Preparing Your Successor Trustee For Their Future Roles. Minoti H. Rajput, CFP ChSNC Mehul S. Mistry, CFP Sanford (Sandy) J. Mall, JD, CELA, CAP, VA

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1 Preparing Your Successor Trustee For Their Future Roles Minoti H. Rajput, CFP ChSNC Mehul S. Mistry, CFP Sanford (Sandy) J. Mall, JD, CELA, CAP, VA

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3 Scott Turner & Michelle Turner Jones Case Study 2016

4 The Turner Family Keith Turner (Deceased) Leslie Turner (Deceased) Brother Scott Turner (Age 42) Sister Michelle Turner Jones (Age 47) Robert Jones (husband) (Age 50) Jared (Age 21) Sean (Age 19)

5 Keith & Leslie Turner Keith Turner 74 Yrs. Keith passed away in February, 2013 following multiple strokes. Keith was a retired engineer for Ford Motor Company. Leslie Turner 76 Yrs. Leslie passed away in July, 2015 after a reoccurrence of breast cancer. She was a retired school teacher Primary caregiver for Scott until her illness. Basic Planning st Amendment nd Amendment

6 The Trustee & Her Brother Michelle Michelle is a Human Resources Director at an engineering company. Michelle is married to Robert (age 50). They live in Kentucky and have 2 children; Jared is 21 and Sean is 19. They both attend the University of Louisville. Robert is the principal of a high school. Scott Scott is Michelle s younger brother. He has Down Syndrome. He functions well in many areas but is limited in some important areas. Scott receives SSDI, Medicare and Medicaid. He works at McDonalds 3 hours a day 4 days a week and makes about $ 300 a month. Scott is a happy & pleasant individual and is healthy.

7 Turner Estate July 2015 House - $300,000 Cottage - $125,000 Automobile - $20,000 Cash/ Savings - $80,000 Brokerage Account - $ 120,000 IRA - $820,000 Life Insurance: Second to Die - $500,000 Leslies Personal - $100,000 Total = $2,045,000

8 Turner Estate Breakdown Leslie s Trust Home $300,000 Cottage $125,000 Automobile $20,000 Cash / Savings $80,000 Brokerage Account $120,000 IRA $820,000 Life Insurance Second To Die $500,000 Leslie s Personal Insurance $100,000 TOTAL $ 2,065,000

9 Legal Plan July 2015 Home Quit Claim Deed Leslie s Trust Cottage Quit Claim Deed Michelle IRA Second to Die Life Insurance Leslie s Life Insurance Michelle Scott s Discretionary Trust Leslie s Trust Leslie s Revocable Trust Scott s Discretionary Trust Brokerage Account Cash/ Savings At Leslie s Death Michelle Michelle or her Children

10 Additional Notes Other Estate Planning Documents o Pour-Over Wills o Durable Power of Attorney for Health Care o Durable Power of Attorney for Finance The Turner estate will be divided equally between Michelle and Scott s Trust. Since the IRA and cottage will be distributed to Michelle outside the trust, other assets will be distributed to Scott s trust to make it equal.

11 Calculation of Estate Division Total Estate $2,065,000 Less Misc. Estate & Last Expenses $150,000 $1,915,000 Inheritance to Michelle $957,500 Inheritance to Scott s Trust $957,500

12 Estate Division & Adjustment Michelle IRA $820,000 Cottage $125,000 From Other Assets $12,500 Total = $957,5000 Scotts Special Needs Trust Second to Die Life Insurance $500,000 From Other Assets $457,500 Total = $957,500

13 Additional Facts 1. Keith & Leslie wanted Scott to continue to live at home for as long as possible. 2. Michelle is settled in Kentucky and will continue to work and live there. She is the successor trustee of both her parents and Scott s trust. She had encouraged her parents to find long term housing for Scott for many years but her parents had always resisted the idea. 3. After Keith s strokes, Michelle took 3 weeks leave of absence from work to help Leslie find caregivers for Keith at home. It worked well until his last stroke 6 weeks before his death. Leslie was not in good health at the time. 4. Due to Michelle s efforts, Scott moved into an AFC housing arrangement on a private pay basis while Leslie received care at home. The arrangement was facilitated by a service agency that is able to provide additional supports to benefit Scott and assist Michelle in her efforts. The long term care policy paid for Leslie s expenses. Scott s moving into a home was very difficult for Leslie and Scott. 5. Michelle visited Leslie and Scott every weekend during the last 3 months of Leslie s illness and hospitalization.

14 Michelle s Role as a Successor Trustee A. Administrative Duties, Responsibilities and Settlement/Distribution of Assets from Leslie s Estate. *Professionals Involved: o Financial Advisors o Attorney o Accountant o Estate Sale Professional o Real Estate Agent

15 1. Collect Death Certificates

16 2. Notify Professionals involved; Financial Advisor, Attorney, and Accountant.

17 3. Obtain authority to serve as Successor Trustee (execute Certificate of Trust) [Attorney] 4. Obtain new taxpayer identification number (EIN) from the IRS. [Attorney/Accountant/Online] 5. Take an inventory of all assets and liabilities and verify that there are no assets that require Probate. [Financial Advisor & Attorney.]

18 6. Obtain date of death value of all investments and growth/earnings after date of death. [Financial Advisor] 7. Provide required notices to the Qualified Trust Beneficiaries. [Attorney]

19 8. Send notice to known creditors. [Attorney] 9. Publish notice to cut off creditor claims after 4 months. [Attorney] 10. Secure, distribute / sell personal property. [Family and Estate Sale Professionals]

20 11. File death claims with Social Security as well as any insurances controlled by her as Trustee of Leslie's Trust and as Successor Trustee of Scott's Discretionary Needs Trust. [Michelle and Financial Advisor] 12. Ensure that Leslie took her RMD in the year of her death. If she did not, then it is Michelle's duty to do so before the deadline. [Financial Advisor]

21 13. Work with CPA to prepare personal tax return (1040) for year of death and to prepare tax return for the estate. [Accountant]

22 14. Work with CPA to prepare tax return for Discretionary Needs Trust. [Accountant] 15. Negotiate, pay, dispute debts, expenses, taxes. 16. Follow the terms of the Trust to determine shares to be distributed to each beneficiary. 17. The net estate value will be known after completion of the administrative duties. Further, all distributions of assets made outside of the Trust should be accounted for.

23 18. Apply the formula equalizing the total distribution between Michelle and Scott's Discretionary Needs Trust. 19. Once calculations are complete, make distributions of the appropriate assets, property, funds to herself personally and to herself as Trustee of Scott's Discretionary Needs Trust. [See Distribution List] 20. Terminate Trust. 21. Work with CPA to ensure that the Trust's final tax return is properly filed.

24 Michelle s Role as a Successor Trustee B. Scott s Discretionary Trust 1. Obtain EIN for Scott's DNT/SNT. [Attorney/CPA/Online] 2. Establish accounts, as Trustee to enable her to receive Scott's inheritance. [Bank/Financial Advisor]

25 3. Michelle has to determine if she can handle the investment management of the Special Needs Trust herself or rely on a Financial Advisor that has the expertise and experience working with Special Needs trusts. 4. Work with financial advisor; determine Scott s expenses, availability of government benefits and income necessary from his Special Needs Trust. Develop investment strategies to provide income, long term growth and tax efficiency while using prudent investor. Note that this needs to be revisited more than once per year for fiduciary protection. [Financial Advisor] 5. Work with financial advisor and CPA to ensure minimum of taxes are required to be paid. [Financial Advisor/Accountant]

26 Michelle s Role as a Successor Trustee C. Advocacy For Scott 1. Manage Scott s expenses and pay bills. 2. Seek additional supports (ie: agency that assisted in placement in AFC). 3. Seek alternative long-term placement if the AFC arrangement does not work out.

27 4. Consider hiring Care Manager to assist. Michelle lives out of state and may not be able to handle everything from a distance. 5. Consider use of a portion of the DNT to be put into a PAT as a back-up.

28 6. Develop a working relationship with Scott's supports coordinator. 7. Work with a qualified special needs attorney to determine if Scott has sufficient capacity to execute Powers of Attorney and HIPAA authorization documents. If not, seek Guardianship. 8. Develop life plan either following Letter of Intent (if any was prepared by parents) or to include provisions for Scott to vacation, socialize, and/or receive extra needed services to enhance his quality of life.

29 9. Periodically check to make sure Scott is maximizing his government benefits. Seek the help of a Special Needs attorney for this. 10. Attorney will also assist in filing any required notices to the SSA and DHHS as well as with the completion of annual redetermination paperwork required by SSA. 11. Become Scott's Representative Payee to receive his SSA income.

30 Summary of Action Items A. Legal & Financial Review Legal documents periodically. Coordinate all assets with the trust documents. Consolidate accounts, (Example; fewer bank account, investment accounts etc.). Declutter your household and list recipients of valuables. Does the Special Needs Trust have the language to hold IRAs? Is your financial planning up to date? Will your assets deplete if you need Long Term Care?

31 Summary of Action Items B. Other Update Letter of Intent regularly. Have the successor trustees meet your professional team to understand their role. Let them determine what they can handle and what they will need professionals to handle. Find the future residents of your special needs adult or child while your still alive.

32 THANK YOU!