Posted by William Byrnes on March 19, 2011
You’d better think twice before agreeing to act as trustee for your clients’ trusts, since doing so can cost you far more than the goodwill and fees it generates.
We all know that, depending on the circumstances, a trust, its grantor, or its beneficiaries can be held responsible for tax liability stemming from trust income.
What about its trustee?
Although trustees are not usually personally responsible for a trust’s taxes, a trustee can be stuck with the tax bill if the trustee breaches his or her fiduciary duty to the beneficiaries. A U.S. District Court recently considered a trustee’s liability for GST taxes when the trust’s beneficiaries claimed that the trustee failed to keep them informed of their potential liability for taxes stemming from trust distributions.
The trustees’ mistake in this case could cost them over $1 million. Read the full analysis by linking to AdvisorFX!
Posted in Trusts | Tagged: accounting, Beneficiary, Fiduciary, tax, Taxation, Trust law, Trustee, United States | Leave a Comment »
Posted by William Byrnes on February 17, 2011
A recent Delaware Court of Chancery decision illustrates the severe consequences that can befall an insurance agent trustee who violates his or her duties to the trust’s beneficiaries. The agent in the case agreed to serve as trustee of a client’s life insurance trust.
The client, a Father, had a falling out with his son over the Father’s marriage to a woman 17 years his junior. Nevertheless, the Father and his second wife formed a trust for the benefit of the son. The couple asked their family insurance agent to serve as trustee of the trust. The trust purchased a second-to-die life insurance policy on their lives. Although the trust was irrevocable, the Father ad young wife asked the trustee to revoke the trust only three years after it was formed. The trustee intelligently refused to revoke the trust, but did agree to loan the policy’s cash value to the couple.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
Posted in Trusts | Tagged: Business, Delaware Court of Chancery, Financial services, Fred Wilpon, insurance, Lawsuit, Trustee, United States | Leave a Comment »
Posted by William Byrnes on February 8, 2011
Recently some wealth managers have established trustee services with regards to retirement accounts. It’s a good fit, generally, when the wealth manager can offer clients information regarding deductible contributions to a retirement account, and further act as a fiduciary vis-à-vis trustee of those funds.
What are the basic requirements in order to act in the capacity as a trustee for IRA and other retirement account purposes?
First, an Individual Retirement Account (IRA) must be a trust created or organized in the United States for the exclusive benefit of an individual or his beneficiaries. Such trust must be maintained at all times as a domestic trust in the United States. The instrument creating the trust must be in writing.
Secondly, the trustee of an IRA trust may be a person other than a bank if the person demonstrates to the satisfaction of the Commissioner of the Internal Revenue Service that the manner in which the person will administer trusts will be consistent with the requirements of the tax code. The person must submit a written application including the information discussed below. Read further at AdvisorFYI
Posted in Pensions, Trusts | Tagged: Individual Retirement Account, Internal Revenue Service, Retirement, Roth IRA, tax, Trust law, Trustee, United States | Leave a Comment »
Posted by William Byrnes on September 24, 2010
Why is this Topic Important to Wealth Managers? Provides a view with respect to revocable trust concepts and estate planning. Presents identifying factors of the trust, what it’s commonly used for, as well as some of the benefits and detriments of its implementation.
This week has mainly discussed the use of trusts with characteristics of complete transfers by grantors. This edition will explore the revocable nature of trusts and how they are applicable to estate planning.
The main difference between a revocable trust and one that is not, is that “the settlor reserves the right to terminate the trust and recover the trust property and any undistributed income.” “The creation of a revocable living trust involves either the transfer of property to one or more trustees or the settlor’s declaration that he holds the property in trust for himself and that upon his death the property is to be held for other beneficiaries.”
For the complete blogticle and its analysis, see AdvisorFYI.
Posted in Uncategorized | Tagged: estate planning, law, Living trust, Property, Settlor, Trust law, Trustee, United States | Leave a Comment »