What’s interesting about estate planning is that it is one of the few things you can mess up and not pay the consequences. You can leave wealth to your beneficiaries and you can also leave problems. Strange and unexpected things can happen after someone dies. There are always complaints about relatives, lawyers, judges, probate, trusts and the like. However, the blame virtually always lies within the flaws of the estate plan. Sometimes they are accidental. Often though, people do not really want to deal with certain problems or do not take the time to work thru them by planning and management even if they have good lawyers. The aftermath of the tragedy can become more difficult for the family.
Let’s try to prevent the problems. Note: the following information primarily governs assets and liabilities owned in an individual name. The various types of ownership and how they relate to estate planning will be covered in a later post.
First of all, everyone has a will. You may say that you never wrote a will, so how can I have one? Well, a will has been prepared for you by the State in which you reside. In some cases, it could include another State where you may live part time. This could be a problem of “dual domicile” which will be examined at a later time.
Anyway, every State has a simple will when someone dies “intestate”, meaning without their own will. We can call this the “generic will” for simplicity. This will is encapsulated in the State laws known as Probate or Estates and Trusts. There you will find your generic estate plan and it may work for you. The provisions normally provide for your spouse and minor age children and if necessary continue for your adult children, parents and siblings. Most States have similar terms and provisions. There are a few “community property” Sates:Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. If you live in these States, you should familiarize yourself with the laws as they cover more than just estates.
If you do not want the generic will, you can write your own and should do this with the help of an attorney who specializes in this area of law. In preparation, there are some things you should know. Remember, this covers assets and liabilities titled in single name, individual, ownership. Your will must conform to State law. It will generally mandate that final expenses and taxes must be paid. There will also be provisions to pay certain types of debts and claims that were in existence at the time of death or that are brought forth after death. For instance, if you died in a car accident and there were other people involved, your estate could be sued if it was your fault. Sometimes past things you may have done or been involved with can revive after death. There are also laws that require distributions to your spouse and minor age children. In general, you cannot disinherit this class of beneficiaries. You need to know that a separation from your spouse does not apply at death. If you have been separated for many years but never officially divorced, the spouse can make a claim against your estate and will probably have priority. There could be certain deviations if you were in the process of divorce at the time of death. Same with any minor age children living at the time of your death. If you have not seen the child in many years it doesn’t matter. The child can make a claim and have priority. If someone tries to hide the existence of these beneficiaries, that person can be held personally liable. So other than the specific laws of the State, you can customize your estate plan in numerous ways as you discuss your will with your attorney.
This next item is extremely important. You will need to select an Executor or Personal Representative to manage the estate process. If you die intestate, without a will, the Court will appoint a person, usually your spouse or adult child. If necessary, the Court could appoint someone else or also a professional. If you are doing your own will, your attorney will ask who you would like to serve in this capacity. Here is the critical part – this is not the family honor you think it is. It is a very important managerial position.
After someone dies, there are primarily two types of work that needs to be done. One is the legal work which is done by the attorney. By the way, it does not have to be the same attorney who wrote the will. If there are no unusual circumstances, this is fairly easy. It basically is filing legal paperwork with the Court on a timely basis.
The other work is done by the Executor/Personal Representative. This can include estate organization, protecting assets, paying bills, financial management, investments, real estate, businesses, taxation, handling claims and previous contracts and now even social media accounts. it can become complex and very serious. it is unlikely that your spouse, friend or relative is capable or prepared to do all this work. In which case, different professionals need to be hired. Much of this may fall on the attorney who will legitimately charge extra fees for doing the work that should be done by the Executor/Personal Representative. Any problems that arise are the responsibility of the person you choose. Mistakes made by professionals who are working on the estate can become the personal liability of the Executor/Personal Representative who hired them. This is where a lot of things can go wrong. You need to discuss these things with the person you would like to choose. Make sure they understand the job and they are capable and willing to serve. You will also want to name successors (back ups) in the event that your first choice is unable or unwilling to serve at the time of your demise.
You can also name someone who is knowledgeable and experienced to serve as a Co-Executor/Personal Representative to assist in this function. At the very least, you should assemble a list of various professionals your family can use to help them in this time of need. Besides an attorney, there can be financial advisers, accountants, bankers, agents, etc. Prepare notes and instructions for your Executor/Personal Representative regarding your burial wishes, and how to handle special assets or situations such as collections or business interests. If you can, you should try to communicate your plans and the reasons for them to your family and beneficiaries.before death. Even if it is uncomfortable, it may diminish problems and difficult emotions after your death.
A final word on Probate. It is not the nightmare you often hear. In fact, it may be the most secure manner to process and distribute an estate and there are actual advantages, particularly on creditor claims. Everything is overseen by the Court and the judges are usually experienced and fair. The legal work is mostly procedural. Again most of the problems originate in the estate plan itself. Some issues may have been passed over or the documents may be out of date given your present circumstances. Regularly review your plans with your advisers. The death of a family member is such a terrible tragedy, you need to make the transition for your family as smooth as possible.
Also see “Estate Planning With Young Children” June 2, 2018
More to come in future posts.