assets (Heggstad Petition)  15.40B
    • F.  Notice Requirements
      • 1.  Notice Requirements for Prob C §17200 Petition  15.40C
      • 2.  Chart: Notice Provisions for Prob C §17200 Petition  15.40D
      • 3.  Notice Requirements for Prob C §850(a)(3) Petition  15.40E
      • 4.  Chart: Notice Provisions for Prob C §850(a)(3) Petition  15.40F
    • G.  When Court Must Deny, Abate, or Dismiss Prob C §850(a)(3) Petition  15.41
    • H.  Discovery Rules  15.42
    • I.  Exculpatory Clauses for Benefit of Trustee  15.43
    • J.  Remedies Available  15.44
      • 1.  Suspension of Trustee Powers  15.44A
      • 2.  Remedies for Breach of Trust  15.44B
    • K.  Measure of Trustee Liability for Breach of Trust  15.45
    • L.  Costs and Fees  15.46
    • M.  When Order May Be Appealed  15.47
    • N.  Form: Sample Order Confirming Trust Assets (Heggstad Petition)  15.47A
  • VI.  LITIGATION INVOLVING TRUSTEE AND THIRD PARTIES
    • A.  Pursuit of Claims
      • 1.  Duty to Pursue Claims  15.48
      • 2.  Limitations on Duty to Pursue Claims  15.49
    • B.  Tort Litigation  15.50
    • C.  Contract Actions  15.51

16

Modification, Revocation, and Termination of Trust

Sandra Price

May Lee Tong

  • I.  MODIFICATION OF TRUST
    • A.  How and Why Trusts Are Modified
      • 1.  Reasons for Modification  16.1
        • a.  Tax-Motivated Changes  16.1A
        • b.  Modification of Bond Requirements  16.1B
      • 2.  How Modification Procedures Differ for Revocable and Irrevocable Trusts  16.2
      • 3.  Cautionary Notes Regarding Modification of Irrevocable Trusts  16.3
        • a.  Will Modification Trigger No-Contest Clause  16.3A
        • b.  Will Change Be Given Effect by IRS  16.3B
      • 4.  Alternatives to Modification  16.4
    • B.  Modification of Revocable Trusts
      • 1.  Settlor’s Power to Modify Trust  16.5
      • 2.  Modification Procedure  16.6
        • a.  Compliance With Trust Instrument  16.6A
        • b.  Trustee Duty to Suggest Modifications  16.6B
      • 3.  Form: Modification of Trust  16.7
      • 4.  Restatement Versus Modification  16.7A
      • 5.  Form: Restatement of Trust in Entirety  16.8
      • 6.  Written Directions to Trustee  16.9
    • C.  Modification of Irrevocable Trusts
      • 1.  When Trust May Be Modified  16.10
      • 2.  Consent of All Beneficiaries
        • a.  When Beneficiaries May Compel Modification  16.11
        • b.  Obtaining Consent of Beneficiaries Who Lack Capacity or Are Unborn or Unascertained  16.12
        • c.  Form: Ex Parte Petition for Order Modifying Trust Terms  16.13
        • d.  Form: Order Approving Modification of Trust Terms  16.14
      • 3.  Consent of All Beneficiaries and Settlor  16.15
      • 4.  Consent of at Least One Beneficiary and Settlor  16.16
      • 5.  Existence of Uneconomically Low Principal  16.17
      • 6.  Changed Circumstances  16.18
        • a.  Cy Pres Doctrine  16.18A
        • b.  Petition for Modification  16.18B
    • D.  Modification to Conform to Tax Laws
      • 1.  Charitable Remainder Trust  16.19
      • 2.  Marital Deduction Trust  16.20
    • E.  Need for Trust Reformation When Surviving Spouse Is Not U.S. Citizen  16.20A
      • 1.  Reformation of Trust to Qualify as QDOT  16.20B
      • 2.  Form: Petition to Reform Trust to Qualify as QDOT  16.20C
      • 3.  Form: Judgment Reforming Trust to Qualify as QDOT  16.20D
    • F.  Combining or Dividing Trusts  16.21
  • II.  REVOCATION OF TRUST
    • A.  Presumption of Revocability in California  16.22
    • B.  Revocation Procedure
      • 1.  When Exclusive Revocation Method Provided in Trust Instrument  16.23
      • 2.  When Trust Instrument Is Silent  16.24
        • a.  Trusts Executed on or After July 1, 1987  16.25
        • b.  Trusts Executed Before July 1, 1987  16.26
        • c.  Revocation of Married Settlor Trust  16.26A
      • 3.  Documenting Revocation of Trust  16.27
    • C.  Special Revocation Situations
      • 1.  Revocation by Conservator of Estate  16.28
        • a.  Special Revocation Procedure  16.28A
        • b.  Exceptions to Revocation by Conservator  16.28B
      • 2.  Revocation by Agent Acting Under Power of Attorney  16.29
      • 3.  Beneficiary’s Right to Withdraw Principal Under “Five or Five” Power
        • a.  Notice of Withdrawal Right  16.30
        • b.  Form: Letter to Beneficiary Regarding Exercise of Withdrawal Right  16.31
        • c.  Timing of Withdrawal Right
          • (1)  Determining Year of Exercise  16.32
          • (2)  Valuation Date  16.33
          • (3)  Determining Amount Subject to Election  16.34
          • (4)  Method of Payment  16.35
  • III.  TERMINATION OF TRUST
    • A.  Termination on Occurrence of Specific Event  16.36
    • B.  Termination Because Trust Uneconomical to Administer
      • 1.  Based on Provision in Trust Instrument  16.37
      • 2.  Based on Statutory Provision  16.38
      • 3.  Distribution of Assets on Termination  16.39
      • 4.  Form: Petition to Terminate Trust Uneconomical to Administer Under Prob C §15408  16.40
      • 5.  Form: Consent to Terminate (and Waiver of Accounting) by Beneficiary  16.41
      • 6.  Form: Order Terminating Trust Under Prob C §15408  16.42
    • C.  Impossible or Illegal Purpose  16.43
    • D.  Consent of All Beneficiaries  16.44
    • E.  Consent of Settlor and All Beneficiaries  16.45
    • F.  Consent of Settlor and at Least One Beneficiary  16.46
    • G.  Changed Circumstances  16.47
    • H.  Settlor as Sole Beneficiary  16.48
  • IV.  DUTIES OF TRUSTEE ON TERMINATION
    • A.  Fiduciary Responsibilities  16.49
    • B.  Administrative Duties
      • 1.  Identifying and Locating Beneficiaries  16.50
      • 2.  Distributions to Minors or Incompetent Adults  16.51
      • 3.  Determining Beneficiaries’ Interests  16.52
      • 4.  Notification of Beneficiaries  16.53
      • 5.  Form: Sample Letter to Beneficiary  16.54
      • 6.  Methods of Distribution  16.55
      • 7.  Form: Receipt on Distribution  16.56
      • 8.  Final Steps on Termination  16.57
      • 9.  Form: Declaration of Final Discharge; Order  16.58

17

Long-Term Trust Administration

James P. Lamping

  • I.  CONTINUING TRUST ADMINISTRATION  17.1
    • A.  Team Approach  17.2
    • B.  Checklist Approach  17.3
  • II.  ACTIONS PRIOR TO INITIAL MEETING  17.4
    • A.  Begin Information Gathering Process  17.5
    • B.  Identify the Client  17.6
    • C.  Check Potential Conflicts  17.7
    • D.  Prepare Trust Summary  17.8
    • E.  Review Asset Information and Financial Records  17.9
    • F.  Prepare Documents to Be Signed at Initial Meeting  17.10
    • G.  Prepare Calendar of Deadlines (To Be Updated Continually)  17.11
  • III.  INITIAL MEETING WITH TRUSTEE  17.12
    • A.  Identify Client and Scope of Representation  17.13
      • 1.  Articulate Identity and Capacity of Client  17.14
      • 2.  Discuss the Role of Beneficiaries in the Representation  17.15
    • B.  Identify Issues Requiring Immediate Attention  17.16
      • 1.  Actual or Threatened Litigation  17.17
      • 2.  Tax Issues  17.18
      • 3.  Problems With the Trust Instrument  17.19
      • 4.  Beneficiaries Who Need Immediate Distributions  17.20
      • 5.  Liquidity Analysis and Budgeting  17.21
    • C.  Review Trust Instrument in Detail  17.22
    • D.  Discuss Standards for Distributions  17.23
      • 1.  Mandatory Income Interest  17.24
      • 2.  Discretionary Distribution Provisions  17.25
        • a.  Ascertainable Standard  17.26
        • b.  Nonascertainable Standard  17.27
        • c.  Special Types of Discretionary Trusts  17.28
        • d.  Consideration of Beneficiary’s Other Resources  17.29
    • E.  Discuss Trustee’s Duties Under the Instrument and Relevant Law  17.30
      • 1.  Exercise of Discretionary Powers  17.31
      • 2.  Duty to Maintain Records  17.32
      • 3.  Uniform Principal and Income Act  17.33
      • 4.  Uniform Prudent Investor Act  17.34
        • a.  Standard of Care  17.35
        • b.  Review Trust Assets  17.36
        • c.  Document Investment Decisions  17.37
        • d.  Delegation of Investment Decisions  17.38
        • e.  Developing an Investment Strategy  17.39
        • f.  Duty to Diversify  17.40
        • g.  Social Responsibility  17.41
      • 5.  Accounting Requirements  17.42
      • 6.  Obtain Appropriate Insurance  17.43
      • 7.  Review for Foreign Trust Status  17.43A
    • F.  Identify Additional Documents Required and Schedule Follow-Up Meeting  17.44
  • IV.  ACTIONS FOLLOWING INITIAL MEETING
    • A.  Prepare Minutes of Initial Consultation  17.45
    • B.  Prepare Trust Administration Memorandum  17.46
    • C.  Review Actions of Former Counsel  17.47
      • 1.  Notices to Interested Parties and Governmental Entities  17.48
      • 2.  Severance of Trusts with Mixed Inclusion Ratios  17.49
      • 3.  Appropriate Allocation and Actual Funding of Subtrusts  17.50
      • 4.  Improper Principal and Income Allocations  17.51
      • 5.  Completion of Required Accountings  17.52
      • 6.  Filing of Required Tax Returns  17.53
      • 7.  Overdue Mandatory Income Distributions  17.54
    • D.  Update Spreadsheet of Trust Assets and Liabilities  17.55
    • E.  Communicate and Meet With Advisors  17.56
    • F.  Prepare Written Investment Plan  17.57
    • G.  Identify Issues for Which Court Confirmation or a Notice of Proposed Action Would Be Appropriate  17.58
    • H.  Identify Additional Actions Required to Complete Implementation Phase of Administration  17.59
    • I.  Prepare Team Management Chart  17.60
    • J.  Meet Again With Trustee and Advisors as Needed to Complete Implementation Phase of Administration  17.61
  • V.  TRUST MAINTENANCE
    • A.  Schedule Regular Meetings to Review Administration  17.62
    • B.  Review Investments and Prepare Documentation  17.63
    • C.  Prepare Account and Report  17.64
    • D.  Consider Modification or Termination of Trust  17.65
  • VI.  FORMS
    • A.  Form: Trust Administration Checklist  17.66
    • B.  Form: Beneficiary Financial Questionnaire  17.67
    • C.  Form: Table of Trustee Duties  17.68
    • D.  Form: Team Management Chart  17.69

 

CALIFORNIA TRUST ADMINISTRATION

(2d Edition)

March 2018

TABLE OF CONTENTS

 

File Name

Book Section

Title

CH02

Chapter 2

Overview of Trustee’s Duties, Standards, and Powers

02-055F

§2.55F

Contract Clause Disclosing Fiduciary Status

02-055G

§2.55G

Trustee Signature Line for Contracts

02-062

§2.62

Petition for Additional Trustee Powers

02-063

§2.63

Order Granting Petition for Additional Trustee Powers

02-065

§2.65

Certification of Trust

CH04

Chapter 4

Rejection of Trust; Resignation and Removal of Trustee

04-004

§4.4

Letter Declining to Serve as Trustee

04-005

§4.5

Formal Declination to Serve as Trustee of Testamentary Trust

04-014

§4.14

Petition for Order Accepting Resignation of Trustee and for Appointment of Successor Trustee or Temporary Trustee for Unsupervised Trust

04-015

§4.15

Nomination of Successor Trustee

04-016

§4.16

Consent to Act as Successor Trustee

04-016A

§4.16A

Consent to Act as Temporary Trustee

04-017

§4.17

Order Accepting Resignation of Trustee and for Appointment of Successor Trustee or Temporary Trustee for Unsupervised Trust

04-017A

§4.17A

Petition for Order Accepting Resignation of Trustee and for Appointment of Successor Trustee or Temporary Trustee for Court-Supervised Trust

04-017B

§4.17B

Order Accepting Resignation of Trustee and for Appointment of Successor Trustee or Temporary Trustee for Court-Supervised Trust

04-018

§4.18

Letter of Resignation to Beneficiaries

04-034

§4.34

Petition of Beneficiary to Remove Trustee

04-037

§4.37

Order Removing Trustee

04-059

§4.59

Affidavit of Change of Trustee

CH07

Chapter 7

Recordkeeping and Accounting

07-006

§7.6

Agreement Between Cotrustees on Recordkeeping and Accounting Responsibilities

07-014

§7.14

Letter Advising Trustee What Records to Keep

07-021

§7.21

Letter to Beneficiary Requesting Information

07-023

§7.23

Trust Provisions for Notice to Trustee of Births, Deaths, and Other Events Affecting Interests

07-034

§7.34

Record of Trustee’s Discretionary Actions

07-036

§7.36

Notice of Proposed Action: Adjustment Between Principal and Income

07-036A

§7.36A

Letter to Trustee Objecting to Investment Strategy

07-054D

§7.54D

Notice of Accounting for Trustee Actions in Nonfiduciary Capacity

07-059

§7.59

Waiver of Account

07-061

§7.61

Letter to Beneficiary About Account

07-065G

§7.65G

Beneficiary Release of Trustee

07-069

§7.69

Waiver of Court Account

07-114

§7.114

Petition for Settlement of Account and Approval of Compensation and Fees

07-116

§7.116

Verification of Petition

07-120A

§7.120A

Waiver of Notice of Hearing and Consent to Petition

07-123

§7.123

Order Settling Account

07-126

§7.126

Using the Accounting Spreadsheets

CH09

Chapter 9

Trustee Compensation, Attorney Fees, and Other Administrative Costs

09-057

§9.57

Petition to Approve Trustee Compensation and Attorney Fees

09-058

§9.58

Additional Petition Clauses for Cotrustees

09-059

§9.59

Order Approving Trustee Compensation and Attorney Fees

09-060

§9.60

Additional Order Clauses for Cotrustees

CH10

Chapter 10

Creditors’ Rights Against the Trust

10-031

§10.31

Notice to Creditors

10-054

§10.54

Petition for Approval and Settlement of Claims

10-056

§10.56

Order for Approval and Settlement of Claims

10-061

§10.61

Notice of Pendency of Action

10-062

§10.62

Complaint Against Trustee

CH10A

Chapter 10A

Beneficiary’s Creditor’s Rights Against the Trust

10A-009

§10A.9

Request for Transfer to Creditor

10A-010

§10A.10

Assignment by Beneficiary

10A-011

§10A.11

Notice to Trustee of Assignment

10A-021

§10A.21

Petition to Enforce Money Judgment

10A-022

§10A.22

Order Enforcing Judgment

CH11

Chapter 11

Income Taxation of Trusts

11-077

§11.77

Portion of Trust Income Taxed to Grantor

CH12

Chapter 12

Estate Tax Returns

12-079

§12.79

Checklist: Estate Tax Considerations In Trust Administration

12-080

§12.80

Procedural Guide: Filing Estate Tax Forms

CH13

Chapter 13

Administering Single-Person Trust After Settlor’s Death

13-002

§13.2

Comprehensive Procedural Checklist

13-056

§13.56

Hybrid Fee Agreement Provision

13-062A

§13.62A

Certification of Trust

13-062B

§13.62B

Affidavit of Death of Trustee

13-082

§13.82

Client Information Tracking Sheet

13-083

§13.83

Letter Confirming Appointment

13-084

§13.84

Information and Documents Needed

13-085

§13.85

Client Conflict Information Request

13-086

§13.86

Trust Summary: One-Person Trust

13-086A

§13.86A

Petition for Determination of Proration of Estate Tax

13-087

§13.87

Authorization to Disclose Information

13-088

§13.88

Beneficiary and Heir List

13-089

§13.89

Asset Collection

13-090

§13.90

Trust Liabilities

13-091

§13.91

Instructions Regarding Medical, Funeral, Administration, and Personal Expenses

13-092

§13.92

Last Illness, Funeral, and Administration Expenses

13-093

§13.93

Trustee Time Report

13-094

§13.94

Environmental Questionnaire

13-095

§13.95

Sample Letter to Clients and Notification by Trustee

13-096

§13.96

Real Property

13-097

§13.97

Traded Securities

13-098

§13.98

Mutual Funds

13-099

§13.99

U.S. Bonds

13-100

§13.100

Other Securities

13-101

§13.101

Bank, Savings and Loan, and Credit Union Accounts

13-102

§13.102

Life Insurance

13-103

§13.103

Annuities, IRAs, and Retirement Benefits

13-104

§13.104

Promissory Notes, Mortgages, and Deeds of Trust

13-105

§13.105

Election to Have CPA Prepare Income Tax Returns

13-106

§13.106

Sample Trustee’s Letter to CPA

13-107

§13.107

Letter of Instructions for Completing Asset Collection Sheet

13-108

§13.108

Attorney’s Letter to Appraiser

13-108A

§13.108A

Attorney’s Letter Requesting Copy of Gift Tax Return

13-109

§13.109

Trust Administration Memorandum

13-110

§13.110

Liquidity/Cash Needs Analysis

13-111

§13.111

Trustee’s Letter to IRS

13-112

§13.112

Distribution Table

13-112A

§13.112A

Grant Deed for Transferring Single-Settlor Trust Property to Child

13-113

§13.113

Closing Letter to CPA

13-114

§13.114

Sample Termination of Engagement Letter

13-115

§13.115

Client Survey

CH13A

Chapter 13A

Administering Moderate Married Settlor Trust on the Death of the First Spouse

13A-080

§13A.80

Steps For Implementing Subtrust Allocation And Completion Of Administration

13A-082

§13A.82

Sample Trust Asset Allocation Agreement

13A-083

§13A.83

Table Showing Allocation to Various Subtrusts

13A-084

§13A.84

Trust Administration Memorandum

13A-085

§13A.85

Letter to CPA Confirming Responsibilities

13A-086

§13A.86

Client Letter Concerning Portability Election (Used in Situations With Credit/Survivor’s Trust Allocation)

13A-087

§13A.87

Client Letter Concerning Portability Election (Used With No Credit/Survivor’s Trust Allocation)

13A-088

§13A.88

Client Letter (When Portability Election Made)

13A-089

§13A.89

Client Letter (When Portability Election Not Made and No Credit Trust Created)

13A-090

§13A.90

Client Letter (When Client Does Not Desire to Make Portability Election But Credit Trust Has Been Created)

CH14

Chapter 14

Subtrust Allocation and Funding on the Death of the First Spouse

14-013A

§14.13A

Sample Letter to IRS Regarding Extension of Time to File

14-013B

§14.13B

Sample Letter to Insurance Company

14-013C

§14.13C

Sample Letter to Beneficiary

14-013D

§14.13D

Sample Letter to CPA Requesting Information

14-015A

§14.15A

Trust Summary: Two-Person Trust at First Death

14-015B

§14.15B

Trust Administration Memorandum

14-016

§14.16

Checklist: Creating and Using Spreadsheet

14-025A

§14.25A

Where to Put Receipts and From Where to Pay Expenses

14-083

§14.83

Checklist For Implementing Subtrust Allocation And Completion Of Administration

14-084

§14.84

Form: Sample Trust Asset Allocation Agreement And Accompanying Schedules

14-085

§14.85

Spreadsheet Listing Trust and Nontrust Assets With Separate Columns Based on Character of Assets

14-086

§14.86

Spreadsheet Listing Trust and Nontrust Assets With Separate Columns for Title and Date-of-Death Values

14-087

§14.87

Augmented Spreadsheet Showing Debts for Each Asset

14-088

§14.88

Augmented Spreadsheet Showing Net Value

14-089

§14.89

Augmented Spreadsheet Showing Allocation Dates

14-090

§14.90

Augmented Spreadsheet Showing Allocation Values

14-091

§14.91

Augmented Spreadsheet Showing Net Change From Date of Death to Date of Allocation

14-092

§14.92

Augmented Spreadsheet Showing Value of Assets Passing Outside Trust

14-093

§14.93

Alternative Spreadsheet Showing Shares and Subtrusts Receiving Assets in Survivor’s Trust/Disclaimer Trust Plan

14-094

§14.94

Alternative Spreadsheet for Survivor’s Trust/Credit Trust Plan (Without Marital Share)

14-095

§14.95

Alternative Spreadsheet for Survivor’s Trust/Credit Trust Plan (With Marital Share)

14-096

§14.96

Alternative Spreadsheet for Credit Trust/Marital Trust

(Without GST Division) Plan

14-097

§14.97

Alternative Spreadsheet for Credit Trust/Marital Trust (With GST Division) Plan

14-098

§14.98

Alternative Spreadsheet for Credit Trust (With GST Division)/Marital Trust Plan

14-099

§14.99

Alternative Spreadsheet Showing Shares and Subtrusts Receiving Assets in Unusual Situations

14-100

§14.100

Completed Allocation Spreadsheet Showing Shares and Subtrusts Receiving Assets, With Comments

14-103

§14.103

Completed Allocation Spreadsheets Showing Shares and Subtrusts Receiving Assets, With Formulas

14-104

§14.104

Table Showing Allocation to Various Subtrusts

14-104A

§14.104A

Decedent and Surviving Spouse’s Target Calculation Worksheet

 

§14.104B

Subtrust Allocation Worksheet for Pecuniary Marital/Residuary Credit Formula with Date-of-Distribution Funding

 

§14.104C

Subtrust Allocation Worksheet for Pecuniary Credit/Residuary Marital Formula with Date-of-Distribution Funding

 

§14.104D

Subtrust Allocation Worksheet for Fractional Share Formula

14-104E

§14.104E

Completed Decedent and Surviving Spouse’s Target Calculation Worksheet

 

§14.104F

Completed Subtrust Allocation Worksheet for Pecuniary Marital/Residuary Credit Formula

 

§14.104G

Completed Subtrust Allocation Worksheet for Pecuniary Credit/Residuary Marital Formula

 

§14.104H

Completed Subtrust Allocation Worksheet for Fractional Share Formula

14-105

§14.105

Certification of Trust for Family Trust

14-106

§14.106

Certification of Trust for Credit Trust

14-107

§14.107

Certification of Trust for Survivor’s Trust

14-108

§14.108

Form: Affidavit Of Death Of Trustee

14-109

§14.109

Form: Grant Deed For Transferring Assets Out Of Family Trust

14-110

§14.110

Comprehensive Procedural Checklist: Two-Person Trust—First Death

CH14A

Chapter 14A

Further Steps After the Death of the First Spouse

14A-004

§14A.4

Notice of Proposed Action (Prob C §§16500–16504)

14A-005

§14A.5

Sample Prob C §17200 Petition

14A-005A

§14A.5A

Memorandum in Support of Prob C §17200 Petition

CH15

Chapter 15

Court Proceedings

15-040B

§15.40B

Sample Petition for Order Confirming Trust Assets (Heggstad Petition)

15-047A

§15.47A

Sample Order Confirming Trust Assets (Heggstad Petition)

CH16

Chapter 16

Modification, Revocation, and Termination of Trust

16-007

§16.7

Modification of Trust

16-008

§16.8

Restatement of Trust in Entirety

16-013

§16.13

Ex Parte Petition for Order Modifying Trust Terms

16-014

§16.14

Order Approving Modification of Trust Terms

16-020C

§16.20C

Petition to Reform Trust to Qualify as QDOT

16-020D

§16.20D

Judgment Reforming Trust to Qualify as QDOT

16-031

§16.31

Letter to Beneficiary Regarding Exercise of Withdrawal Right

16-040

§16.40

Petition to Terminate Trust Uneconomical to Administer Under Prob C §15408

16-041

§16.41

Consent to Terminate (and Waiver of Accounting) by Beneficiary

16-042

§16.42

Order Terminating Trust Under Prob C §15408

16-054

§16.54

Sample Letter to Beneficiary

16-056

§16.56

Receipt on Distribution

16-058

§16.58

Declaration of Final Discharge; Order

CH17

Chapter 17

Long-Term Trust Administration

17-066

§17.66

Trust Administration Checklist

17-067

§17.67

Beneficiary Financial Questionnaire

17-068

§17.68

Table of Trustee Duties

17-069

§17.69

Team Management Chart

 

Selected Developments

March 2018 Update

Tax law provisions establish a consistent set of rules for revocable trusts that become irrevocable on a settlor’s death. For these trusts, there may be an estate tax liability for single-settlor trusts, as discussed in chapter 13, and property may be allocated to a marital deduction qualifying trust, as discussed in chapter 14. The hypotheticals in those chapters, and in chapter 13A and chapter 14A, reflect an assumed administration in 2018 based on a date of death in 2017.

Those chapters reflect the inflation adjustment of the applicable exclusion amount from $5 million to $5,490,000 for decedents dying in 2017. The inflation-adjusted applicable exclusion amount is $5,600,000 in 2018. The applicable exclusion amount is doubled ($11,200,000 in 2018) for gifts made and decedents dying in 2018–2025. Depending on the trust design, postmortem planning may involve intentional inclusion of the decedent’s trust assets in the survivor’s estate. See §13A.79A.

Chapter 2 has a revised discussion of a beneficiary’s standing to sue the trustee of a revocable trust during the settlor’s lifetime reflecting recent case law. See §§2.4D, 7.54E, 15.13B, 15.38.

Chapter 3 has a revised discussion of trust powers held in a fiduciary or beneficial capacity. See §3.12.

Chapter 4 has a new form of consent to appointment as temporary trustee and revised forms of petition and court order accepting resignation of trustee, and related discussion reflecting the alternative appointment of a temporary trustee or receiver on resignation of trustee. See §§4.14–4.17B. The update also has a revised discussion of the trustee attorney-client privilege as against the successor trustee reflecting recent case law. See §4.35.

Chapter 6 has a revised discussion of environmental expenses. See §6.50D.

Chapter 7 has a revised discussion of allocation of money received from entities between income and principal reflecting recent legislation. See §§7.42A, 8.16A.

Chapter 9 has a revised discussion of attorney fees and costs in litigation brought by beneficiaries against the trustee. See §§9.49–9.53.

Chapter 10A has a revised discussion of judgments against beneficiaries for restitution and child or spousal support and the rights of general creditors against trusts for education and support reflecting recent case law. See §§10A.24–10A.28.

Chapter 12 has a revised discussion of the portability election reflecting recent case law. See §12.2C. The update also has a revised discussion of the late-payment penalty. See §12.13A. The increased applicable exclusion amount for 2018 is reflected in §12.57. The equivalent GST exemption for 2018 is reflected in §12.74C.

Chapter 15 has a revised discussion of actions for breach of fiduciary duty reflecting the decision in Williamson v Brooks (2017) 7 CA5th 1294. See §15.33.

Chapter 16 has a revised discussion of no-contest clauses reflecting the decision in Urick v Urick (2017) 15 CA5th 1182. See §16.3A. The update also has a revised discussion of modification with consent of all beneficiaries reflecting recent legislation. See §§16.11–16.14.

Forms and discussion throughout the book are revised to reflect optional electronic delivery of notice with the consent of the recipient under Prob C §1215.

About the Second Edition Authors

KAREN E. ANDERSON, B.S., University of Minnesota; J.D., Loyola University, Los Angeles. Ms. Anderson is a private professional fiduciary. She is a coauthor of chapter 7 (Recordkeeping and Accounting).

MICHAEL ANTIN, B.S., 1960, University of California, Los Angeles; J.D., 1963, University of California, Berkeley, School of Law. Mr. Antin, of the Los Angeles bar, specializes in income taxation, employee benefits, deferred compensation, and life and disability insurance planning. He is a Certified Specialist in Taxation Law. He is a coauthor of chapter 8 (Principal and Income).

ALEXANDRA LABOUTIN BANNON, B.A. and M.A., San Francisco State University; J.D., University of California, Berkeley, School of Law. Ms. Bannon, a partner in the firm of Anglea & Bannon, Pasadena, specializes in tax and probate administration and litigation, and environmental tax. She is a Certified Specialist in Estate Planning, Trust and Probate Law. Ms. Bannon is the author of material used in chapter 6 (Managing Specific Trust Assets).

PAUL J. BARULICH, B.A., 1981, University of California, Berkeley; J.D., 1984, Golden Gate University School of Law. Mr. Barulich is the Managing Director of Barulich Dugoni Law Group in San Mateo and a Certified Specialist in Estate Planning, Trust, and Probate Law. He is the author of chapter 2 (Overview of Trustee’s Duties, Standards, and Powers).

JAMES P. BESSOLO, B.A., University of Southern California; J.D., Loyola University, Los Angeles. Mr. Bessolo is Vice President and Senior Trust Counsel of Northern Trust Bank and is a member of the Trusts and Estates, Real Property, and Taxation sections of the California Lawyers Association. He is the author of First Edition update material used in several chapters.

ELIZABETH ANNE BIRD, B.A., 1972, University of California, Berkeley; J.D., 1978, University of California, Hastings College of the Law. Ms. Bird, of the San Francisco bar, specializes in estate and trust planning, administration, and related taxation issues. She is a Certified Specialist in Estate Planning, Trust and Probate Law. Ms. Bird is a coauthor of chapter 4 (Rejection of Trust; Resignation and Removal of Trustee).

SANDRA J. CHAN, A.B., 1976, University of California, Los Angeles; J.D., 1979, University of California, Davis, School of Law. Ms. Chan, of the Santa Barbara bar, practices in the areas of estate planning, probate, and trust and decedent’s administration. She is a coauthor of chapter 4 (Rejection of Trust; Resignation and Removal of Trustee).

CHRISTINE L. CRAIG, B.A., 1987, University of California, Berkeley; J.D., 1991, and M.B.A., 1992, Santa Clara University. Ms. Craig is a former member of the firm of Gaw Van Male, Napa, and currently practices in Scotts Valley. She limits her practice to estate planning, trust administration, probate, and conservatorship. Ms. Craig is a coauthor of chapter 7 (Recordkeeping and Accounting).

DAVID B. GAW, A.B., 1967, University of Colorado; J.D., 1971, University of California, Hastings College of the Law. Mr. Gaw is a founding partner of the firm of Gaw Van Male, Napa. He is a Certified Specialist in Estate Planning, Trust and Probate Law and is certified as an elder law attorney by the National Elder Law Foundation. Mr. Gaw is the author of chapter 13 (Administering Single-Person Trust After Settlor’s Death) and chapter 14 (Subtrust Allocation and Funding on the Death of the First Spouse) and a coauthor of chapter 13A (Administering Moderate Married Settlor Trust on the Death of the First Spouse) and chapter 14A (Further Steps After the Death of the First Spouse).

DIBBY ALLAN GREEN, A.B., 1978, Westmont College; 1988–1989, Santa Barbara College of Law; Certificate in Negotiation, Mediation & Conflict Management, 2000, University of California, Santa Barbara Extension. Ms. Green is an Advanced Certified Paralegal in estate planning and probate with California Property Tax Planning & Paralegal Services, California City (formerly with the law firm of Ambrecht & Associates, Santa Barbara). Ms. Green is a coauthor of chapter 7 (Recordkeeping and Accounting).

MARGARET M. HAND, B.A., 1989, University of California, San Diego; J.D., 1993, University of California, Berkeley, School of Law. Ms. Hand, a partner in Hartog, Baer & Hand, Orinda, is a Certified Specialist in Estate Planning, Trust and Probate Law and a fellow of the American College of Trust and Estate Counsel. She specializes in probate and trust administration, as well as conservatorships and guardianships. In addition, she teaches fiduciary accounting for the CalCPA Education Foundation. Ms. Hand is the author of chapter 10A (Beneficiary’s Creditor’s Rights Against the Trust) and a coauthor of chapter 10 (Creditors’ Rights Against the Trust).

ANN C. HARRIS, B.A., 1972, University of California, San Diego; J.D., 1980, University of San Diego Law School; LL.M. (Taxation), 1981, Boston University. Ms. Harris is an adjunct Professor of Law at the University of San Diego and has taught Federal Income Taxation of Trusts and Estates and Federal Gift, Estate, and Generation-Skipping Transfer Taxation. She is a coauthor of chapter 12 (Estate Tax Returns).

JAMES P. LAMPING, B.A., 1996, University of Michigan; J.D., 1999, and LL.M. (Taxation), 2000, University of San Diego Law School. Mr. Lamping, a former associate with Gaw Van Male, Napa, currently practicing in San Francisco, focuses his practice on estate planning, trust administration, probate, and litigation. He is a member of the United States Tax Court Bar and a former member of the Executive Committee of the Trusts and Estates Section of the State Bar of California. He is the author of chapter 17 (Long-Term Trust Administration) and a coauthor of chapter 13A (Administering Moderate Married Settlor Trust on the Death of the First Spouse) and chapter 14A (Further Steps After the Death of the First Spouse).

MICHAEL PATIKY MILLER, A.B. cum laude, 1965, Rutgers University; J.D., 1968, New York University School of Law. Mr. Miller was a partner in Weinberg, Ziff & Miller, Palo Alto, specializing in taxation, estate planning, probate and trust administration, and probate litigation, and a Certified Specialist in Taxation Law. Mr. Miller died in 2007. He was the original author of chapter 10 (Creditors’ Rights Against the Trust).

RUTH A. PHELPS, B.A., 1972, Immaculate Heart College, Los Angeles; J.D., 1975, LL.M. (Taxation) 2004, Loyola Law School. Mrs. Phelps is a partner with the Phelps Law Group, Pasadena. She is a fellow of the National Academy of Elder Law Attorneys and a fellow of the American College of Trust and Estate Counsel. Mrs. Phelps is the author of chapter 15 (Court Proceedings).

SANDRA PRICE, B.A., 1972, New York University; J.D., 1978, University of San Francisco; M.S. in Taxation, 1990, Golden Gate University. Ms. Price is a partner in Sideman & Bancroft, LLP, San Francisco, where she focuses her practice primarily on estate and gift taxation, estate planning, and the related areas of probate and trust administration. She is a Certified Specialist in Estate Planning, Trust, and Probate Law and a Fellow of the American College of Trust and Estate Counsel. Ms. Price is a coauthor of chapter 12 (Estate Tax Returns) and chapter 16 (Modification, Revocation, and Termination of Trust).

BART J. SCHENONE, B.A., 1971, Stanford University; J.D., 1974, University of Michigan. Mr. Schenone formerly practiced with Schenone & Peck, Hayward, and currently practices with Temmerman, Cilley & Kohlmann, Danville, in the areas of estate planning, trust, and probate law, as well as in the related areas of real property and business law. He is a Certified Specialist in Estate Planning, Trust and Probate Law and a Fellow of the American College of Trust and Estate Counsel and former chair of the Executive Committee of the Trusts and Estates Section of the State Bar of California. Mr. Schenone is a coauthor of chapter 4 (Rejection of Trust; Resignation and Removal of Trustee) and the author of chapter 5 (Investments and Management of Trust Assets).

MARC M. STERN, B.A., 1981, Stanford University; J.D., 1986, University of Southern California. Mr. Stern is a partner at the firm of Greenberg Glusker Fields Claman & Machtinger LLP, Los Angeles, concentrating in trust and probate litigation and taxation. He is a coauthor of chapter 11 (Income Taxation of Trusts).

MICHAEL L. TAYLOR, B.A., 1971, University of Santa Clara; J.D., 1974, University of Santa Clara. Mr. Taylor was senior counsel at the firm of Foley & Lardner, Los Angeles, and was a Certified Employee Benefit Specialist. Mr. Taylor is a coauthor of chapter 8 (Principal and Income).

ROBERT S. TIPPETT, B.A., 1984, Yale University; J.D., 1987, University of Michigan. Mr. Tippett formerly practiced trust and estate law with the firm of Greenberg Glusker Fields Claman & Machtinger LLP, Los Angeles. He currently resides in Park City, Utah. Mr. Tippett is the author of chapter 9 (Trustee Compensation, Attorney Fees, and Other Administrative Costs) and a coauthor of chapter 11 (Income Taxation of Trusts).

MAY LEE TONG, B.A., 1970, Pomona College; J.D., 1983, Golden Gate University School of Law. Ms. Tong practices in Oakland, specializing in estate planning, trust, and probate administration. She is a Certified Specialist in Estate Planning, Trust and Probate Law and former chair of the Executive Committee of the Trusts and Estates Section of the State Bar of California. Ms. Tong is a coauthor of chapter 16 (Modification, Revocation, and Termination of Trust).

OnLAW System Requirements:
Desktop: Windows XP, 7 or 8, Mac OS 10.8
Mobile: iOS6, iOS7, Android 4.2
Firefox, Chrome, IE and Safari browsers

Note: OnLAW may work with some devices running older versions of these Operating Systems or Windows RT; however, functionality is not guaranteed.

Please see FAQs for more details.
Products specifications
PRODUCT GROUP Publication
PRACTICE AREA Estate Planning
Products specifications
PRODUCT GROUP Publication
PRACTICE AREA Estate Planning