January | 2023 |

How to Choose a Non-Professional Trustee

Who is the RIGHT person to manage your estate?

An important, and often confusing, step in an estate plan is selecting a trustee. A trustee is responsible for managing a trust on behalf of its beneficiaries and distributing assets according to the trust’s specifications (see our article “What does a Trustee do after the Settlor dies?”). Finding the right person to be in charge can be the difference between positive and detrimental family relations after you depart, so take the time to select the right person.

In our next issue of “Estate Planning & Probate News,” we’ll discuss how to select a professional fiduciary. In this issue, we’re assuming you’ve made the decision to hire a non-professional trustee.

Family member or friend?

It is true that your trustee should be someone that you trust implicitly to be in charge – but that is just the starting point. An “old school” approach is to select the oldest child, regardless of whether the person has the best skill set to be the trustee. Unfortunately, this approach is often one of the most likely options that can result in infighting, misunderstandings, poor management and litigation (especially if your children don’t get along). For instance, the child who steamrolls everyone else, doesn’t really listen, maybe has some financial messiness of their own (divorce, too much debt, can’t balance a checkbook) is not a good candidate for a trustee and certainly not the person who’s going to treat everyone in the family loyally and neutrally. If you do want to select a child, it is highly recommended that you evaluate your selection based on criteria other than birth order.

Other non-professional trustee options include non-immediate family members, friends, and trusted business colleagues. Usually these are selected because they respect you and your goals, understand your family’s dynamics, and will not charge a trustee fee.

Top Ten Factors to Consider

It is clear that choosing a non-professional trustee can be tricky. There is a lot consider, so let’s look at the “top ten” factors that many trustors look at when choosing a non-professional trustee:

Location: It doesn’t help when the trustee is hundreds of miles away from your property and possessions. That means that the trustee will have to make many (costly) trips, or more likely, must rely upon local help – who possibly should have been selected as trustee in the first place.
Financial acumen: If you’re considering who should act as trustee, you likely have a reasonable amount of financial assets that require knowledge and expertise. Since the trustee is responsible for gathering all your assets, paying off your debts, and distributing your assets per your wishes, selecting someone who is good at finances is a great step.
Organizational abilities: Estates can be complicated, so it can be useful to select an individual who is effective in managing everything from bill paying to real estate disposition to handling financial institution investments.
Age and health: Quite often a trustee needs to get their hands dirty, sorting through furniture, moving boxes to find records, and other activities that are impractical to ask a laborer in to help every time this is needed.
Flexible schedule: Can the trustee literally drop everything to help with your estate? Handling an estate can be very time intensive, especially in certain phases such as asset disposition.
Communication and social skills: Talking to distraught family members in a diplomatic manner can be tough in the best of circumstances. Common courtesy sometimes gets thrown out the window when a trustee has to work with relatives.
Common sense: Unfortunately, some non-professional trustees demonstrate very poor judgment, getting themselves in a lot of trouble and causing big problems for the estate.
Fairness and objectivity: To do the job effectively, a trustee needs to be objective. Decisions need to be made fully on behalf of all the beneficiaries and not out of any self-interest. This can be difficult when a family member is the trustee.
Care about you and your legacy: Settling your estate may take one year or longer. Will the trustee be willing to devote the energy to settle it correctly, vs. rushing to get it done? Do you want a trustee who will take care in distributing your personal possessions – or are you comfortable with “just take it all to the dump”? Believe it or not, the latter happens more frequently than you might think.
Willingness to get legal guidance: The potential financial consequences of legal or tax errors by a nonprofessional executor not only hurt the beneficiaries of the estate – the trustee could be responsible personally for taxes generated because of his or her mistake, and fiduciary lawsuits are the largest source of probate/trust lawsuits. Retaining a trust attorney is generally an advisable move.

Specialized Estate Administration Expertise

All of your best laid plans can result in a firestorm if you don’t put the right person in charge of your estate. The good news is that Mortensen & Reinheimer, PC is ready to help each step along the way. Please contact us at (714) 384-6053 to make an appointment, or use our online contact form. Our website is http://www.ocestateplanning.net.

About the author:
Tamsen R. Reinheimer, Attorney, is a Certified Specialist in Estate Planning, Trust & Probate Law (The State Bar of California Board of Legal Specialization). She has significant experience in all aspects of estate planning, trust administration, and probate. Contact Tamsen at tamsen@ocestateplanning.net.

BUDGETING FOR THE NEW YEAR – 5 KEY TIPS – prospects

BUDGETING FOR THE
NEW YEAR – 5 KEY TIPS

budget v actual

What can your business do in January to improve all of 2023?

A budget isn’t just about planning for potential expenses or tracking results – it’s about providing a tool to actively manage your business profitability, month-in and month-out. Here are some key tips to help your business in 2023:

Budget vs. Actual

An important structure of your budget is to track “budget vs. actual” (as opposed to this year vs. last year). This helps to manage the finances of your business accurately and strategically. By analyzing the monthly differences between your agreed-upon budget and the actual amounts out in the field (i.e., your “variance), management can catch financial issues early on and develop solutions before they become bigger problems.

The “budget” column is the predicted amount based on strategic objectives tempered by historical income and expenses, while the “actual” column reflects real data. Whether the variance between the two is minor (i.e., due to unforeseeable variations in spending and financial activity) or significant (which should generally lead to immediate actions), management will be able to review and then take efforts to adjust operations in order to meet profitability goals.

Variances in expenses can be caused by several factors including: materials/services market dynamics (e.g., raw materials costs), labor costs (i.e., mismanaged overtime), and machinery and equipment (breakage/repairs and replacement). By knowing the difference between your projected budget and actual spending, management can:

Improve financial reporting capabilities
Determine causes and take actions to improve future results
Reduce risk in corporate finances

On the income side, variance analysis can sometimes generate surprising results. You may find that a sudden drop in certain customer segments that wasn’t detected, or identify growth opportunities to take advantage of in the future.

5 Steps to a Better Budget
There are several steps that any business can take to make the budgeting process more effective. Here are five that MyCFO has found to be helpful:

Check industry standards (i.e., comparative data from similar size companies in your field) to see how you can improve performance.
Involve employees (gain their input and commitment)
Define and understand risks (i.e., strategically considering key factors that could adversely affect performance)
Anticipate your sales cycle and cash flow
Constantly revisit your budget (at least monthly, more frequently depending on your business dynamics)

Recent Engagements
See our related article on “Budgeting for Maximum Profit!” to see how MyCFO assists clients with budgeting – and how we can help you!

Planning for Success
Successful businesses create annual budgets and regularly monitor performance. Would you like to take steps to make 2023 a profitable, successful year for your business? The professionals at MyCFO can offer invaluable expertise in the budgeting process. Contact us today for a free initial consultation!

BUDGETING FOR THE NEW YEAR – 5 KEY TIPS – clients

BUDGETING FOR THE
NEW YEAR – 5 KEY TIPS

budget v actual

What can your business do in January to improve all of 2023?

Budget vs. Actual

Improve financial reporting capabilities
Determine causes and take actions to improve future results
Reduce risk in corporate finances

5 Steps to a Better Budget
There are several steps that any business can take to make the budgeting process more effective. Here are five that MyCFO has found to be helpful:

Check industry standards (i.e., comparative data from similar size companies in your field) to see how you can improve performance.
Involve employees (gain their input and commitment)
Define and understand risks (i.e., strategically considering key factors that could adversely affect performance)
Anticipate your sales cycle and cash flow
Constantly revisit your budget (at least monthly, more frequently depending on your business dynamics)

Recent Engagements
See our related article on “Budgeting for Maximum Profit!” to see how MyCFO assists clients with budgeting – and how we can help you!

BUDGETING FOR THE NEW YEAR – 5 KEY TIPS – refs

BUDGETING FOR THE
NEW YEAR – 5 KEY TIPS

budget v actual

What can your customers do in January to improve all of 2023?

A budget isn’t just about planning for potential expenses or tracking results – it’s about providing a tool to actively manage business profitability, month-in and month-out. Here are some key tips to help your customers’ businesses in 2023:

Budget vs. Actual

An important structure of a budget is to track “budget vs. actual” (as opposed to this year vs. last year). This helps to manage company finances accurately and strategically. By analyzing the monthly differences between agreed-upon budget and the actual amounts out in the field (i.e., “variance), management can catch financial issues early on and develop solutions before they become bigger problems.

Variances in expenses can be caused by several factors including: materials/services market dynamics (e.g., raw materials costs), labor costs (i.e., mismanaged overtime), and machinery and equipment (breakage/repairs and replacement). By knowing the difference between a projected budget and actual spending, management can:

Improve financial reporting capabilities
Determine causes and take actions to improve future results
Reduce risk in corporate finances

On the income side, variance analysis can sometimes generate surprising results. Management may find that a sudden drop in certain customer segments that wasn’t detected, or identify growth opportunities to take advantage of in the future.

5 Steps to a Better Budget
There are several steps that any business can take to make the budgeting process more effective. Here are five that MyCFO has found to be helpful:

Check industry standards (i.e., comparative data from similar size companies) to see how can improve performance can be improved.
Involve employees (gain their input and commitment)
Define and understand risks (i.e., strategically considering key factors that could adversely affect performance)
Anticipate the sales cycle and cash flow
Constantly revisit a budget (at least monthly, more frequently depending on business dynamics)

Recent Engagements
See our related article on “Budgeting for Maximum Profit!” to see how MyCFO assists clients with budgeting – and how we can help!

Planning for Success
Successful businesses create annual budgets and regularly monitor performance. Would your customers like to take steps to make 2023 a profitable, successful year for their businesses? The professionals at MyCFO can offer invaluable expertise in the budgeting process. Have your customers contact us today for a free initial consultation!

New California law limits Conservatorships after Britney Spears saga

What do conservators and conservatees need to know?

AB 1194, approved recently by Governor Newsom, makes important changes to California conservatorship laws. This bill was spurred by recent events surrounding Britney Spears’ widely publicized conservatorship and the alleged conservatorship abuse. What does this bill mean to conservators and conservatees?

Why did the law change?

Pop star Britney Spears had been under a widely publicized conservatorship that allegedly was not only unnecessary but being used to financially exploit and control her personal life. As this court battle unwound, the public wondered how many others might also be suffering under such a restrictive conservatorship arrangement? AB 1194 was enacted, among other goals, to address this possibility under California conservatorship law.

What are the major changes in the law?

Overall, AB 1194 is designed to empower conservatees in decisions being made about their lives, as well as hold private fiduciaries further accountable for their actions (a person under conservatorship is a “conservatee”, generally referring to an adult, while a “ward” is used to refer to a minor child). It provides greater protection for conservatees placed under court-ordered conservatorships and promotes less restrictive alternatives.

How are conservatees empowered? Conservatorships are designed to be a necessary last resort to protect the vulnerable. These are complex legal arrangements in which a judge appoints an individual or organization to care for another adult (known as a conservator) who is deemed unfit to care for themselves or to manage their own finances.

The new law requires that judges document all alternatives to a conservatorship before granting one. In other words, the law is partially aimed at helping conservatees understand that there are other ways to get support to make decisions and preserve their rights. This is accomplished through “supported decision-making” which is a tool that allows people with disabilities to choose trusted individuals to support them in making decisions. The law requires conservators to talk to the conservatee about decisions and, to the greatest extent possible, take their wishes into consideration unless it endangers their health and safety. Advocacy groups note the law’s importance of ensuring the autonomy of people with disabilities.

AB 1194 also makes it easier to dissolve probate conservatorships, by granting conservatees more power to contest the establishment or maintenance of a conservatorship.

How are fiduciaries impacted? Another major change of AB 1194 is placing additional restrictions and penalties on private fiduciaries who allegedly engage in wrongful behavior that damages a ward or conservatee. This includes: disclosing fee schedules before being retained; specifying some aspects of investigations of professional fiduciaries, including possible sanctions; allowing punitive dames for a professional fiduciary who is found to have abused a ward or conservatee; and requires the Professional Fiduciaries Bureau to remove the license of a fiduciary who knowingly, intentionally, or willfully breaches a legal or fiduciary duty to an elder or dependent adult, and in cases where the professional fiduciary is found to have caused physical, monetary, or even mental suffering to a client through gross negligence or gross incompetence

Key Takeaways for Conservatorships

The court will look for the least restrictive action for the conservatee, in terms of impacting constitutional rights. For example, if minor assistance is needed and a family member is willing to help, then that will be the likely course vs. a conservatorship.
The court will do their own homework in seeking what is best for the conservatee, including sending out an evaluator for a report, requesting health records, and appointing an attorney to represent the conservatee.
Any intent to “capture the king or queen and take all the money” (i.e., become a conservator for personal financial gain) will eventually prove to be disastrous for that individual.
Conservators must be bonded, creditworthy, and maintain exceptional and regularly updated financial records.

Expertise in Conservatorships

Conservatorships are designed to be useful legal tools to protect the vulnerable. Mortensen & Reinheimer, PC understands these special situations. For assistance, please contact Mortensen & Reinheimer, PC at (714) 384-6053 or use our online contact form. Our website is http://www.ocestateplanning.net .

About the author:
Weily Yang is an attorney at Mortensen & Reinheimer, PC, an estate planning and probate law corporation in Irvine. Weily is a zealous advocate for individuals with special needs. His primary focus is special needs trusts and probate conservatorships together with estate planning, trust administration, and probate. He can be reached at weily@ocestateplanning.net.