How much can I charge as a trustee?

The question of reasonable compensation for a trustee or fiduciary often comes up. There is no black and white rule regarding reasonable compensation. Reasonable compensation means it depends–it depends on the surrounding circumstances of the administration. And the factors are proscribed in the Colorado Revised Statutes (CRS).

As the fiduciary (personal representative/conservator/agent/trustee), you are entitled to reasonable compensation. But what is reasonable? Reasonableness is determined by a number of factors in C.R.S. Section 15-10-603:

  • the type of labor required and whether a special skill or difficulty is required to perform the service properly;
  • the opportunity cost of not working your regular job;
  • the compensation is equivalent to what others in the community might charge for the same service;
  • nature and size of the estate; liquidity of the estate; results and benefits of the person’s actions;
  • life expectancy of the respondent/ward/protected person/beneficiaries
  • any time limitations or circumstances regarding the administration of the estate;
  • the expertise, special skills, reputation, and ability of the person performing the services; and
  • terms of the governing instrument

With those factors, I can provide some trial court examples:

(1995) Roger and Roy sought compensation of over 200 hours of labor as co-representatives of the estate. Roger charged $50 an hour and Roy charged $35 an hour. A beneficiary challenged the hourly rates as excessive. The trial court approved the compensation based on the following circumstances:

  • Both Roy and Roger left their jobs to be the co-representatives;
  • They would have had to hire someone at a similar rate;
  • The size of the estate was modest; and
  • One of the representatives was a highly-paid executive who left his job to perform his duties for the estate

Estate of Beren (2012) – The personal representative set his compensation at $375,000 per year. Before appointment, he was the CFO of the Berenergy Corporation. The decedent was Mr. Beren, who was the sole shareholder of Berenergy Corporation. Mr. Beren died in 1996, but this Court of Appeals case was not published until 2012. This means the litigation went on for years. Mostly, because of a spousal elective share issue and beneficiary fights. It is presumed the total value of the estate was hundreds of millions. From 1996 to 2010, the personal representative increased his annual salary to over 1 million a year. After an evidentiary hearing, the trial court concluded the compensation was reasonable. The court of appeals affirmed the decision, and it was based on the following circumstances:

  • The estate was unique, and it could not compare it to similar or customarily charged circumstances for most estates, because of the size and complexity.
  • The corporation was a closely-held business, and the fiduciary kept it very profitable during the administration of the estate.
  • It was the fiduciary’s only job, and he devoted his entire life to the company’s success.
  • The heirs substantially benefited from the fiduciary’s efforts despite their objections to his compensation.
  • By accepting this job, he was precluded from doing anything else.
  • Before accepting the appointment, he was the CFO of the Corporation and making a similar salary before requesting additional compensation.
  • The fiduciary’s compensation represented less than 1% of the estate’s value (market rate for fiduciaries who charge a percentage generally charge 1% of the total assets per year).

The last example is an outlier, but it assists the objective: If you provide a benefit to the estate, and your expertise justifies the wage, you are probably within a reasonable compensation. Sometimes benefit to the estate is not always pecuniary, but that is outside the scope of this article.

Based on the court examples and the firm’s experience, I have provided my own recommendations:

You are making $12-$18 an hour. Your education is between a high school diploma and a bachelor’s. You have no experience being a fiduciary. Your mother died, and she named you the personal representative of the estate. Result: reasonable compensation could be $20-$40 an hour. This represents a reasonable wage you would have pay someone else for most of the manual labor, inventory, and selling items. However, I recommend retaining an accountant and an attorney to protect your personal liability.

You are small business owner with expertise in bookkeeping, accounting, and inventory management. Result: reasonable compensation could be $40-$80 an hour. This represents your expertise in most tasks for estate administration, including supervision of employees, and your fiduciary services would preclude you from working.

You are a dentist, but you do not have expertise in bookkeeping and accounting, as that is delegated to someone else. Result: reasonable compensation could still be $60-$100 an hour. This represents your educational background to perform difficult tasks, supervise employees, and review complicated material. Further, there is an opportunity cost of neglecting your regular job to perform the fiduciary services. I still recommend retaining an accountant and an attorney to protect your personal liability.

If you choose to be compensated, I recommend obtaining court approval first to avoid any problems later. For more information or a consultation regarding compensation or estate administration, please contact the grand junction estate attorneys, Reams & Reams at 970-242-7847 or email us at ztreams@reamslaw.com.

The material presented on this site is included with the understanding and agreement that Reams & Reams is not engaged giving legal advice by posting material on this website. The services of a competent professional should be sought if legal or other specific expert assistance is required. Further, the firm does not wish to represent anyone desiring representation based upon viewing this website in any state or jurisdiction where this website fails to comply with all laws and ethical rules. The firm is also only licensed to practice in the State of Colorado. Any material presented on this site may be different or incorrect in another state. Please consult any attorney before using any of this information.

How do I remove a trustee or invalidate a trust?

Removing a trustee or invalidating a trust is not easy to do. In fact, it could take sometimes years to resolve. However, there are reasons: the person who executed the trust did not have the capacity to sign it; or, the trustee was mismanaging the assets. In those cases, you may have grounds to do something about it. (Also, consider the appointment of a conservator and/or guardian if the acting trustee is losing capacity to act.)

This exact scenario is happening with the deceased Denver Bronco’s owner Pat Bowlen’s trust and his estate. His trust owns the Denver Broncos, and the heirs are his children. Two of his daughters do not like how the trust is being handled. Currently, the trustee is the team’s president, Joe Ellis. The daughters also do not believe their father had the capacity to execute the trust when he signed it. Therefore, they filed to remove the acting trustee and have attempted to invalidate the trust. However, those actions come with consequences.

Beth Wallace and Amie Klemmer filed a lawsuit Friday in Arapaho County Court challenging the validity of the trust, which includes a no-contest clause, on the grounds that their father lacked the mental capacity and was under undue influence when he signed his estate planning documents in March 2009…

…By choosing to challenge the validity of the trust in court, Wallace and Klemmer are putting themselves at risk of being disinherited if they’re found in violation of the no-contest clause and the 2009 trust is upheld in court. Their rights as beneficiaries would bypass them and go to their children.

https://gazette.com/sports/broncos/daughters-dispute-pat-bowlen-s-trust-risking-disinheritance/article_7f931d48-d657-11e9-b575-8fa17abe3e2c.html

How would someone start this process?

First, look at the trust document. It should include a section on how to remove the trustee. Sometimes, the trust states the majority of the beneficiaries can vote out a trustee. However, more often it requires the a court filing to remove the trustee with cause. That means you need a compelling reason and the judge has to agree. Always be careful before filing anything: The trust may include language regarding the consequences if you do file something against the trustee without any supporting evidence. This is called the no-contest or an in terrorem clause. They can be enforced if you do not have a basis for your claims. If they are enforced and you lose, you might have just lost your inheritance. The Colorado Supreme Court reversed such a decision from the trial court, but it took an appellate review to fix that error. Sandstead-Corona v. Sandstead, 415 P.3d 310, 2018 CO 26 (Colo. 2018).

Second, review the statute. The Uniform Trust Code codifies the procedure for a petition, which is set out in C.R.S. § 15-5-101 through 15-5-1404. Also, check the statute of limitations on your claims. You must file your claim within these deadlines. Some of these are codified in the Trust Code; some of them are codified in C.R.S. § 13-80-101 through 13-80-119. The new Trust Code allows the trustee to shorten the window, but he or she must do it properly.

Third, include supporting documentation with your claims. While not these are not required, medical information is important when invalidating a trust. A doctor’s statement of incapacity is helpful. If you are trying to remove a trustee, you should have financial or other documentation showing the trustee mismanaged the trust.

If you invalidate the trust, what happens?

Without knowing all the facts and the trust itself, it is possible all the assets in the trust will revert back into the individual’s name who created the trust. If there is a Will, it will control the disposition of assets. If there is no Will, you might create another nightmare.

If you are considering these claims or preparing to defend against such claims and need assistance, please call the Grand Junction Estate Attorneys Reams & Reams at 970-242-7847

The material presented on this site is included with the understanding and agreement that Reams & Reams is not engaged giving legal advice by posting material on this website. The services of a competent professional should be sought if legal or other specific expert assistance is required. Further, the firm does not wish to represent anyone desiring representation based upon viewing this website in any state or jurisdiction where this website fails to comply with all laws and ethical rules. The firm is also only licensed to practice in the State of Colorado. Any material presented on this site may be different or incorrect in another state. Please consult any attorney before using any of this information.

Maylin falling in leaves

Beneficiary Deeds, am I right?

There was a recent article in the Daily Sentinel that created a lot of buzz with my estate planning clients you can read here. All of sudden, everyone wanted a beneficiary deed. We wrote and recommended such a tool in 2016 It solves everything, am I right? Maybe.

Essentially, a beneficiary deed is executed and recorded like a regular deed, but it has a special designation for your grantee. It is codified in the Colorado Revised Statutes in 2004. It acts like a death beneficiary designation you might have on your checking account or life insurance policy. The grantee does not own the asset until the property owner’s death. You can revoke it any time without the beneficiary’s consent. And you can sell the property without the beneficiary’s consent. However, upon death of the property owner, it will automatically transfer the real property to the listed beneficiaries. If you are worried about avoiding probate, this tool also assists with that.

But there are downsides to a beneficiary deed: If you have two or more beneficiaries on the deed, it could cause a problem down the road. They will each own a portion of the house. The beneficiaries must cooperate, maintain, and consent to sell the property. If not, litigation may result to force the sale of the real property by partition. This example is illustrated in a Washington Post article or this article between two siblings who inherited the house. Of course, the same problem would occur if you devised your house to two or more beneficiaries by Will. The alternative is to appoint one personal representative in your Will to sell and split the proceeds of the house.

Another downside: Because a beneficiary deed it is an incomplete gift before death, Long Term Care Assistance with Medicaid eligibility is an issue (I am referring to Medicaid for Long Term Care Assistance, not Medicare). If you require and need Medicaid Long Term Care Assistance, you cannot keep the beneficiary deed and must revoke it. If Medicaid is part of  your estate plan, a beneficiary deed may not work.

A beneficiary deed is a great estate planning tool, but you should consider these questions and consequences before executing one. If you want more information or a consultation regarding your estate plan, please contact the grand junction estate attorneys, Reams & Reams at 970-242-7847 or email us at ztreams@reamslaw.com.

Overview of Colorado Probate Filing Fees

How much does it cost to file estate or trust proceedings?

Sometimes the probate process or trust administration can take awhile; sometimes the process is short. But where do you start and how much does the court charge to file a document?

The following table presents an overview of the court costs associated with different actions for Colorado estate or trust cases in 2019:

Probate ActionCourt Fee
Opening probate for a small estate(valued at ≤$68,000)$83
Opening informal probate for larger estates$199
Opening formal probate for larger estates$199
Filing a petition for a trust action$199
Registering a trust statement$198
Filling a petition to contest a claim$198
Depositing a Will with the Court$18
Demand for Notice$36
Jury demand fee$231

If you want to review all fees and costs for different actions, please see the Colorado Judicial’s website: https://www.courts.state.co.us/Forms/PDF/FeesChart%20-JDF1.pdf

If you are thinking about executing an estate plan or may need to review an old one, please call the Grand Junction Estate Attorneys at 970-242-7847.

leatha reams will

Do You Need a Will? Most Older Americans Do Not Have One

According to a study by Merrill Lynch and Age Wave, published through the TheStreet, “…nearly half of Americans over 55…have no will.” The cost is not an issue. Most put it off until it is too late.

“It can be arduous in getting clients to address that question few Americans like discussing,” said Dennis Nolte, vice president and financial advisor at Seacoast National Bank in Florida and a certified financial planner.

TheStreet, “Nearly Half of Older Americans Dont Have Wills or Estate Plans,” https://www.thestreet.com/personal-finance/nearly-half-of-older-americans-don-t-have-wills-or-estate-plans-14858171

Putting it off until later is easier. But when is later? I still believe cost is a worry. A simple estate plan should average $450-$650. It increases with custom language. But the important question is whether a Will is even needed? As an attorney, my answer is maybe yes and maybe no.

Without a Will, your estate is distributed pursuant to the Colorado Revised Statutes. If you are married and have joint assets with the spouse, your estate is fairly secure: After the death of one spouse, the surviving spouse automatically receives the other half. After the surviving spouse dies, all of your assets will be split among your surviving children. No children? Then it will go to your surviving parents. No surviving parents? Then it will go to your surviving siblings and their descendants. No surviving siblings? Then it will to your paternal and maternal grandparents’ descendants, which include uncles, aunts and potential cousins. If you die without a Will, the default rules find an heir, but it may not be the person you wanted to inherit. A Will solves those uncertainties. You can designate your personal representative. You can designate your funeral and burial wishes. Most importantly, you can designate your heirs. We have some questions to think about here.

If you are thinking about executing an estate plan or may need to review an old one, please call the Grand Junction Estate Attorneys at 970-242-7847.

Estate Taxes? “Rolling in the Deep”

Administering an estate or trust? Were taxes filed before the person died? How would you know? The IRS allows access to previously filed returns with authority. An unpaid income tax bill is common. Hopefully, there is a recorded lien to alert you. But some go unnoticed. This problem occurs at every income scale. As a recent example, review the Estate of Aretha Franklin.

Ms. Franklin died August 16, 2018 from pancreatic cancer. She was a prolific singer and songwriter. She was inducted into the Rock and Rock Hall of Fame. Her estate may be worth over $80 million (which might trigger “estate tax” problems). But she neglected to pay her income taxes for years.

The IRS filed an additional Proof of Claim for more than $1.5 million for tax years dating back as far as 2010 for 945 taxes and related penalties.


Irs Seeks To Recover Millions In Unpaid Taxes From The Estate Of Aretha Franklin
Kelly Erb – https://www.forbes.com/sites/kellyphillipserb/2018/12/28/irs-seeks-to-recover-millions-in-unpaid-taxes-from-the-estate-of-aretha-franklin/#5e5003715f9c

Ms. Franklin forgot or neglected to file. Now, it is the executor’s problem. The IRS is a creditor of the estate. Any unpaid tax will be a liability. It is the fiduciary’s job to negotiate or satisfy these claims.

Some people confuse “estate tax” with income tax in an estate. The federal “estate tax” might affect the estate if the combined assets of the decedent or trust are over $11.18 million (2018). See IRS’s reference to the Estate Tax. Aretha Franklin will have that problem, but the majority of Americans should never worry about it.

However, if the estate generates income above a certain amount, such as capital gains or dividends, the fiduciary will have to file an estate return for that income. See IRS’s reference to the Income Tax Return for Estates and Trusts. Of course, these are general considerations. The are exceptions to these rules. There are also pitfalls and penalties if you do not file on time. Do not be a link in the IRS’s “Chain of Fools,” as Ms. Franklin would belt. Retain an accountant to advise on any taxable event or liability before you close the estate or trust (even better: hire them immediately when you start acting as a fiduciary).

If you need advise on how to properly administer an estate or trust, please contact the Estate Attorneys of Grand Junction, Reams & Reams at 970-242-7847.

Auctioning Estate Property has Consequences

Auctioning off a property is quick. It gets the property sold. However, it comes at a cost. When real estate in an estate or trust sits on the market for too long, the heirs may start to get impatient. Even if you listed the property for market value, you may not get any offers. An auction may be the next step to get the property liquidated. But a guaranteed sale may have consequences. As an example, this billionaire’s estate property in Aspen, Colorado, with roughly 244 acres and six family homes sold for 75% from the original asking price: https://www.wsj.com/articles/ex-billionaires-colorado-ranch-sells-for-over-75-off-1537563592.

If you are attempting to liquidate estate or trust property and need advice, please contact the Grand Junction Estate Attorneys Reams & Reams at (970)-242-7847. Please review our practices areas here and our qualifications.

House for Living Trust - Reams & Reams

Do I need a Trust? Consider a beneficiary deed

I recently read an article that posed the question whether you should put your home in a living trust. The author did not like probate. If you from a larger city, I don’t blame her: Probate proceedings in different states with larger populations can get expensive and lengthy (Relatively, Colorado is a much cheaper state to probate a Will). Instead, the author recommended a living trust, but suggested the price tag would be at least $1,500 to $3,000. That does not include maintenance or guidance execution. These numbers are not unlike the market rates you will see here in the Western Slope. For example, an estate firm in Grand Junction lists their flat fees on their website, and they charge $1,500 for a nontaxable estate plan person with a trust. I assume by nontaxable, they mean an estate less than $5.4 million. If it is taxable, the charge is $2,500. Many firms do not do flat rates and charge an hourly, because every estate plan is different and hard to estimate. It is likely though the total charge for any living trust may exceed $2,000. The reason? They are complicated to draft with conditions specific to your estate plan and assets need to be transferred and maintained, which includes other legal documents. You also need a trustee and the ability to manage it every year. If the trust generates income, you need a tax accountant that is familiar with fiduciary returns.

In contrast, a Will may be less than $1,000. Some attorneys can do one for a couple hundred dollars for a simple Will. Once it is drafted, it is done–you do not need to look at it again unless you have a significant life event may effect the Will. With a Will, the amount you pay for a trust is about the same or more you might pay to probate the Will for a simple estate. Therefore, there is not a savings to do a living trust for smaller estates. But why do that when there are other ways to avoid it altogether and potentially save money? That is why you should consider a beneficiary deed with your estate plan as an alternative.

A beneficiary deed operates much like a payable on death designation you might have on your checking account or life insurance policy. The beneficiaries are listed on the deed, but they do not own the property until death. You can revoke it any time or sell the property without the beneficiary’s consent. Upon death, it will automatically transfer the house to your beneficiaries upon recording the death certificate. Is there a downside? A couple, depending on your situation. Because it is an incomplete gift, Medicaid eligibility is an issue (I am referring to Medicaid for Long Term Care Assistance, not Medicare). They wont allow you to keep the beneficiary deed, and they will ask you to revoke it before applying or they will deny your application. If Medicaid is part of  your estate plan, a beneficiary deed will not work.

There are a couple other downsides: a Beneficiary Deed does not include conditions or contingencies. Do you want to give your home to  your children but only until they graduate college or turn a certain age? Do you own multiple properties in different states and want them managed properly after death? Do you have children on disability or public assistance, which might be jeopardized if they receive an inheritance? If the answer is yes to any of these questions, then a trust or a Will with a testamentary trust might be a better option for you.

 

If you are considering these options or want more information regarding your estate plan, please contact the grand junction estate attorneys at Reams & Reams. We are available to assist completing or even modifying your estate plan.

 

I received a claim in an Estate. What do I do now?

If you are the executor or the personal representative of an estate, chances are you received a claim in the mail for the decedent. Most likely, it is an unpaid credit card bill. That bill has now been forwarded to collections and they are asking you, the next of kin, to personally pay it. Rest assured: You are not personally liable to pay this debt; however, the estate might be liable. Generally, creditor claims have priority over heirs, but they must be filed within certain deadlines. If it is a known creditor, that deadline to file a claim is generally one year from date of death. If you want to shorten this, give the known creditor notice. They have sixty days to file a claim or until the published notice deadline, whichever is later, or the claim is barred. If it is an unknown creditor and you publish a Notice of Creditors in the newspaper, the deadline to file is generally four months from the notice. This is considered the published notice deadline. That is why it takes at least six months to open and close an estate: You want the creditor period to expire first. You pay heirs before creditor, you open yourself up to personal liability. After the deadline has passed, the claim is barred and forever extinguished. The personal representative actually does not have the authority to pay a barred claim.

If the claim is valid or court-ordered to pay and if you have more than one, you must pay claims in the following priority. (1) Property held by or in the possession of the deceased person as fiduciary or trustee of a trust; (2) administrative costs and expenses to administer the estate or trust; (3) funeral expenses; (4) federal taxes; (5) medical expenses of last illness of decedent; (6) state taxes; (7) Medicaid; (8) child support obligations; and (9) all other claims. This is not word-for-word; I am paraphrasing the statute. For a more complete citation, look at the Colorado Revised Statutes Section  15-12-805. You can review them here.

As an example, if the estate has $100, and you receive a claim for $200 from Medicaid but you also have a funeral bill for $400, pay the funeral bill first and give notice to Medicaid why they are not receiving any funds.

If you do not think the claim is valid, disallow it. The creditor has sixty (60) days to file a petition for allowance and set a hearing for the claim or it is barred.

If you need assistance with a claim or general administration of an estate, please call the Grand Junction Estate Attorneys at Reams & Reams: 970-242-7847.