Is it Wise to Have Three Grown Children Named Co-Executors of Your Will?

Is it a good idea to have your three grown children listed as co-executors of your will? This may get somewhat confusing when probating a will, if there are multiple executors.

What are the pros and cons to choosing one child to act as your executor, instead of selecting all three of your children to act together?

nj.com’s recent article asks “I’m planning my will. Is it bad to have more than one executor?”

The article explains that the duty of the executor is to gather all the decedent’s assets, pay any outstanding debts and liabilities and then account for and distribute the remaining estate to the beneficiaries, according to the instructions in the decedent’s will.

The executor is allowed to hire professionals and others to help with tasks, like completing a decedent’s final income tax return or preparing the home for sale.

When you have multiple executors appointed, these tasks can be assigned to each person to lessen the burden of the many duties and responsibilities that an executor has.

On the downside, if those appointed can’t work together easily and without strife, appointing multiple siblings can make the administration of an estate much more difficult due to arguments, conflicts of interest, one sibling taking the lead to the resentment of the others or one executor undermining another executor’s actions.

The problem is, in situations where the siblings don’t get along, designating one of them as executor can cause hard feelings and conflict. It’s not uncommon for those siblings who aren’t named as executor, to complain about every decision made by the named executor or delay in the administration of the estate.

If there are multiple executors, the majority rules. That can avoid deadlock. Simple math in this case says that you want to avoid naming an even number of executors or name a person who can act as the tiebreaker.

Even with a “majority rules” agreement among the executors, there are some financial institutions and other entities that may require all the executors to sign documents and/or checks on behalf of the estate. This can become burdensome and inefficient, if there are multiple executors.

Speak with your estate planning attorney about your family dynamics and get their opinion about what would be best in your personal situation.

Reference: nj.com (May 22, 2019) “I’m planning my will. Is it bad to have more than one executor?”

 

Should I Leave an Inheritance to My Kids?

Some retirees make a big mistake and give their retirement savings away without considering their own income needs. Before you make gifts to others, take a look at how much to spend on yourself. Determine how much you need to save and how much you can withdraw each year, when you retire.

Investopedia’s article, “Challenges in Leaving Inheritance to Children,” says to consider the effect of inflation and taxes and maintain a diversified portfolio of growth and income investments to help your portfolio keep pace with inflation.

The biggest unknowns with retirement income and children’s inheritance are unexpected illness and high healthcare costs. Government programs are frequently not helpful in paying for nursing homes and other forms of long-term medical care. Medicare covers nursing home stays for a very limited period. Medicaid mandates that you spend nearly all of your own money, before it will pay for long-term care. You can’t just move assets to family members to qualify for Medicaid, because the program restricts benefits, if asset transfers were made within five years prior to applying for Medicaid. The rules are tricky, when it comes to eligibility.

You can protect your assets from the costs of catastrophic illness with a long-term care insurance policy. However, these policies can be very expensive and have coverage limitations. Consider them carefully.

What happens if you outlive your retirement funds? With longer life expectancies, it’s crucial to try to manage retirement-plan withdrawals, so you do not deplete all of your assets during your lifetime.

You could purchase an immediate annuity with some retirement money to ensure a guaranteed amount, for at least as long as you live. Some pension and retirement plans may allow you to stretch payments over single or joint life expectancies, rather than receive the proceeds as a lump sum.

If you expect to inherit assets from your parents, you may be in a better position financially than someone who doesn’t expect to receive an inheritance. Note that certain inherited assets, like stocks and mutual funds, are eligible for a favorable tax treatment called a step-up in basis. If you are leaving assets to others, this could mean significant savings for heirs.

You may also want to set up a trust to control distributions from the estate to the surviving spouse and children. If you or your spouse have children from previous relationships but don’t have a prenuptial agreement, trusts can ensure that specific assets are passed to designated children.

You may share your wealth with others by gifting assets, creating a trust, deferring income or purchasing life insurance or tax-deferred variable annuities.

Talk to an experienced estate planning attorney  to determine the best options for your circumstances.

Reference: Investopedia (November 26, 2018) “Challenges in Leaving Inheritance to Children”

 

An Estate Plan Directs Assets According to Your Wishes

Anyone who has any assets they want distributed should have an estate plan, regardless of the size of their estate. Having a will and an estate plan created by an experienced estate planning attorney is the easiest place to start, says the Observer-Reporter in the article “Set up an estate plan so your assets go where you want.” Without a will, the state will decide what happens to your assets, and it may not be what you wanted.

If your will was done more than four years ago and was never updated, it may lead to some unwanted results. If people you named as beneficiaries or executors have died, or if there were divorces in your family, these are examples of changes that should be addressed in the estate plan.

Many people don’t know that insurance policies, annuities, 401(k), or IRA accounts that have a designated beneficiary are going to the designated beneficiary, regardless of what is in the will. If the will says everything in the estate should be divided equally between children, but one child was named the beneficiary on the life insurance policy, then only the named child will inherit the insurance policy.

Another part of an estate plan that is needed to ensure that your wishes are followed, is a financial power of attorney and a health care power of attorney. The financial power of attorney gives the person you name the legal ability to make financial decisions for you, if you are incapacitated. The health care power of attorney, similarly, gives the person you name the power to make health care decisions for you, if you cannot do so for yourself. A living will is another part of planning for incapacity that is a part of a comprehensive estate plan. The living will lets your wishes for end of life care be known to others.

Assets that pass to heirs through beneficiary designations do not go through the probate process. However, assets distributed through your will do so. Probate administration of an estate takes some time to complete, depending upon where you live. In some states, probate is more involved and time consuming than in others.

Another reason why people like to avoid probate is that documents, including your will, are filed with the court and become part of the public record. That’s why many people who lose a family member find themselves receiving direct mail and phone calls about buying insurance policy or selling their home.

There are ways to minimize the number of assets that pass through probate, which your estate planning attorney will be able to explain. Trusts are used for this purpose. There are a variety of trusts that can be used, depending upon your circumstances. Some are used to protect inheritances, if a person has an opiate addiction or cannot manage her own affairs. Others are used, so individuals with special needs do not receive inheritances that would make them ineligible for government benefits.

An experienced estate planning attorney can advise you in creating an estate plan that fits your unique circumstances.

Reference: Observer-Reporter (April 19, 2019) “Set up an estate plan so your assets go where you want”

 

Why Do Singles Need These Two Estate Planning Tools?

Morningstar’s article, “2 Estate-Planning Tools That Singles Should Consider” explains that a living will or advance medical directive, are legal documents that detail your wishes for life-sustaining treatment. They are documents that you sign when you are of sound mind and say you want to be removed from life supporting measures, if you become terminally ill and incapacitated.

If you’re on life support with no chance of getting better, you’d choose to have your family avoid the expense and stress of keeping you alive artificially.

Like a living will, a durable power of attorney for healthcare is a legal document that names an agent to make healthcare decisions for you, if you are unable to make them yourself.

A durable power of attorney for healthcare can provide your instructions in circumstances in which you’re not necessarily terminally ill, but you are incapacitated.

When selecting an agent, find a person you trust enough to act on your behalf when you’re unable. Let this person know exactly how you feel about blood transfusions, organ transplants, disclosure of your medical information and other sensitive topics that may arise, if you’re incapacitated.

A durable power of attorney eliminates any confusion, especially if this person is someone other than your spouse. Your doctors will know exactly who the decision-maker is among your relatives and friends.

These two documents aren’t all that comprise a fully comprehensive estate plan. Singles should regularly make certain that the beneficiary designations on their checking and retirement accounts are up to date.

You should also consider your life insurance needs, especially if you have children and/or a mortgage.

It is also important to understand that a living will doesn’t address the issues of a will. A will ensures that your property is distributed after your death, in accordance with your wishes. Ask for help from an experienced estate planning attorney.

These two documents—a living will and a durable power of attorney—can help ensure that in a healthcare emergency, any medical and financial decisions made on your behalf are in accordance with what you really want. Speak with to an estate planning attorney in your state to get definitive answers to your questions.

Reference: Morningstar (April 23, 2019) “2 Estate-Planning Tools That Singles Should Consider”

 

What Are the Six Most Frequent Estate Planning Mistakes?

it is a grim topic, but it is an important one. Without a legal will in place, your loved ones may spend years stuck in court proceedings and spend a lot in legal fees to settle your estate.

The San Diego Tribune writes in its recent article, 6 estate-planning mistakes to avoid, that without a plan, everything is more stressful and expensive. Let’s look at the top six estate planning mistakes that people need to avoid:

No Plan. Regardless of your age or financial status, it’s critical to have a basic estate plan. This includes crafting powers of attorney for both healthcare and finances and a living will.

No Discussion. Once you create your plan, tell your family. Those you’ve named to take care of you, need to know what you’ve decided and where to find your plan.

Focusing Only on Taxes. Estate planning can be much more than just about tax avoidance. There are many other reasons to create an estate plan that have nothing to do with taxes, like charitable giving, special needs planning for a family member, succession planning in the event of incapacity and planning for children of a prior marriage, to name just a few.

Leaving Assets Directly to Children. If you leave assets directly to your children or grandchildren under age 18, it can cause unintended custodian or guardianship issues. Minors can’t own legal property, so a guardian will be appointed by the court to manage the property for them, until they reach age 18. If you don’t name a guardian, the court will appoint one for you and that person may have very different ideas about how the account should be managed and invested.

Making Mistakes with Ownership and Property Titles. With many blended families, you may want to preserve assets from an inheritance as your own separate property or from a prior marriage for your children. There are many tax consequences and control issues in blended families about which you may not be aware.

Messing Up Your Trust. Many people don’t properly fund or update their trusts. An unfunded trust doesn’t do anyone any good. Assets that aren’t titled in the name of the trust don’t avoid probate.

Finally, be sure to review your estate plan regularly, and make an appointment with a local, experienced estate planning attorney  as your circumstances change.

Reference: San Diego Tribune (April 18, 2019) “6 estate-planning mistakes to avoid”

 

What Are the Five “Must Have” Estate Planning Documents?

WTHR 13’s recent article, “The 5 legal documents every adult should have” lists the five key documents involved in estate planning.

  1. General Durable Power of Attorney. This document states who you want to make decisions, if you’re unable to do so for yourself. Without it, your family may have to petition the courts to become your legal guardian, which can be time consuming and expensive. A power of attorney allows the person whom you select, to pay your mortgage or rent and your bills.
  2. Health Care Power of Attorney. This document plans for the situation, if you are unable to make your own health care decisions. You name someone you trust, like family members or friends, to do this on your behalf.
  3. Will. This says that when you pass away, here’s what I want to happen. A will states who will get your assets after your death. If you don’t have a valid will in place, the state laws of intestacy will govern what will happen to your estate—which may not be what you want.
  4. Living Will. This is the document in which you state your instructions for end-of-life care, such as life support. This document is used to make certain that your family and physicians know what you want your end-of-life care to be. A living will is much different than a will.
  5. Revocable Living Trust. This document can be important, if you’re a parent with young children and would like your assets passed down properly to your children, if you die. Typically, if children are under 18 or 21, they’re legally minors and can’t receive assets. A trust can help coordinate their receiving your property.

An experienced estate planning attorney can help you with the creation of these documents, while creating an overall plan so that your wishes are followed, your legacy is protected and your family is secure.

Reference: WTHR 13 (April 17, 2019) “The 5 legal documents every adult should have”

 

Who Can I Name as a New Executor of My Will?

MoneySense’s recent article, “Should the sole recipient of an estate be the executor too?” explains that naming someone as an executor is an extremely important duty. The task carries a lot of responsibility. With new rules that have been passed in the last year, the tax reporting and understanding of the assets in an estate is extremely important.

There are several factors to consider, when you think about whom you might name as an executor. First, is age. It’s smart to choose a person who’s younger than you. Although that doesn’t guarantee that person will outlive you, it certainly will up the odds. Ideally, you should try to find a person who is comfortable with the areas of money and tax and doesn’t easily get overwhelmed by paperwork. Since the role of estate executor can be an intense issue that takes a great amount of time, the person you choose ideally will be retired or have the bandwidth to dedicate the substantial time commitment required to do the job properly.

Based on the complexity of the assets in the estate—and the amount of planning the deceased has done to make the job a little bit easier—the winding up of an estate can take more than a year. If the assets must be probated, you’ll want the person you appoint to understand the process and liability that she’s accepting. There are multiple tax returns and filings that must be completed and filed at specific times.

There are banks that offer trust services, but these can be expensive and will take a chunk out of the estate in fees, until the last tax filing is completed. An attorney is also a good choice, but not many lawyers will take on the liability and have the time to act as an executor.

Many people ask a family member who’s either performed these duties in the past or is willing and knowledgeable enough to do things in a conscientious manner and follow through. Remember, the more estate planning that’s done in advance, the easier it makes it for an executor.

Another option is to have two or more adult children act as an executor. However, this can add some complexity to the process, because first they have to both be in agreement on every issue; second, they must both be available to make decisions and sign documents at the same time. These days you can have siblings living from Maine to Oregon, and people can travel all over the world at any time.

Make sure the person you’re considering is aware of not only your thoughts but also of the time commitment and process involved. An executor—unhappy with their role—can ask the court to remove them. However, this can result in the estate being tied up for a long time. Also, make sure you use a reputable estate planning attorney.

Reference: MoneySense (March 27, 2019) “Should the sole recipient of an estate be the executor too?”

 

Why Are Wills So Important?

Drafting a last will and testament is an important part of estate planning. However, even with the critical importance of having a will, a recent AARP survey found that 20% of Americans over the age of 45 don’t have one.

Detailing your wishes helps to eliminate unnecessary work and potential stress and anxiety, when a loved one dies. Wills let your heirs act with the decedent’s wishes in mind, and a will can make certain that assets and possessions wind up in the right hands.

The Oakdale Leader’s recent article, “Things People Should Know About Creating Wills” says that when you meet with an experienced estate planning attorney, he or she will discuss the following topics with you:

Assets: Create a list of known assets and determine which assets are covered by your will and which are to be passed through joint tenancy, beneficiary designation, or a living trust. For instance, life insurance policies or retirement plan proceeds will be distributed directly to the named beneficiaries. A will also can cover other assets, such as photographs, personal items, autos and jewelry.

Guardianship: Parents’ wills should include a clause that states who they want to become guardians of their minor children.

Pets: Some people use their will to state the guardianship for their pets and to leave money or property to help care for them. However, it is important to remember that pets don’t have the legal capacity to own property, so don’t give money directly to pets in your will. In some states, you can establish a pet trust.

Funeral directions: Probate won’t occur until after the funeral, so funeral wishes in a will often go unnoticed. You can let your executor know your wishes in a separate document.

Executor: An executor is a trusted person who will carry out the terms of your will. He or she should be willing to serve and be capable of executing the will.

People who die without a valid will become intestate, which means the estate will be settled based on the laws of where that person lived. The court will appoint an administrator to transfer property. However, the administrator is bound by law and may make decisions that go against the decedent’s wishes. To avoid this, make sure you have a valid will and other estate planning documents.

Reference: Oakdale (CA) Leader (March 27, 2019) “Things People Should Know About Creating Wills”

 

How Do I Make the Right Estate Planning Moves When I Divorce?

The Journal Enterprise explains in its recent article, “5 Estate Planning Moves If You Are Getting Divorced,” that the following tips will help you get your plans in order, so your final wishes will be carried out later.

Medical Power of Attorney. This is also called a healthcare proxy. This person is named to make decisions on your medical care, if you’re ill or injured and can’t state your medical care decisions. Unless you make the change, your ex-spouse will have this right.

Financial Power of Attorney. Like a healthcare proxy, this is someone you select to take charge, if you become incapacitated. This person has authority over your financial decisions, and it means they have the authority to pay your bills, access your bank and investment accounts, collect and cash your paychecks and make financial decisions for you. You want to be certain that your assets are protected, and your financial obligations are met, while you’re unable to act on your own behalf. Most people name a spouse, but if you get divorced and don’t switch this designation, your spouse will still be your financial power of attorney and will retain access to your finances.

Create a List of Things to Change After Your Divorce. A divorce can freeze some assets and accounts, which remains in effect until it’s finalized. Therefore, you won’t be able to change the beneficiary on life insurance policies, pensions and other types of accounts. Ask your estate planning attorney to find out exactly what accounts will be affected. Once you know which ones are frozen, you should make a list to ensure you won’t neglect to change them, when the divorce is finalized.

Modify Your Will. In some states, you may not be permitted to create a new will, but your attorney should still be able to help you make the necessary changes. You’ll want to review your heirs. If you do have minor children and you have sole custody, you may want to designate another person as their guardian. If you named your spouse as executor of your will, you may want to consider changing that.

Modify Your Trust. You may have a revocable living trust, in addition to a will. One of the advantages of a revocable trust is that it doesn’t go through probate, so your heirs get a bigger inheritance more quickly. If you have a revocable trust, talk to your estate planning attorney about changing it after your divorce.

If you don’t make these changes at the time of your divorce, your assets may not go to the right beneficiaries, or your ex-spouse may end up with rights you didn’t intend.

Reference: Journal Enterprise (March 20, 2019) “5 Estate Planning Moves If You Are Getting Divorced”

Suggested Key Terms: Estate Planning Lawyer, Wills, Capacity, Guardianship, Executor, Probate Court, Inheritance, Power of Attorney, Healthcare Directive, IRA, 401(k), Beneficiary Designations, Life Insurance,

What is a Life Estate?

The question of a life estate may arise, when adult children are discussing the possibility of moving a parent into an assisted-living facility and selling the family home.

The Spokesman-Review’s recent article asks: “Does a life estate have cash value?”

The article explains that a life estate is a form of co-ownership. A person’s interest in property is limited to his life, with the property passing to other recipients at his death. The person who holds the life estate is called a life tenant, and those who receive the property at the death of the life tenant are called remaindermen.

The life tenant and the remaindermen both have real interests in the property, but unlike other partnerships or other forms of co-ownership, the life tenant and remaindermen don’t have rights in the property at the same time. Only the life tenant has a current right to possession. The remaindermen’s interest doesn’t become activated, until the death of the life tenant.

A life estate is an actual form of ownership, rather than a right to use. The life tenant—in many cases the parent—“owns” the house until her death. The parent will need to pay the taxes and keep the property in reasonable condition. The life tenant could sell the property, but the buyer would only have rights until she dies. There would be few people who would ever buy the property. No lender would loan mom money against the property because their interest would go away when the life tenant died.

But there is a value to a life estate, and upon sale, the life tenant must be compensated for the sale of their interest. Life estates are valued using the age of the life tenant and the present fair market value of the property.

Although life estates typically end when the life tenant (or another specified person) dies, some specify conditions that can trigger termination. These would cause the life estate to be terminated, even though the life tenant is still alive and well. For example, a life estate may terminate, if the life tenant leaves the home for more than six months. The actual life estate document details any conditional limits that define when the life estate terminates.

Talk with an experienced estate planning attorney about whether a life estate makes sense for your situation, or if there are alternative strategies that would be better suited.

Reference: The Spokesman-Review (March 17, 2019) “Does a life estate have cash value?”