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By Liza Horvath


Mind the Gap


There is a period of time during which seniors are most vulnerable to financial abuse and, unfortunately, it is also the time when such exploitation can easily go undetected. Few attorneys address this potential problem when they are creating estate plans for clients and the results are causing financial ruin for many seniors. Further, families can be seriously damaged by mishandled finances and the abuse often destroys family relationships – sometimes irrevocably.


This period of time is referred to as “the gap” in estate planning. As seniors age, some will succumb to dementia or another debilitating disease. If you have created a revocable trust as part of your estate plan and succumb to an illness that renders you unable to effectively deal with your financial affairs, the named successor trustee in your documents can simply step in to pay bills, manage finances and make sure that you are being taken care of appropriately. There normally is no need for court intervention and often times few people are even aware that someone else is now handling the finances.


The simplicity of having your successor trustee simply step in and take over your finances and the privacy afforded by this planning are some of the reasons that the use of revocable trusts has gained so much popularity. Regrettably, the ease of taking over and the private nature of trusts has also opened opportunities for immoral or unscrupulous acts by the very people in whom you have placed your trust. Sometimes successor trustees simply make mistakes because they are uninformed or inexperienced – but “the gap” opens wide the chance for a breach of trust – intended or otherwise.


The reason the gap exists is simply due to a confluence of California probate law, trust draftsmanship and our understandable desire for privacy. When we have a trust and we die, the trustee is bound by the probate code to provide information and accountings of their management of our trust assets to the ultimate beneficiaries of the estate. If we become incapacitated, unless our trust document states otherwise, the trustee has no duty to account to anyone but us – and if we are incapacitated – we are not in a position to detect if assets are being mishandled.


One of the reasons this gap in accountability exists is because most of us do not want our children or the eventual heirs of our estate knowing what we have – we want our finances kept private. The law presumes that even if we become incapacitated – we may at some point regain capacity and, if we do, would we want all that information divulged? A simple remedy could be to ask your attorney to include a line or two in your trust document that states that at any time there is someone other than you acting as trustee, that an accounting of trust assets and activities must be rendered to your attorney, accountant or someone else you trust. Mind the gap - a second set of eyes not only helps you – it keeps your trustee accountable, on track with your wishes and can keep the trustee above the scrutiny of family and heirs.


Liza Horvath has over 30 years experience in the estate planning and trust fields and is the president of Monterey Trust Management, a financial and trust management company. This is not intended to be legal or tax advice. If you have a questions call (831)646-5262 or email liza@montereytrust.com










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