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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

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.

 

5 Easy Steps to Effectively Administer an Estate or Trust or Conservatorship

Managing an estate is much like managing a trust or a conservatorship. It primarily involves gathering the assets, managing them for creditors, heirs, or any interested persons, and then distributing the assets to the rightful people upon conclusion. With all these entities, there are things you need if you want to effectively administer assets for another person or an estate. Here are five of the most important things:

  1. Hire an accountant or an attorney with estate tax knowledge. Most often, there is no tax issue to deal with if the estate only consists of a house (see the “step up” basis rule) and some personal property; however, I recommend having a tax professional tell you that rather than ignoring what could become a tax nightmare. Accountants sometimes charge a reduced rate to review your file to confirm a return is not needed. For example, if the estate or trust collects dividends, that is considered taxable income, and the estate should file a return for that year you received the dividends. If you close or terminate the estate or trust before paying that taxable income, as the fiduciary, you might be stuck with personally paying the bill or penalty if your forgot about it. By then, the heirs are probably long gone or have already spent their money.
  2. Inventory the assets as best as you can.  In most cases, heirs or interested persons can reasonably work out how to divide the assets. However, in every case, you should itemize and inventory everything as best as possible. Contested cases sometimes materialize overnight. At the very least, put tags like these on every piece of property the estate or trust owns. Take pictures of everything. These practices will separate your stuff from the estate’s stuff, and it will avoid commingling. You should then prepare an inventory. Microsoft Excel works great. We track our assets with Wasp MobileAsset. The price for that may be more than what you are willing to invest for one estate; however, you can use this excel template I made as a guide. It will keep track of what the estate owns, the estimated value, and what the items sold for. I would recommend quickbooks and quicken to track your expenses and income as well. When you conclude your administration, this report is vital to show the interested parties how everything was distributed. If you do not adequately track the personal property and expenses, somebody is going to ask you about a particular item six months into the administration. Without proper tracking, you will not have any idea where that item is located or where it went.
  3. Keep track of your time and expenses. Many executors or trustees that do not regularly to this type of work forget to track their time on a consistent basis. When administration has concluded, they end up trying to estimate how much time they spent. Without calendars or a billing system, estimating in lump sums will get contested and you may not be able to charge at all or at a very reduced rate. Buy a cheap or free calendar and put down your hours for each day. You can calculate a reasonable hourly rate later. Don’t forget about mileage either. Expenses are also reimbursable.
  4. Get appraisals or a market analysis for assets. If you are selling land or valuable assets, nothing is better than a professional appraisal to back up your sale. They are also great expert witnesses to rely upon in contested cases. Where there have been disputes over sale of assets, and the ones that stand up are professional appraisals behind them the sale. The assessed value with the county’s assessor and Zillow will give you a good estimate but do not solely rely on them.
  5. Never buy or take estate owned for yourself. This is axiomatic, but it needs to be repeated. Someone else has put you in charge to handle the estate or conservatorship. Someone entrusted you to do the right thing on behalf of the others involved and to not take from the estate. Even if you buy it for market value, you are putting yourself in a compromising position. Further, the transaction could be voidable if it is not expressly authorized by the court and after notice of interested persons.

 

In many cases, you probably can do most of the work on your own if you follow these rules. If you need assistance, maybe even limited advisement, please call the Grand Junction Estate Attorneys, Reams & Reams at 970-242-7847.

Probate Questions from last presentation

At our last probate presentation we held at Immaculate Heart of Mary Catholic Church (if you would us to speak with your institution or group, free of charge, about Will, Trusts, and Probate, please contact us), there were a number of index cards with questions that we quickly answered. If you forgot or wanted more detail with those answers, I wanted to follow up with some of those answers on our site.

 

Some of you asked about the Colorado Judicial Branch website for the standard forms. You can find those forms here: https://www.courts.state.co.us/Self_Help/Index.cfm

I have also linked a couple of the forms from other resources on our resources page: http://dev.reamslaw.com/resources/

However, take caution with anything you download.

The number one piece of advice we tried to instill from the presentation: Refrain from downloading forms off the internet. If you must do it, have someone (preferably an attorney) review the document before signing it. These documents have legal consequences that sometimes take years and may spend a lot of your hard-earned assets to fix in the court system if they are not done right. As I noted in the presentation, some of those forms, which purport to reflect Colorado law, are glaringly wrong.

 

Here were some of the index cards and my answers:

 

Question: I have a Colorado Will, but I will move out-of-state soon. Is this the Will still good? Vis-versa: I moved into Colorado and my Will is from another state.

Answer: Your Will is still generally valid from another state, but there are some things you need consider that you may want to update: What law governs my Will? (Most of the time, that clause is near the bottom of your Will.) If another state governs the interpretation of your Will or if it changes depending on which state your reside in, did distribution schedule of your Will change? (Terms like per capita at each generation or by representation may be defined differently in other states). Now that you have moved, will my nominated personal representative be able to efficiently administer my estate or will he or she have to delegate from afar? The marital rules may have changed, especially if you moved into a community property state such as California. Does the new state allow common law marriage and will that effect the outcome of your Will?

 

Q: Do you prepare medical and financial powers of attorney?

A: Yes, and we prepare them along with your Last Will and Testament and Advanced Directives to give your medical agent instructions in certain situations. Most estate planning attorneys can provide all of these documents for your estate plan.

 

Q: If most of my assets are in a 401k, should I still have a Will?

A: If your 401k has a listed beneficiary other than the Estate, this is considered a non-probate asset. That means upon death, it will generally be distributed to whomever is the listed beneficiary, no matter what your Will says. There are always exceptions to this rule, but generally non-probate assets trump your Will. However, even if all of your assets are going to be distributed outside your Will, we recommend a Will as a backup. There may be cases where you missed an asset, or the beneficiary designation is ineffective, or any issue that may arise. The most important thing to consider is making sure your estate plan is consistent. Without a Will, the distribution of assets may not be what you intended.

 

Q: What is the quickest type of Will to put together?

A: In Colorado, if you need to make a Will immediately and you have the capacity to do it, you may write out your Will in your own handwriting (on a legal pad, napkin, or any medium available) and then sign it. For some reason, Colorado does not require it to be dated, but I recommend it in case you do more than one. In this form, it does not need to be witnessed or notarized, but I recommend that too to confirm it was you who signed it and to prevent forgery or undue influence. Colorado refers to this as a holographic will. However, I do not recommend you continue to use this as your Last Will and Testament. Any mistake and ambiguous term or clause may invalidate it or create litigation among your family.

 

Q: Do I need a Trust?

A: My general answer to this question for most of my clients is No, but it depends on the person’s needs and estate plan. Trusts are complicated and difficult to manage if you do not maintain them appropriately. Colorado has a very efficient probate system, unlike California, which has seemed to have created the trust problem. Unlike California, lawyers cannot charge percentages (I have seen in some instances where they have, but the percentage has to be reasonable to services rendered on behalf of the estate.). The high commissions in California have resulted in a lot of trusts, because people have tried to avoid the probate system. In Colorado, I only recommend trusts if it serves a particular purpose, such as, but not limited to

  • Beneficiaries that are disabled, on special needs, public assistance, or minors
  • Beneficiaries have issues with financial responsibility and have creditors
  • Beneficiaries are incarcerated
  • You want give your beneficiaries their inheritance over time or when they reach a certain milestone rather than in one lump sum
  • Tax or marital issues
  • Medicaid issues
  • Real property in multiple states or multiple properties that need managed

 

Q: In Colorado, does a financial power of attorney expire on death?

A: Yes. Your authority to act as an agent under a financial power of attorney terminates on death.

 

Q: How much does a Will cost?

A: It depends. At our firm, we strive to keep the costs low. Please see our Estate Planning page to understand the factors of the cost and how you can lessen the cost. Estimated costs that I have seen in other firms range from $300 to $2,000; however, the market average in Mesa County seems to center around $500 to $1000. If you know someone who has done their estate plan recently, ask them about their experience and who they would recommend.

 

If any of these questions concern you, we recommend you have someone review your estate plan. Contact us today 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.