Trust Administration – Helping Your Successor Trustee be Prepared

Even if you have created a well-designed estate plan that achieves your goals, you may still wonder how to ensure your plan will be administered as you expect. If you have named a family member or loved one as your successor trustee, will that person be capable of carrying out their fiduciary responsibilities during a time of emotional distress and mourning? If you have chosen a professional trustee, how do you know your trust will be administered smoothly and according to your wishes? To get the most out of your trust, be sure to work with a qualified attorney who can assure you they are prepared to help your successor trustee wind down your affairs, administer your trust, and ensure your beneficiaries have what they need during the administration process. 

The trustee you name will have fiduciary duties, owed to the trust beneficiaries, that must be upheld throughout the trust administration process. The trustee must administer the trust according to its terms and cannot use the trust for their own benefit. As well, the trustee must deal with all beneficiaries impartially. 

These are some of the more important trust administration duties your trustee will have:

  • Locating your estate planning documents (trust document, will, etc.). You can help by letting your trustee know where these documents are kept and by giving the trustee your attorney’s contact information.


  • Collecting other important documents such as insurance policies, real estate deeds, car titles, bank and investment account statements, and tax returns.


  • Meeting with your attorney to determine the strategy for administering your trust and to prepare the legal documents needed to carry out that plan.


  • Preparing a list of creditors and arranging to pay off any debts.


  • Preparing lists of property, accounts, jewelry, and other valuables, and obtaining a professional valuation of these items, when needed.


  • Filing all the necessary tax returns and paying any taxes due. This could include not only the trust income tax return and the estate tax return, but also a final income tax return.


  • Maintaining the required trust accounting.


  • Understanding what property and money are included in the trust, and ensuring things are allocated and transferred to your beneficiaries in a way that reflects your intentions as expressed in the trust.

While this list may seem intimidating, a qualified attorney can help guide your trustee successfully through each step in the process. 

If you have not recently reviewed your property and assets, trust funding, choices of trustees and beneficiaries, and the structure of your plan, we would encourage you to contact our office for a free consultation.

We would also invite you to download a free copy of our Successor Trustee Manual from our website at At Kling Law Offices, our goal is to help you plan well and then to help your successor trustee carry out those plans so you can have the peace of mind you deserve.

A Win for Taxpayers: Transfer Tax Clawback Eliminated

In 2017 when the Tax Cuts and Jobs Act (TCJA) was signed into law, it made significant changes to gift and estate transfer taxes. These changes were effective starting in 2018 and continue through 2025. One of the biggest changes was doubling the basic exemption amount—meaning how much can be transferred free of the gift, estate, and generation-skipping transfer taxes. This exemption went up from $5 million to $10 million. With adjustments for inflation, the 2019 exemption is $11.4 million for individuals and $22.8 million for married couples. Uncertainty was creeping in, however, as the TCJA will “sunset” on December 31, 2025. Starting on January 1, 2026, the basic exemption amount will revert to 2017 amounts and taxpayers have been unsure how the IRS will address lifetime gifts once the exemption amount falls back to a lower level. 

The concern with making large gifts prior to the TCJA’s sunset was whether the IRS would attempt to “clawback” a portion of these gifts if the lifetime gift amounts exceeded the exemption amount in effect at the time of the gift-giver’s death. For example, if someone leaves a $3 million estate, makes $8 million in lifetime gifts during 2018 when the exemption amount is $11.4 million and passes away in 2019, no tax will be due. The calculation works like this: $3 million estate + $8 million lifetime gifts = $11 adjusted taxable estate. With an exemption of $11.4 million, there remains $400,000 of unused exemption amount and no tax is due. On the other hand, if the gift-giver was to pass away in 2026 when the exemption amount has reverted to $5 million (ignoring inflation adjustments for the purposes of this example), it was unknown whether the IRS would argue tax was due on the value of the estate that exceeded the $5 million exemption ($11 million taxable estate – $5 million exemption = $6 million the IRS might claw back as taxable).

In good news for taxpayers, Final Regulations became effective on November 26, 2019, that clarifies there will be no clawback of lifetime gifts that exceed the exemption amount in effect at the time of the gift-giver’s death. Thus, if you make $8 million in gifts today that are sheltered by the cumulative $10 million exclusion and pass away after 2025, these special rules will allow the basic exclusion amount to be equal to the amount you gifted ($8 million) instead of applying only the $5 million exemption available in 2026. 

As such, the current exemption levels present a compelling opportunity for wealthy families to be proactive in making lifetime gifts. Gifting is an effective strategy to reduce the value of your estate during your lifetime while also providing for loved ones who may have meaningful uses for the gift. Because the TCJA will sunset in 2025, this is potentially also a “use it or lose it” opportunity. If you are interested in “using it” or learning more, please contact Kling Law Offices for a complimentary consultation on wealth preservation and transfer strategies. 

Legacy spelled with wooden blocks

Leaving an Ethical Will as Part of Your Estate Plan

In estate planning, we spend a lot of time working on the provisions of your will and trust documents. Expressing your intent in these documents is vitally important to ensuring your wishes are carried out. We also encourage our clients to talk to their loved ones about their planning. Letting your beneficiaries know your plans and wishes, at age-appropriate levels, can be the key to a smooth transition at a difficult time. Another way to express your wishes is through an “ethical will.” Not to be confused with a legal document, the ethical will is non-binding and usually takes the form of a letter (sometimes called a “legacy letter”) that shares your history, feelings, wishes, and advice.

The use of ethical wills dates to ancient biblical times and continues to be a significant part of Jewish tradition and education. While ethical wills began as letters from parents to their children, supplying moral instruction and life wisdom, they are often used more broadly today. Your ethical will might tell your life’s story, recording how the twists and turns you encountered led you to be the adult your children know as a parent. Alternatively, it might be a compilation of thoughts and commentary of all the essential things you want to say to your loved ones. Or, your ethical will could simply be an explanation of your final wishes—your chance to be fully prepared for the end of life. No matter the style you choose, an ethical will can have a lasting impact on your loved ones.

From the lawyer’s standpoint, we encourage the communication an ethical will provides, but caution against writing anything that contradicts your estate planning documents. Legally, your Last Will and Testament, trust, living will, advance directive, and powers of attorney will explain your wishes and make clear what decisions should be made on your behalf if you are unable to act. These documents are the cornerstone of your legacy and give your loved ones clarity. It is important that your ethical will not call into question the instructions, decisions, and gifts set out in your legal documents. Rather, your ethical will is a means to communicate ideas that are important to you and should complement the bequests and legal matters your estate planning documents address. Leaving an ethical will for your loved ones can help you say goodbye in a loving, meaningful way.

If you are ready to create your estate plan and want to explore making an ethical will as part of that plan, contact our office today. By talking through your goals and desires, we can help you implement a plan that is tailored to your personal family situation. By creating a sound estate plan, you can give your loved ones a roadmap for administering your estate; by creating an ethical will, you can leave them a piece of your heart. No matter which way you want to plan, our goal is to give you the peace of mind you deserve.

Life Insurance as part of estate planning

Life Insurance as Part of Your Estate Plan

In estate planning, what we do revolves around your wealth, how it might grow in the future, and what you want to provide for your heirs. When you have substantial wealth and want to pass on substantial wealth, there are lots of options. Since estate planners are not clairvoyant, deciding which options to employ generally comes down to matching your needs and desires with the currently available tools. Many times, the tools we choose invoke a “hedging strategy” that helps balance the “what ifs” (what laws will be in effect when I die) with the certainties (that I will die).

An important hedging tool can be the purchase of life insurance. In this instance, we are referring to permanent life insurance (aka “whole” life insurance), as opposed to term life insurance. While term insurance is viewed as an expense, strategically designed life insurance is a financial instrument that is an investment in the future. This forward-focus must be recognized: you will not benefit from the insurance; it is for someone else. For anyone who has the wealth to design their estate plan around legacy assets, the key is that life insurance can protect against the erosion of the value of other assets in the estate while providing its own financial return.

Life insurance can help hedge against a loss of estate value in a number of ways. Changes in tax laws that affect income, capital gains, or estate taxes are possible every 4 to 8 years with government leader changes. Subsequent generations may be interested in entrepreneurial opportunities that would alter the liquidity of your estate, or a sudden, severe health issue could significantly decrease your estate’s value – not to mention, the simple math of generational divides means familial assets dilute over time. While none of these possibilities may bother you, life insurance can provide a cash infusion that bolsters generational wealth – the hedge that will fill any unexpected gaps.

Life insurance can also be used to support specific estate or business succession strategies. For example, if only 2 of 3 children are involved in a closely held business, their interests may diverge between growing the business and accessing distributions. The children’s interests can be “equalized” by giving the non-involved child cash from life insurance while giving the involved children the business. Life insurance proceeds can also pay the estate and capital gains taxes owed on retained assets, thereby significantly increasing the net-inheritance to beneficiaries. Since there is no asset as flexible as cash, life insurance creates options for the executor, which is always favorable. 

Life insurance is unique: it does not compare to other assets in your estate. Because of this, it may be the appropriate way to meet your multi-generational estate planning goals. Choosing an investment that will so clearly generate options for your executor can be hard to argue against. If you are in the position to consider legacy planning, contact our office for a consultation about whether life insurance should have a place in your long-term planning.

Stack of books on shelf

The Words of Your Estate Plan Matter

Did you know that best-selling author Tom Clancy’s estate ended up being the focus of a massive tax bill dispute between four of his children and his second wife? The controversy arose from an awkwardly written phrase in a codicil to Clancy’s will. The original will divide Clancy’s assets into three trusts, leaving one-third to his wife (marital trust), one-third to his wife during her lifetime and then to the children (a family trust), and one-third to be divided equally among his four children from a previous marriage (the children’s trusts). Considering Clancy’s estate was valued at $86 million, there were plenty of assets to go around. There was also a big tax bill due.

The tax exemptions available at the time meant that between $11.8 to $15.7 million in taxes were due, depending on how those taxes were allocated among the trusts. One key sentence in the codicil read, “No asset or proceeds of any assets shall be included in the Marital Share of the Non-Exempt Family Residuary Trust as to which a marital deduction would not be allowed if included.” This one sentence spurred two years of litigation over which trusts would bear the tax burden.

Clancy’s children from his first marriage wanted to share the tax burden, having the family trust pay a share and each of the children’s trusts pays the remainder. Under this construction, the total tax bill would have been $15.7 million. Clancy’s widow, however, asserted that her husband’s codicil confirmed that both the marital trust and the family trust qualified for the marital deduction and should not pay any tax. That position meant the children’s trust would be required to pay $11.8 million in taxes on the approximately $28.5 million they initially inherited.

Ultimately, the Maryland Court of Appeals issued its decision in favor of Alexandra Clancy. While the decision meant less tax overall would be owed, the burden for paying the entire $11.8 million tax bill rested on only four of Clancy’s children (through trusts holding their inheritances).

For a writer, whose fortune was built upon words, it is surprising that what Clancy intended might have been different from what was actually written. The lawyer who wrote the codicil testified that the intent was for both the marital trust and the children’s trust to share the tax burden. The court, however, decided that the disputed language meant all estate taxes had to be paid by the children’s trust because that was the only way to fully protect the marital deduction under federal estate tax laws.

This “celebrity experience” illustrates how much the wording of your documents matters. The law turns on what your documents actually say, not on what you “hoped” or “intended.” That is why it is crucial to work with an experienced estate planning attorney. Quality matters and it is the factor that will prevent battles between heirs who manage to read the same language in different ways. Please contact our office for your consultation with a qualified, and quality, estate planning attorney.