Ask Liz Weston

Get smart with your money

Estate planning

Q&A: In estate planning, finding the right trustees can be a challenge

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Dear Liz: My partner of 37 years and I have shared a revocable living trust for much of that time. It has become necessary to update our successor trustees, since one has passed away and the second is our age. It has been pointed out that we ought to name younger people who are more likely be around when the need arises. This is becoming the hard part. Both of us have a single sister but they are also seniors, so not the best long-term choice. Nieces and nephews live out of state and are not the ideal choice, either. I am wondering about designating this task to an accountant or attorney firm but have absolutely no idea how to make this happen.

Answer: Yours is a common issue for “solo agers” — people who don’t have reliable adult children who can take over in case of incapacity or death.

Naming someone younger does increase the odds the person will be able to serve when the time comes, but nothing is guaranteed. That’s why Los Angeles estate planning attorney Burton Mitchell urges his clients to focus first on naming the best choices, rather than eliminating people because of age or geography. He also recommends naming multiple alternates. Circumstances change, and your first choice may not be available when you need them.

You want successor trustees who are trustworthy, dependable and honest. They don’t have to be relatives: Friends or professionals may be good choices if they’re willing to serve. Jennifer Sawday, an estate planning attorney in Long Beach, urges you to ask first before naming a tax pro, attorney or financial advisor, since many are unable or unwilling to serve in this capacity for clients.

Professional fiduciaries may be another option, or you can look for professional or corporate trustees. Your local bank may offer trust administration services, for example. These options obviously would be more costly than a friend or family member. Sawday recommends consulting a knowledgeable estate planning attorney who can recommend trust officers or professional fiduciaries for you to interview.

Even if you opt for a professional to handle the financial side, you may prefer to have a friend or relative serve as your healthcare decision maker should you become incapacitated. In that case, geography may matter, since the person may need to get to the hospital quickly or spend an extended period advocating for you. Even here, though, it’s more important to name the right people, rather than necessarily the closest ones. You want someone who understands your priorities and who will fight to ensure those priorities are honored. Someone older who understands the concept of a “good death” may be more appropriate than someone younger who doesn’t. (Katy Butler’s book “The Art of Dying Well” has helpful information for this choice.)

If you don’t have enough people in your life you can rely on, there’s still time to turn that around. As a fellow solo ager, certified financial planner Carolyn McClanahan recommends building a mixed-age community. McClanahan says this means making “care deposits” starting in your 50s by volunteering and mentoring younger people.

“If you come from a place of giving, when you get older, that tribe is willing to look out for you,” she says.

Q&A: Giving your money away? The IRS wants to know about it.

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Dear Liz: You recently wrote that “the only givers who have to pay taxes are those who have given away millions in their lifetimes.” I tend to be generous with my offspring who are the beneficiaries of my trust. For example, I gave a down payment on a house to my son last year. Because of long-held rental property investments, my estate is probably close to the $13-million lifetime limit. Since lifetimes don’t expire until we die, and I plan to live to 120, does this mean that until I give away over $13 million in cash, I don’t have to report or pay taxes in any given year on gifts?

Answer: Not quite.

You have to file a gift tax return to report any gift over the annual limit, which in 2024 is $18,000 per recipient. Gifts don’t have to be in cash to be reportable. If you’d given your son a house instead of a down payment, you’d still need to file a gift tax return.

Reportable gifts are deducted from your lifetime gift and estate exemption, which is $13,610,000. Once you deplete that exemption, you would have to pay gift taxes on any gifts above the annual limits. Even if you don’t deplete the exemption, reportable gifts will reduce the amount of your estate that can avoid estate taxes. You’d be wise to get advice from an estate planning attorney about how to handle gifts.

Q&A: Long overdue to dust off that living trust

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Dear Liz: It’s been over 25 years since we paid for a living trust from a lawyer. We have since misplaced the original document. Our house is all paid up and we have one child. In case of our death, can he request a copy of the living trust from the county register?

Answer: Some states do allow living trusts to be registered with local courts, but typically these documents are private and never filed with a government agency.

You’re long overdue for an updated document, in any case. Estate plans should be reviewed every three to five years, after major life changes and whenever estate tax laws change — as they did in 2001, 2010 and 2017.

Q&A: After creating a living trust, don’t forget to review it

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Dear Liz: My husband and I created a living trust about six years ago. How often do we need to review it with an attorney if we’ve had no major life changes?

Answer: You’re already overdue.

The standard advice is to have your attorney review your trust every three to five years or after major life events, including marriage, divorce, a birth, a death, a change in your financial status or a move across state lines. You also should review and update your schedule of assets to reflect accounts you’ve opened and closed in the intervening years.

Q&A: Big banks can cause big headaches when it comes to retitling accounts

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Dear Liz: Someone recently asked whether to make a bank account “payable on death” or put it in their living trust. Our bank has refused to allow us to retitle our accounts so we can have them in our trust. Is “payable on death” our only option?

Answer: No, but you may need to move your accounts to another firm.

Some large national banks do balk at retitling bank accounts, notes Jennifer Sawday, an estate planning attorney in Long Beach. By contrast, many smaller banks, credit unions and big brokerage firms have no problem retitling accounts to living trusts.

If your bank isn’t willing to help you now, just imagine how difficult it will make matters for your loved ones after you die and they need to access your accounts, Sawday says.

If you’re reluctant to leave your big bank entirely, consider keeping a small amount of money in a day-to-day checking account while putting the bulk of your cash in a more trust-friendly bank.

Q&A: A follow-up question about payable on death accounts

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Dear Liz: I’ve worked for various broker dealers for 33 years and have never heard of a “payable on death” account. Did you mean transfer on death (TOD) in your previous column?

Answer: I did not.

Payable on death accounts are similar to transfer on death accounts since both allow owners to designate beneficiaries and avoid probate, the court process that otherwise follows death. But the two accounts are meant for different types of assets. Bank accounts use the payable on death designation, while investment accounts are transfer on death. Some states have transfer on death registration for vehicles and transfer on death deeds for real estate.