Just What Does an Executor Do?

Spending the least amount of time possible contemplating your death is what most people try to do. However, one part of the estate planning process needs time and reflection: deciding who should serve in important roles, including executor. Whatever the size of your estate, the people you name have jobs that will impact your life and your family’s future, says a recent article “How to get it right when naming an executor and filling other key roles in your estate plan” from CNBC. A quick decision now might have a bad outcome later.

First, let’s look at the executor. They are responsible for everything from filing your last will with the court to paying off debts, closing accounts and making sure that assets in your probate estate are distributed according to the directions in your last will. They need to be trustworthy, organized and able to manage financial decisions. They also need to be available to handle your estate, in addition to their other responsibilities.

Note that some of your assets, including retirement tax deferred accounts, life insurance proceeds and any other assets with a named beneficiary, will pass outside of your probate estate. These assets need to be identified and the custodian needs to be notified so the heir can receive the asset.

Settling an estate takes an average of 16 months, with smaller estates being settled more quickly. Larger estates, worth more than $5 million and up, can take as long as four years to settle.

Some people prefer to name co-executors as a means of spreading out the responsibilities. That ix fine, unless the two people have a history of not getting along, as is the case with many siblings. Sharing the duties sounds like a good idea, but it can lead to delays if the two don’t agree or can’t coordinate their estate tasks. Many estate planning attorneys recommend naming one person as the executor and a second as the contingency executor, in case the first cannot serve or decides he or she does not want to take on the responsibilities. The same applies to any trustees, if your estate plan includes a trust.

Make sure the people you are considering as executor, contingent executor, trustee or success or trustee are willing to take on these roles. If there is no one in your life who can take on these tasks, an option is to name an estate planning attorney, accountant, or trust company.

Another important role in your estate plan is the Power of Attorney. You’ll want one for financial decisions and another for healthcare decisions. They can be the same person or different people. Understand that the financial Power of Attorney will have complete control over your assets, including accounts, real estate, and personal property, if you are too incapacitated to make decisions or to communicate your wishes.

The healthcare Power of Attorney will be making medical decisions on your behalf. You will want to name a person you trust to carry out your wishes—even if they are not the same ones they would want, or if your family opposes your wishes. It’s not an easy task, so be sure to create a Living Will to express your wishes, if you are placed on life support or suffer from a terminal condition. This will help your healthcare Power of Attorney follow your wishes.

Finally, revisit your estate plan every three to five years. Life changes, laws change and your estate plan should continue to reflect your wishes. The lives of the people in key roles change, so the same person who was ready to serve as your executor today may not be five years from now. Confirm their willingness to serve every time you review your last will, just to be sure.

Reference: CNBC (March 5, 2021) “How to get it right when naming an executor and filling other key roles in your estate plan”

Is it Better to Have a Living Will or a Living Trust?

A living will and a living trust are part of an estate plan that achieves the goals of protecting you while you are living and your loved ones when you have passed. You may need both, but before you make any decision, first know what they are, says the article “Living Will vs. Living Trust” from Yahoo! Finance.

A living will is a legal document used in healthcare decision making. It offers a way for you to provide in exact terms what kind of medical care and treatment you want to receive in end-of-life situations. They are not fun to contemplate, but the alternative is leaving your spouse or children guessing what you would want and living with the consequences. By having a living will prepared properly with your estate planning attorney (to ensure that it is valid), you tell your loved ones what you want. They will not be left guessing or fighting among each other. The treating physicians will also know what you want.

This is different from an advance healthcare directive, which also deals with medical situation but from a different angle. The advance healthcare directive is used to name an agent who will act on your behalf to make medical decisions. It is used in situations other than end-of-life care. Let’s say you are incapacitated by an illness. That person is authorized to make medical care decisions on your behalf.

A trust is a legal entity that lets you transfer assets to the ownership of a trustee and has little to do with your healthcare. The trustee is a person named to be in charge of the trust. He is considered a fiduciary, a legal standard requiring him to put the interest of the trust above his own. A living trust is one of many different kinds of trusts.

Living trusts are also known as “inter vivos” trusts and take effect while you are alive. You (the grantor) are permitted to serve as your own trustee. You should name one or more successor trustees, who can take over just in case something happens to you. You can also name someone else to be the trustee. That is usually a trusted person or a financial institution.

Living trusts may be revocable or irrevocable. When they are revocable, assets transferred to the trust can be moved in and out of the trust as you like, as long as you are alive. You can add assets, remove assets, change the named beneficiaries, or even change the terms of how the assets are managed.

An irrevocable trust is just as it sounds—once it’s created and funded, those assets are permanently inside the trust. There are some states that permit “decanting” of a trust, that is, moving the assets inside a trust to another trust. Your estate planning attorney will know if that is an option for you.

So, do you need a living will or a living trust? You probably need both. The living will deals with your healthcare, while the living trust is all about your assets. Do you need a trust? Most estates will benefit from some kind of a trust. Depending on the type of trust, it may let you protect assets against creditors, give you control postmortem of how and when (or if!) your beneficiaries receive their inheritance, and removes the assets from your taxable estate. Both are important tools in a comprehensive estate plan.

Reference: Yahoo! Finance (Feb. 18, 2021) “Living Will vs. Living Trust”

Preparing for an Estate Planning Meeting

Preparing to meet with an estate planning attorney for the first time is an opportunity to get organized and think about your wishes for the future. If you meet with your accountant every year to prepare tax returns, this may be a familiar process. It’s a chance to step away from day-to-day activities and focus on your life, as described in a recent article “Preparing for an Estate Planning Consultation: 10 Items to Consider Before Meeting Your Attorney” from The National Law Journal.

Minor Children Need Guardians and Conservators. In most states, families with minor children need a last will to designate one or more guardians to raise the children in the event both parents die. A successor should be named in case the first named guardian is unable or unwilling to serve. Discuss your decision with the people you are naming; don’t leave this as a surprise. Choosing these people is a hard decision. However, don’t let it be a reason to delay creating your estate plan. It’s better that you name a guardian, rather than let the court make that decision.

Agents, Trustees, and Power of Attorney. With a Durable Power of Attorney, your assets can be managed by a named agent, if you become incapacitated. The person who manages your estate after death is the executor. They are named in your last will. If you have trusts, the documents that create the trust also name the trustees. It is possible for one person to act as a fiduciary for all of these roles, although the tasks can be divided.

Living Will and Patient Advocate Designation. If you are incapacitated, a Patient Advocate can make medical decisions on your behalf, including following the instructions of your Living Will.

Personal Property. Any items of personal property, whether their value is sentimental or monetary, should be specified in the will. A list of items and who you want to receive what, may spare your heirs from squabbles over your personal effects, large or small. If you own a business or real estate, they also need to be addressed in your will.

Charitable Donations. If you are charitably minded, your will is one way to make bequests and build a lasting legacy. Charitable donations can also be made to gain tax benefits for heirs.

Beneficiary Distributions. The beneficiary designation is the unsung hero of the estate plan. By managing beneficiary designations while you are living—updating beneficiary designations, assigning beneficiary designations to all accounts possible—you take assets out of your probate estate and smooth the asset distribution process. However, there are some wrinkles to consider.

Minor children may not receive assets until they become of age—18 in most cases. Do you want your children (or nieces or grandchildren) to receive an inheritance, while they are still in their teens? Proper estate planning includes trusts created, so a responsible adult can manage the trust on their behalf. Your trust can also be structured so the money may only be used for college expenses, or when the children reach certain ages.

Surviving Pets. You can plan for your pet’s care, if you pass away or become incapacitated before they die. Most states permit the creation of a pet trust, an enforceable means of providing assets to be used for the care and well-being of your pet.

Your estate planning attorney will be able to provide you with a list of the documents she will need to get started on your estate plan, but these are the major issues that you will be discussing at your first meeting.

Reference: The National Law Journal (Feb. 23, 2021) “Preparing for an Estate Planning Consultation: 10 Items to Consider Before Meeting Your Attorney”

What’s a Living Will?

Living wills can be used to detail the type of healthcare you do or don’t want to receive in end-of-life situations or if you become permanently incapacitated or unconscious. A living will tells your healthcare providers and your family what type of care you prefer in these situations, explains Yahoo Finance’s recent article entitled “How to Make a Living Will.” These instructions may address topics, such as resuscitation, life support and pain management. If you don’t want to be on life support in a vegetative state, you can state that in your living will.

A living will can be part of an advance healthcare directive that also includes a healthcare power of attorney. This lets your chosen healthcare proxy make medical decisions on your behalf, when you’re unable. A living will typically only applies to situations where you’re close to death or you’re permanently incapacitated; an advance directive can cover temporary incapacitation.

Ask an experienced estate planning attorney or elder care lawyer about the technical aspects of how to make a living will. You should consider what to include. Every state is different, so your attorney will help you with the specifics. However,  you’ll generally need to leave instructions on the following:

  • Life-prolonging care, like blood transfusions, resuscitation, or use of a respirator;
  • Intravenous feeding if you are incapacitated and cannot feed yourself; and
  • Palliative care can be used to manage pain, if you decide to stop other treatments.

You will want to be as thorough and specific as possible with your wishes, so there is no confusion or stress for your family when or if the day arrives. You next want to communicate these wishes to your loved ones. You should also give copies of your living will to your doctor. If you’re drafting a living will as part of an advance healthcare directive, be certain that you get a copy to your healthcare proxy.

Review your living well regularly to make sure it’s still accurate because you may change your mind about the type of care you’d like to receive.

Ask your attorney to help you draft a living will along with a healthcare power of attorney, so all of the bases are covered as far as healthcare decision-making. When choosing a healthcare proxy, select a person on whom you can rely, to execute your wishes.

A living will can be an important component of an estate plan and preparing your family for your death.

Reference: Yahoo Finance (Feb. 18, 2021) “How to Make a Living Will”

Get Estate Plan in Order, If Spouse Is Dying from a Terminal Illness

Thousands of people are still dying from COVID-19 complications every day, and others are dealing with life-threatening illnesses like cancer, heart attack and stroke. If your spouse is ill, the pain is intensified by the anticipated loss of your life partner.

Wealth Advisor’s recent article entitled “Your Spouse Is Dying: 5 Ways To Get Your Estate In Order Now,” says that it’s frequently the attending physician who suggests that your spouse get his affairs in order.

Your spouse’s current prognosis and whether he or she’s at home or in a hospital will determine whether updates can be made to your estate plan. If it has been some time since the two of you last updated your estate plan, you should review the planning with your elder law attorney or estate planning attorney to be certain that you understand it and to see if there are any changes that can and should be made. There are five issues on which to focus your attention:

A Fiduciary Review. See who’s named in your estate planning documents to serve as executor and trustee of your spouse’s estate. They will have important roles after your spouse dies. Be sure you are comfortable with the selected fiduciaries, and they’re still a good fit. If your spouse has been sick, you’ve likely reviewed his or her health care proxy and power of attorney. If not, see who’s named in those documents as well.

An Asset Analysis. Determine the effect on your assets when your partner dies. Get an updated list of all your assets and see if there are assets that are held jointly which will automatically pass to you on your spouse’s death or if there are assets in your spouse’s name alone with no transfer on death beneficiary provided. See if any assets have been transferred to a trust. These answers will determine how easily you can access the assets after your spouse’s passing.

A Trust Assessment. Any assets that are currently in a trust or will pass into a trust at death will be controlled by the trust document. See who the beneficiaries are, how distributions are made and who will control the assets.

Probate Prep. If there’s property solely in your spouse’s name with no transfer on death beneficiary, those assets will pass according to his or her will. Review the will to make sure you understand it and whether probate will be needed to settle the estate.

Beneficiary Designation Check. Make certain that beneficiaries of your retirement accounts and life insurance policies are current.

If changes need to be made, an experienced elder law or estate planning attorney can counsel you on how to best do this.

Reference: Wealth Advisor (Jan. 26, 2021) “Your Spouse Is Dying: 5 Ways To Get Your Estate In Order Now”

Every Adult Needs a Will and a Health Care Power of Attorney
An concept Image of a power of attorney

Every Adult Needs a Will and a Health Care Power of Attorney

A serious illness can happen at any age, but just 18% of those 55 and older have a living will, power of attorney for health care and a last will and testament, according to a 2019 study by Merrill Lynch Wealth Management.

AZ Central’s recent article entitled “What to know about wills and health care power of attorney in Arizona” says that every adult should have these documents, including young professionals, single people and those without children.

These documents make it easier for an individual and their family during a stressful time. They make your wishes clear.

They also help give directions to family members and allow you to name a person you believe is the most responsible and able to fulfill your wishes.

Note that a power of attorney, living will and last will each has its own purpose.

A power of attorney for health care lets your named agent make medical decisions on your behalf if you are incapacitated, while you are still alive. Without a health care power of attorney or living will, it can complicate and delay matters.

A living will or “advance directive” is used when a person needs end-of-life care. This document can provide instructions on how the person wants to be treated, like not wanting a feeding tube or wanting as much medical help as possible.

In contrast, a last will and testament states what happens to a person’s estate or assets after they pass away. A last will can also designate a guardian for minor children.

A last will can state who will be in charge of the person’s estate, known as an executor or a personal representative.

You should name a primary representative and an alternate to serve and provide copies of the documents to the people chosen for these roles.

Reference: AZ Central (Jan. 14, 2021) “What to know about wills and health care power of attorney in Arizona”

What Estate Planning Documents Should I Have when I Retire?

Research shows that most retirees (53%) have a last will and testament. However, they don’t have six other crucial legal documents.

Money Talks News’ recent article entitled “6 Legal Documents Retirees Need — but Don’t Have” says in fact, in this pandemic, 30% of retirees have none of these crucial documents — not even a will — according to the 20th annual Transamerica Retirement Survey of Retirees.

In addition, the Transamerica survey found the following among retirees:

  • 32% have a power of attorney or medical proxy, which allows a designated agent to make medical decisions on their behalf
  • 30% have an advance directive or living will, which states their end-of-life medical preferences to health care providers
  • 28% have designated a power of attorney to make financial decisions in their stead
  • 19% have written funeral and burial arrangements
  • 18% have filled out a Health Insurance Portability and Accountability Act (HIPAA) waiver, which allows designated people to talk to their health care and insurance providers on their behalf; and
  • 11% have created a trust.

The study shows there is a big gap that retirees need to fill, if they want to be properly prepared for the end of their lives.

The coronavirus pandemic has created an even more challenging situation. Retirees can and should be taking more actions to protect their health and financial well-being. However, they may find it hard while sheltering in place.

Now more than ever, seniors may need extra motivation and support from their families and friends.

The Transamerica results shouldn’t shock anyone. That is because we have a long history of disregarding death, and very important estate planning questions. No one really wants to ponder their ultimate demise, when they can be out enjoying themselves.

However, planning your estate now will give you peace of mind. More importantly, this planning can save your heirs and loved ones a lot of headaches and stress, when you pass away.

Talk to an experienced estate planning attorney today to get your plan going.

Reference: Money Talks News (Dec. 16, 2020) “6 Legal Documents Retirees Need — but Don’t Have”

How Much Should We Tell the Children about the Estate Plan?

Congratulations, if you have finished your estate plan. You and your estate planning attorney created a plan that is suited for your family, you have checked on beneficiary designations, signed all of the necessary documents and named an executor to carry out your directions when you pass. However, have you talked about your estate plan with your adult children? That is the issue explored in the recent article entitled “What to tell your adult kids when planning your estate” from CNBC. It can be a tricky one.

There are certain parts of estate plans that should be shared with adult children, even if money is not among them. Family conflict is common in many cases, whether the estate is worth $50,000 or $50 million. So, even if your estate plan is perfect, it might hold a number of surprises for your children, if you don’t speak with them while you are living.

The best estate plan can bequeath resentment and enduring family conflicts, if family members don’t have a head’s up about what you’ve planned and why.

If you die without a will, there can be even more problems for the family. With no will—called dying “intestate”—it is up to the courts in your state to decide who inherits what. This is a public process, so your life’s work is on display for all to see. If your heirs have a history of fighting, especially over who deserves what, dying without a will can make a bad family situation worse.

Not everything about an estate plan has to do with distribution of possessions. Much of an estate plan is concerned with protecting you, while you are alive.

For starters, your estate planning attorney can help you with a Power of Attorney. You’ll name a person who will handle your finances, if you become unable to do so because of illness or injury. A Healthcare Power of Attorney is used to empower a trusted person to make medical decisions for you, if you are incapacitated. Some estate planning attorneys recommend having a Living Will, also called an Advance Healthcare Directive, to convey end-of-life wishes, if you want to be kept alive through artificial means.

These documents do not require that you name a family member. A friend or colleague you trust and know to be responsible can carry out your wishes and can be named to any of these positions.

All of these matters should be discussed with your children. Even if you don’t want them to know about the assets in your estate, they should be told who will be responsible for making decisions on your finances and health care.

Consider if you want your children to learn about your finances during your lifetime, when you are able to discuss your choices with them, or if they will learn about them after you have passed, possibly from a stranger or from reading court documents.

Many of these decisions depend upon your family’s dynamics. Do your children work well together, or are there deep-seated hostilities that will lead to endless battles? You know your own children best, so this is a decision only you can make.

It is also important to take into consideration that an unexpected large inheritance can create emotional turbulence for many people. If heirs have never handled any sizable finances before, or if they have a marriage on shaky ground, an unexpected inheritance could create very real problems—and a divorce could put their inheritance at risk.

Talk with your children, if at all possible. Erring on the side of over-communicating might be a better mistake than leaving them in the dark.

Reference: CNBC (Nov. 11, 2020) “What to tell your adult kids when planning your estate”

What are the Basic Estate Planning Documents?

Having a well-prepared estate plan means that you have a plan in place to distribute your home, assets and possessions. However, the estate plan does more, says the article “Trustee Tips: Estate Planning Basics” from Wilmington Biz Insights: it also gives your family the insight and legally enforceable directions to follow, so they may honor your wishes.

Estate planning eliminates uncertainty and maximizes the value of the estate, by streamlining the transfer of assets to beneficiaries and minimizing estate tax liability. In addition, estate planning protects your estate and your family from mismanagement, creditor claims or claims from people or companies outside of the family.

Many people equate estate planning with owning a large home and significant wealth, but that’s not true. An estate includes everything people own: their personal residence, retirement accounts, insurance policies, investments and possessions.

A case can be made that estate planning is more important for people with a modest estate to preserve and protect what assets they have, versus a large estate where the family enjoys a large cushion against poverty.

The basic estate planning documents are a last will and testament, trusts, financial power of attorney, health care power of attorney and a living will.

A Last Will and Testament provides instructions to the probate court of the decedent’s final wishes, including naming an executor to carry out the instructions. It also contains instructions on who will raise minor children by naming a guardian. This document, and any other documents filed with the probate court, become part of the public record, and can be accessed by anyone who wishes to see them.

A Revocable Trust also provides instructions but avoids probate. The trust creates a legal entity that owns assets (once they are retitled and placed in the trust). The individual who creates a revocable trust remains in control of the assets, as long as they are alive. The revocable trust can be changed at any time.

A Pour-Over Will is used with a revocable trust. It ensures that any assets not included in the Revocable Trust are “poured-over” into the trust upon death, protecting them from the probate process and keeping your wishes private.

A financial Power of Attorney and Health Care Power of Attorney are documents used to give control of legal and financial affairs and health care decisions, in the event of incapacity.

The Living Will provides directions to designated persons, usually family members, about what kind of medical care is desired in the event of an inability to communicate. This is a gift to loved ones, who would otherwise be left guessing what the person would wish. A HIPAA release should also be prepared to allow doctors to discuss medical matters with the Health Care Power of Attorney.

An estate plan is a way to protect the family’s well-being, not just distributing property and minimizing taxes. A well-crafted estate plan, created for the family’s unique situation, helps avoid family fights, litigation within and outside of the family and provides direction for the next generation.

Reference: Wilmington Biz Insights (Nov. 17, 2020) “Trustee Tips: Estate Planning Basics”

It’s Time to Stop Procrastinating and Have Your Estate Plan Done

While many people have had their wills updated or created in response to the pandemic, millions of Americans have yet to do so, reports the article “How to Stop Stalling On Getting a Will and Estate Plan” from AARP Magazine. The main reasons for the big stall? They haven’t “gotten around to it,” or, they think they don’t have enough assets to leave to anyone and don’t need a will. Neither reason is valid.

Estate Plans Protect Us During Life. A will is a legal document used to distribute assets after death. It saves families from unnecessary costs and stresses resulting from intestacy, which is what having no will is called. However, there are more documents to an estate plan than just a will. One is a health care directive, often called a living will. This document names someone of your choosing to make medical decisions for you if you are unable. It is also used to outline the kind of medical treatments you do or do not want.

Imagine your family faced with making the decision of keeping you on a heart and lung machine or pulling the plug and letting you die. Would they know what you want them to do? Without a living will, they have to make a decision, and hope it’s the one you would have wanted. That’s quite a burden to put on your loved ones, especially since there is a simple way for you to convey your wishes in a legally enforceable manner.

You also Need a Power of Attorney. A financial power of attorney appoints a person of your choosing to make financial and legal decisions on your behalf, if you are incapacitated. This is an important document and can be created to be as broad or as narrow as you want. You can provide the direction for someone—a trusted, responsible adult—to manage finances, including paying bills, managing a portfolio, paying a mortgage and generally taking over the business of your life. Without it, your family will need to go to court to obtain a guardianship and/or conservatorship to take care of these matters.

Estate Planning Requires Hard Conversations. When people say they “haven’t gotten around” to doing their wills, what they are really thinking is “This is too unpleasant a topic for me” or “I can’t bring myself to have this conversation with my children.” Death and sickness are uncomfortable topics, and most people find it painful to discuss them with their spouses and their children.

However, imagine the great relief you will feel when your loved ones know what your wishes are for sickness and death. You can also imagine the relief they will have in knowing that you took the time give them the tools needed to deal with whatever the future will bring.

Joint Wills are Never a Good Idea. A joint will can leave a surviving spouse in a terrible legal and financial situation. They are not even valid in certain states. They can restrict a surviving spouse from changing the instructions of the will, which could create all kinds of hardships. Circumstances change, and a joint will won’t allow for that. Most couples opt for a “Mirror” will, where they leave the estate to each other and/or their children.

Blended Families Need Special Treatment. If your family is made up of children from different parents, it is important to understand that stepchildren are not treated the same as children by the law. You may love your stepchildren as if they were your own, but unless you specifically name them in the will, they will not be included. Your estate planning attorney will know how to address this issue.

A few final thoughts: estate planning laws of each state are different, so you should meet with an estate planning attorney who practices in your state. The Power of Attorney and Health Care Directives should name the people who you feel will carry out your wishes and can be trusted to do as you want. The person does not have to be the oldest male child. They don’t even have to be related to you, as long as the person you choose is trustworthy, responsible and good with managing money and details.

Reference: AARP Magazine (Nov. 12, 2020) “How to Stop Stalling On Getting a Will and Estate Plan”