What Your Executor/Successor/Trustee Needs To Know


A senior gentleman was asked, “How does your family like your new hearing aids?” He responded, “Oh, I haven’t told them I got them yet. I just sit around and listen to their conversations and so far, I have changed the beneficiary of my will three times.”

Estate Planning basically deals with what we have and where we eventually want it to go. I strongly advocate that a financial plan address six major financial disciplines: Estate Planning, Risk Management, Cash Management, Retirement Planning, Tax Strategies, and Asset Allocation.

Let’s examine some of the components of a solid estate plan. I believe it is the foundation of the planning process. Estate planning has everything to do with the “registration” of our assets. Are your assets properly titled? For many, that might involve trust planning in addition to a pour over will, financial powers of attorney, health care powers of attorney, and an Advanced Directive which can include a living will and an appointment of health care proxy. Having a trust is not enough. You must have the assets titled into the trust name in order for it to accomplish its purpose.

Often, the initial attempt at estate planning is a basic “I love you” will. The intent could be “If I die, everything goes to my spouse. If my spouse dies, everything goes to me, and when we both die, everything goes to our children”. With a will, when an individual dies, and depending on the “registration” of the asset, the beneficiary should receive their rightful distribution after probate.

The probate process is basically a “proving process” to determine the eventual distribution of one’s assets. By consulting with your advisors, you might find alternatives to probate and possibly reduce some unnecessary litigation. Could a trust be a tool that is right for you? Ask your advisors about revocable and irrevocable estate planning tools.

Some choose to hold assets in Joint Tenancy with Rights of Survivorship, JTWROS, or Tenants in Common, TIC. Every form of registration has its advantages and disadvantages. It is important for you and your successor to understand the difference. There can be issues a joint tenant could face in managing assets when their spouse becomes incapacitated or incoherent. There can also be complications that arise when our spouse dies and we choose to add our adult children as joint tenants to our assets. Have we created a gift that exceeds the gift tax exemption amount? What if our child has credit complications and we add them as a joint tenant to our assets? What if they are innocently involved in an accident which results in a fatality in the other vehicle? Have we potentially encumbered our own assets with certain types of registrations? Do we have our estate plan structured in a manner to take full advantage of the existing estate tax rules? How do we plan with the uncertainty of future decisions that congress will make? If we gift an appreciated asset to our children in advance of our death, will they miss out on the step-up in tax basis that they might receive if we wait and let them inherit it upon our demise? I recommend consulting with your advisors before making these types of decisions.

Securing your line of succession is of great concern when a surviving spouse chooses to remarry. Consider taking steps to protect your assets and your children’s inheritance in advance of life events that can complicate the situation. I would expect my spouse to remarry but I would not want their next spouse’s children to potentially inherit all of the estate and leave my children “out in the cold”. Needless to say there are many more issues that need to be covered surrounding all the estate planning scenarios. A loving gesture would be to plan in advance in order to simplify the inevitable process that our executor/successor/trustee must face.

The duties of an executor can seem overwhelming. Here are some of the possible responsibilities:

  • Find the last will and read it.
  • File a petition with the court to probate the will.
  • Assemble all of the decedent’s assets.
  1. Take possession of the safe deposit box contents.
  2. Consult with the banks and savings and loans in the area to find all accounts of the deceased. Also check for cash and other valuables hidden around the home.
  3. Transfer all securities to his or her name (as executor) and continue to collect dividends and interest on behalf of the heirs of the deceased.
  4. Find, inventory and protect household and personal effects and other personal property.
  5. Collect all life insurance proceeds payable to the estate.
  6. Find and inventory all real estate deeds, mortgages, leases and tax information. Provide immediate management for rental properties.
  7. Arrange ancillary administration for out-of-state property.
    1. Find and safeguard business interests, valuables, personal property, important papers, the residence, etc.
    2. Inventory all assets and arrange for appraisal of those for which it is appropriate.
    3. Determine liquidity needs. Assemble bookkeeping records. Review investment portfolio. Sell appropriate assets.
    4. Pay valid claims against the estate. Reject improper claims and defend the estate, if necessary
    5. Pay state and federal taxes due.
    6. Collect monies owed the deceased and check interests in estates of other deceased persons.
  8. File income tax returns for the decedent and the estate.
  9. Determine whether the estate qualifies for special use valuation under IRC Sec. 2032A, the qualified family-owned business interest deduction under IRC Sec. 2057 of deferral of estate taxes under IRC Secs. 6161 or 6166.
  10. If the surviving spouse is not a U.S. citizen, consider a qualified domestic trust to defer the payment of federal estate taxes.
  11. File federal estate tax return and state death and/or inheritance tax return. Under the Tax Act of 2001, the federal estate tax gradually phased out until its final repeal in the year 2010. If Congress does not act to repeal it for the years following, it will automatically revert back to the rates in effect during the year 2001, with an exemption for the first $1,000,000. of assets.

Here is a sobering thought. Someday, someone else will give away all your assets. While you have the opportunity, consider taking the necessary steps to ensure your assets are distributed in the manner you would choose.

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