Executor

What Is Involved with Serving as an Executor?

Serving as an executor of a relative’s estate may seem like an honor, but it can also be a lot of work, says The (Fostoria, OH) Review Times’ recent article entitled “An executor’s guide to settling a loved one’s estate.”  

Serving as an executor
Serving as an executor of an estate is an honor, but it could also comes with some challenges.

When serving as an executor of a will, you’re tasked with settling the decedent’s affairs after she dies. This may sound rather easy, but you should be aware that the job could be time consuming and difficult, depending on the size of the decedent’s estate and the complexity of the decedent’s financial and family situation. Here are some of the duties that are expected of anyone serving as an executor:

  • Filing court papers to initiate the probate process
  • Taking inventory of the decedent’s estate
  • Using the decedent’s estate funds to pay bills, taxes, and funeral costs
  • Taking care of canceling her credit cards and informing banks and government offices like Social Security and the post office of her death
  • Readying and filing her final income tax returns; and
  • Distributing assets to the beneficiaries named in the decedent’s will.

Each state has specific laws and deadlines for the responsibilities of anyone serving as an executor. To help you, work with an experienced estate planning attorney and take note of these reminders:

Get organized. Make sure that the decedent has an updated will and locate all her important documents and financial information. Having easy access to deeds, brokerage statements and insurance policies will save you a lot of time and effort, making the job of serving as an executor much easier. With a complex estate, you may want to hire an experienced estate planning attorney to help you through the process. The estate will pay that expense.

Avoid conflicts. Investigate to see if there are any conflicts between the beneficiaries of the decedent’s estate. If there are some potential issues, you can make your job as executor much easier if everyone knows in advance who’s getting what, and the decedent’s rationale for making those decisions. Ask the person you’ll be serving as an executor for to tell her beneficiaries what they can expect, even with her personal items because last wills often leave it up to the executor to distribute heirlooms.

Executor fees. You’re entitled to a fee for the work you do serving as an executor. The fee is paid by the estate. In most states, executors are allowed to take a percentage of the estate’s value, which can be from 1-5%, depending on the size of the estate. However, if you’re also a beneficiary, it may make sense for you to forgo the fee because fees are taxable as income, and it could also cause rancor among the other beneficiaries.

Reference: The (Fostoria, OH) Review Times (Aug. 19, 2020) “An executor’s guide to settling a loved one’s estate”

How Can I Avoid Family Fighting in My Estate Planning?

It’s not uncommon for parents to modify their first estate plans, when their children become adults. At that point, many parents’ estate plans are designed to help efficiently transfer assets to the surviving spouse and ultimately to the adult children. However, this process can encounter a number of hiccups and headaches.

Forbes’ recent article entitled “Three Steps To Estate Planning Without The Family Friction” explains that there are a number of reasons for sibling animosity in the inheritance process. Frequently there are issues that stem from a lack of communication between siblings, which causes doubts as to how things are being done. In addition, siblings may not agree if and how property should be sold and maintained. To help avoid these problems, use this three-step process for estate planning.

Work with an experienced estate planning attorney. Hire an estate attorney who has many years of working in this practice area. This will mean that they’ve seen and, more importantly, resolved most types of family conflicts and problems that can arise in the estate planning process. That’s the know-how that you’re really paying for, in addition to his or her legal expertise in wills and trusts.

Create a financial overview. This will help your beneficiaries see what you own. A financial overview can simplify the inheritance process for your executor, and it can help to serve as the foundation for you and your executor to clearly communicate with future beneficiaries to reduce any lingering doubts or questions that they may have, when they’re not in the loop. Your inventory should at least include the following items:

  • A list of all assets, liabilities and insurance policies you have and their beneficiaries
  • Contact information for all financial, insurance and legal professionals with whom you partner;
  • Access information for any websites your beneficiaries may need for your online accounts; and
  • A legacy letter that discusses non-financial items for your children.

Hold a family meeting. This is the most important one.  Conduct a family meeting that includes the parents and the children who will be inheriting assets. Let them hear directly from you exactly what your plans are.  Some topics for this meeting include:

  • The basics of your estate intentions
  • Verify that a trusted person knows the location of your important estate documents
  • State who your executor and other involved people will be and your rationale
  • Make certain that all parties value communication and transparency during this process; and
  • Discuss non-financial legacy items that are important for you to give to your children.

This three-step process can help keep your children’s relationships intact after you are gone. Hiring an experienced estate planning attorney, creating a clear financial overview and communicating what’s important to you are critical steps in helping to keep your family together.

Reference: Forbes (July 2, 2020) “Three Steps To Estate Planning Without The Family Friction”

What are the Estate Planning Basics?

Estate planning is an all-encompassing term that refers to the process of organizing, inventorying and making plans for the proper handling of your affairs during incapacity and after you die. This typically involves writing a will, setting up a power of attorney and healthcare directives with the help of an experienced estate planning attorney.

CNET’s article entitled “Estate planning 101: Your guide to wills, trusts and all your end-of-life documents” provides us with some of the key steps in getting started with estate planning.

Create an Inventory. Your estate includes all of the things you own, such as your car and other valuable possessions, plus “intangible assets” like investments and savings. If you own a company, that’s also part of your estate. Everything you own should be given a valuation. Have your home and other valuables appraised.

Evaluate your family’s needs. A big reason for estate planning is to make certain that your family is cared for, in the case of your death or incapacitation. If you’re a breadwinner for your family, the loss of your income could be devastating financially. Consider a life insurance policy to help provide a financial cushion that can be used to cover living expenses, college tuition cost, and mortgage payments. You may also need to designate a guardian, if you have children under the age of 18.

Make job assignments. Dividing up a person’s property can be a tough and emotional task. Make it easier by ensuring that all of your assets have been assigned a beneficiary. You’ll also name a few people to coordinate the process of dividing up your belongings. List your beneficiaries, so they know who gets what.

Create a Will. You should have a legally binding document setting everything out in as much detail as possible. A will is a legal document that directs the way in which you want your assets and affairs handled after you die. This includes naming an executor, who is someone to manage how your will is executed and take care of the distribution of your assets.

Help your family if you’re incapacitated. A living will (also known as a medical care or health care directive) states your healthcare preferences, in case you’re unable to communicate or make those decisions on your own. If you need life support, a living will states your preferences.

Start estate planning sooner rather than later. Talk to an experienced estate planning attorney today.

Reference: CNET (June 8, 2020) “Estate planning 101: Your guide to wills, trusts and all your end-of-life documents”

Is it Wise to Name Three Co-Executors of Your Will?

Is it wise to name co-executors of your will? This is a question that many people ask because the don’t want one of their children to feel “left out” or under appreciated.  This may get somewhat confusing when probating a will, if there are multiple executors.

There are pros and cons to naming co-executors of your will.

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?”

Start the New Year with Estate Planning To-Do’s

Families who wish their loved ones had not created an estate plan are far and few between. However, the number of families who have had to experience extra pain, unnecessary expenses and even family battles because of a lack of estate planning are many. While there are a number of aspects to an estate plan that take some time to accomplish, The Daily Sentinel recommends that readers tackle these tasks in the article “Consider These Items As Part of Your Year-End Plan.”  

Review and update any beneficiary designations. This is one of the simplest parts of any estate plan to fix. Most people think that what’s in their will controls how all of their assets are distributed, but this is not true. Accounts with beneficiary designations—like life insurance policies, retirement accounts, and some bank accounts—are controlled by the beneficiary designation and not the will.

Proceeds from these assets are based on the instructions you have given to the institution, and not what your will or a trust directs. This is also true for real estate that is held in JTWROS (Joint Tenancy with Right of Survivorship) and any real property transferred through the use of a beneficiary deed. The start of a new year is the time to make sure that any assets with a beneficiary designation are aligned with your estate plan.

Take some time to speak with the people you have named as your agent, personal representative or successor trustee. These people will be managing all or a portion of your estate. Make sure they remember that they agreed to take on this responsibility. Make sure they have a copy of any relevant documents and ask if they have any questions.

Locate your original estate planning documents. When was the last time they were reviewed? New laws, and most recently the SECURE Act, may require a revision of many wills, especially if you own a large IRA. You’ll also want to let your executor know where your original will can be found. The probate court, which will review your will, prefers an original. A will can be probated without the original, but there will be more costs involved and it may require a few additional steps. Your will should be kept in a secure, fire and water-safe location. If you keep copies at home, make a note on the document as to where the original can be found.

Create an inventory of your online accounts and login data for each one. Most people open a new account practically every month, so keep track. That should include email, personal photos, social media and any financial accounts. This information also needs to be stored in a safe place. Your estate planning document file would be the logical place for this information but remember to update it when changing any information, like your password.

If you have a medical power of attorney and advance directive, ask your primary care physician if they have a means of keeping these documents, and explain how you wish the instructions on the documents to be carried out. If you don’t have these documents, make them part of your estate plan review process.

A cover letter to your executor and family that contains complete contact information for the various professionals—legal, financial, and medical—will be a help in the case of an unexpected event.

Remember that life is always changing, and the same estate plan that worked so well ten years ago, may be out of date now. Speak with an experienced estate planning attorney in your state who can help you create a plan to protect yourself and your loved ones.

Reference: The Daily Sentinel (Dec. 28, 2019) “Consider These Items As Part of Your Year-End Plan”

How Do I Change My Will?

Many people have wills that were drafted years ago. Now they want to leave some specific items to someone who was not included when their original will was drafted. Making changes to a will doesn’t have to be complicated says nj.com’s recent article, “Does my dad need to pay money to get a new will?” However, making changes on your own can cause trouble for the executor if not done correctly.

How do I change my will?
Making simple changes to a will isn’t difficult as long as the correct procedure is followed.

Many times making changes to a will is as simple as creating a written list that disposes of tangible personal property, not otherwise identified and directly disposed of in the original will.

The list must either be in the testator’s handwriting or it can be typewritten, but it must be signed and dated by the testator. This list also must describe the item and the recipient clearly.

This list can be amended or revoked. It should be kept with the will or given to the executor, so he or she knows about it and can ensure it is followed.

It would not be in the interest of the executor and may be perceived as a breach of fiduciary duty to honor such a list and make such a distribution, if the beneficiaries named in the will object. No one wants to cause a fight over the items on the list, after the parent is gone.

Although this kind of change to your will can be done on your own, it would be much wiser to invest in having the items added to a revised will to protect your wishes. If some of the beneficiaries got into a quarrel over the items on the list, it could result in a family fight that a properly drafted and executed revision or amendment could easily prevent.

Reference: nj.com (October 14, 2019) “Does my dad need to pay money to get a new will?”

Should a Trust Be Part of Your Estate Plan

Regular people have learned that they need to have an estate plan to protect themselves, while they are living and to distribute assets when they pass. Estate planning tools like a Power of Attorney and a Health Care Power of Attorney are basic documents anyone over 18 needs to have. Trusts, once the province of the wealthy, are now being used by people in many different economic levels, reports the Cleveland Jewish News in the article “Five reasons to incorporate trust into estate plan.”  

Revocable Trust
Revocable Trusts are very flexible estate planning tools

Taxes. While it’s true that the exclusion for estates and prior taxable gifts is now $11.4 million per individual, most estates won’t be taxable at the federal level. However, don’t overlook state estate taxes. What if life insurance proceeds put your estate into a higher bracket? One way to keep the cap on your estate size, is with an irrevocable life insurance trust, also known as an ILIT. It will keep life insurance policy proceeds outside of a probatable estate and minimize the tax hit.

Asset Distribution. Your will controls who receives what assets, but not what happens to them after they are distributed. A trust can ensure that funds are used for specific purposes, such as higher education. It can also control how funds are distributed to an individual. If there are concerns about how an heir might mishandle an inheritance, perhaps because of an addiction or a lack of financial skills, a trust can be used for oversight into when funds are distributed and possibly under what circumstances. You can set benchmarks for trust distribution, like completing college or a rehabilitation program.

Privacy. Heirs are sometimes surprised when they, along with executors, start receiving solicitations after a loved one’s will is probated. That is because once a will goes through probate, the information is public record and available to anyone, including nosy neighbors, scammers or an estranged family member. A trust provides a layer of privacy. It can also do this while you are living. Certain information, like the ownership of a property, can be made less public, if the property is owned by a trust instead of an individual.

Making Estate Settlement More Efficient. Depending upon the jurisdiction, probate matters can take time. The court process does not always move quickly, and sometimes can be difficult to navigate. Probate can also become expensive. An executor or administrator of the estate is generally paid a percentage of the total value of the assets managed. But assets that are held in a trust do not go through the probate process and can be managed far more efficiently and quickly.

An experienced estate planning attorney will be able to determine what kind of trusts will be most appropriate and useful for your situation.

Reference: Cleveland Jewish News (September 16, 2019) “Five reasons to incorporate trust into estate plan”

How Does a Probate Proceeding Work?

A Will, also known as Last Will and Testament, is a legal document that is used in probate court.  It’s used when a person dies with assets that are in their name alone without a surviving joint owner or beneficiary designated, says the Record Online in the article “Anatomy of a probate proceeding.”

So, how does a probate proceeding work?

How does a probate proceeding work
Probate has been referred to as the law suit you file against yourself after you pass away.

Probate is a judicial or court proceeding, where the probate court has jurisdiction over the assets of the person who has died. The court oversees the personal representative’s payment of debts, taxes and probate fees, in addition to supervising distribution of assets to the person’s beneficiaries. The personal representative of the will has to manage the probate assets and then report to the court.

Without a will, things can get messy. A similar court proceeding takes place, but it is known as intestate succession, and the assets are distributed according to state law.

To start the probate proceeding, the personal representative completes and submits a Petition for Administration with the probate court. Most personal representatives hire an estate planning attorney to help with this. The attorney knows the process, which keeps things moving along.

The probate petition lists the beneficiaries named in the will, plus certain relatives who must, by law, receive legal notice in the mail. Let’s say that someone disinherits a child in their will. That child receives notice and learns they have been disinherited. Beneficiaries and relatives alike must return paperwork to the court stating that they either consent or object to the provisions of the will.

A disinherited child has the right to file objections with the court, and then begin a battle for inheritance that is known as a will contest. This can become protracted and expensive, drawing out the probate process for years. A will contest places all of the assets in the will in limbo. They cannot be distributed unless the court says they can, which may not occur until the will contest is completed.

In addition to the expense and time that probate takes, while the process is going on, assets are frozen. Only when the court gives the all clear does the judge issue what are called Letters of Administration, or “Letters Testamentary,” which allows the executor to start the process of distributing funds. They must open an estate account, apply for a taxpayer ID for the account, collect the assets and ultimately, distribute them, as directed in the will to the beneficiaries.

Now that you know a little about how a probate proceeding works you’re probably asking whether a will contest, or probate be avoided? Avoiding probate, or having selected assets taken out of the estate, is one reason that people use trusts as part of their estate plan. Assets can also be placed in joint ownership, and beneficiaries can be added to accounts, so that the asset goes directly to the beneficiary.

By working closely with an estate planning attorney, you’ll have the opportunity to prepare an estate plan that addresses how you want assets to be distributed, which assets may be placed outside of your estate for an easier transfer to beneficiaries and what you can do to avoid a will contest, if there is a disinheritance situation looming.

Reference: Record Online (August 24, 2019) “Anatomy of a probate proceeding”

What Happens to Credit Card Debts After You Die?

Can you imagine what people would do, if they knew that credit card debt ended when they passed away? Run up enormous balances, pay for grandchildren’s college costs and buy luxury cars, even if they couldn’t drive! However, that’s not how it works, says U.S. News & World Report in the article that asks “What Happens to Credit Card Debt When You Die?” 

What Happens to Credit Card Debt When You Die?
A common misconception is that your debts are wiped out when you die.

The personal representative of your estate, the person you name in your last will and testament, is in charge of distributing your assets and paying off your debts. If your credit card debt is so big that it depletes all of your assets, your heirs may be left with little or no inheritance.

If you’re concerned about loved ones being left holding the credit card bag, here are a few things you’ll need to know. (Note that some of these steps require the help of an experienced estate planning attorney.)

Who pays for those credit card debts after you die? Relatives don’t usually have to pay for the debts directly, unless they are entwined in your finances. Some examples:

  • Co-signer for a credit card or a loan
  • Jointly own property or a business
  • Lives in a community property state (Alaska, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin)
  • Are required by state law to pay a debt, such as health care costs, or to resolve the estate.

A spouse who has a joint credit card account must continue to make on-time payments. A surviving spouse does not need the shock of learning that their spouse was carrying a massive credit card debt, since they are liable for the payments. A kinder approach would be to clear up the debt.

How do debts get paid? The probate process addresses debts, unless you have a living trust or make other arrangements. The probate court will determine the state of your financial affairs, and the personal representative named in your will (or if you die without a valid will, the administrator named by the court), will be responsible for clearing up your estate.

An unmarried person who dies with debt and no assets, is usually a loss for the credit card company, if there’s no source of assets.

If you have assets and they are left unprotected, they may be attached by the creditor. For instance, if there is a life insurance policy, proceeds will go to beneficiaries, before debts are repaid. However, with most other types of assets, the bills get paid first, and then the beneficiaries can be awarded their inheritance.

How can you protect loved ones? A good estate plan that prepares for this situation is the best strategy. Having assets placed in trusts protects them from probate. A trust also allows beneficiaries to save time and money that might otherwise be devoted to the probate process. It also puts them in a better position, if the personal representative needs to negotiate with the credit card company.

Talk candidly with your estate planning attorney and your loved ones about your debts, so that a plan can be put into place to protect everyone.

Reference: U.S. News & World Report (August 19, 2019) “What Happens to Credit Card Debt When You Die?”

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