Question: “I am 60 years old with no savings. I have $20,000 in an online investment account. I get monthly checks from a holdings company that I am a 24.75% owner of. I also receive quarterly checks from estate businesses, but I never know what I am going to get. Our HEMS (health, education, maintenance and support) standard trust is supposed to last for life but the way my brother, the trustee, handles things, we never know what we’ll get. What should someone in my position do? Should I be looking for help from a financial planner or an estate planning attorney? I don’t have a lot to spend but I need help.”
Answer: One of the most important things to do here is ascertain if there’s any waste, fraud or abuse happening with your trust — and yes, you likely need professional help from both an attorney and a financial adviser. (You can use this free tool to get matched to fiduciary advisers, from our ad partner SmartAsset, as well as sites like CFP Board and NAPFA.)
“You should be looking for a complete accounting of the trust’s expenses and income that you can review with a third party accountant or tax attorney with fresh eyes and no bias. In addition, you may wish to seek litigation counsel in the field of trusts and estates, since it sounds like your brother is not managing the corpus properly,” says attorney Yonatan Levoritz, founder of The Levoritz Law Firm.
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As the trustee of the trust, your brother has a fiduciary duty to manage the trust estate to your benefit. “Your brother should put all beneficiaries’ interests first and treat all fairly. You’re also entitled to know how the trust is being managed, which includes the ability to understand how the money is being handled. The trust was likely set up to support your health, safety and welfare, so the money cannot be withheld inappropriately, nor should money try to be preserved so more is left for other beneficiaries,” says elder law attorney Patrick Simasko at Simasko Law.
Look at the underlying estate business and what your brother is taking from the trust. “It may be that they should be sold and other investments purchased that can generate a steady flow of income. It’s the job of the trustee to maximize the holdings of the trust in terms of income assets,” says Levoritz.
Ultimately, you need help from both a financial adviser and an estate attorney. “The former can review the portfolio and advise as to whether it is properly invested. You may have issues with your brother, but an expert needs to evaluate the portfolio,” says Robert D. Steele, partner and head of trusts and estates at Schwartz Sladkus Reich Greenberg Atlas.
If the adviser believes the trust is not well invested in a diverse portfolio, Steele says you should speak to an estate or trust attorney. “The first step is to review the trust agreement or will and understand your rights. Is HEMS the floor for distribution or the ceiling? That depends on how the trust is worded. If it appears that the trustee is not investing properly and not following the standard, you can ask for him to resign,” says Steele.
If the trust or will permits you to remove and replace the trustee, that’s another option. “That is common in recent years but less common years ago, [as] an IRS ruling changed this dramatically some years ago. This depends on the document. The worst case scenario is that you need to file a petition in court seeking the trustee’s removal and replacement. Unfortunately, such a course is not inexpensive,” says Steele.
Is there a possibility that your brother is unaware of your issues? “Communication is key. If longstanding family dynamics are the issue for miscommunication, then an attorney can represent you, solving these issues now and in the future. If an attorney doesn’t get the job done for you, seeking a petition with a probate court would be next. You would ask the judge to supervise the trust administration and the judge can order your brother, as the trustee, to act appropriately or remove him and appoint a new trustee,” says Simasko.
To find qualified estate planning and trust attorneys, visit the Martindale-Hubbell directory where you can search for lawyers based on location and expertise. Most importantly, you’ll want to find an attorney who specializes in trusts and estates, is transparent about fees and communicates clearly in a way you understand.
When looking for a CFP, the National Association of Personal Financial Advisors offers an online search tool to find CFPs by ZIP code as well as specialty. In addition, Garrett Planning Network and the CFP Board’s Let’s Make a Plan online tool also offer access to CFP directories. Look for someone who has experience helping beneficiaries like yourself and be sure to ask them these important questions to help vet them during the interview process. (You can use this free tool to get matched to fiduciary advisers, from our ad partner SmartAsset, as well as sites like CFP Board and NAPFA.)
Have an issue with your financial planner or looking for a new one? Email questions or concerns to picks@marketwatch.com.
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