Top 10 Success Tips for Estate Planning

Unless you’ve done the planning, assets may not be distributed according to your wishes and loved ones may not be taken care of after your death. These are just two reasons to make sure you have an estate plan, according to the recent article titled “Estate Planning 101: 10 Tips for Success” from the Maryland Reporter.

There are several other key tips for estate planning for you to consider, here are 10 of them:

Gather Asset Information.  This should include all your property, real estate, liquid assets, investments and personal possessions, and not just assets you think your Will will control, gather it all.  With this list, consider what you would like to happen to each item after your death. If you have many assets, this process will take longer—consider this a good thing. Don’t neglect digital assets. The goal of a careful detailed list is to enable your fiduciaries to quickly identify, gather and ultimately distribute your assets.

One more key thing, put this list in a place that’s accessible.  Don’t assume technology will make that possible as an era of passwords and high security, although great in most contexts, makes accessibility difficult for your family.  Instead, consider sharing information with them in advance so they are prepared to deal with this.

Meet with an estate planning attorney to create wills and/or trusts. These documents dictate how your assets are distributed after your death. Without them, the laws of your state may be used to distribute assets. You also want to pick the person whose job it is to wind-up your affairs, and these documents name the person responsible for carrying out your instructions.  If you already have estate planning documents, you should have them reviewed from time to time as clients sometimes out grow their estate plans, or have better options on how to accomplish their goals.

Anecdotally, I participate in estate-related study groups, message boards and other groups in which lawyers workshop estate problem.  The hardest cases to figure out and the hardest cases to get a satisfactory conclusion for are very typically cases where no estate planning was done.

If you don’t have an estate plan and want ideas on how to start the process, see this article:  https://galligan-law.com/how-to-begin-the-estate-planning-process/

Guardians for minors, the person who will raise your minor children if you should pass.  You can nominate who will serve as their guardians.

Beneficiaries named?  Now, very frequently people tell me in consultations that they don’t need an estate plan, because they have beneficiaries named on all of their assets. That is virtually never true, however, for this list’s purposes, I say it is worth reviewing which assets should name beneficiaries (e.g. life insurance or retirement funds) and confirm they match what you want.

One of the difficulties with beneficiary designations is that they are like old estate plans, people set them, and then never change them.  I’ve seen ex-spouses left on them, mistakes like naming only one child to receive everything because they will “do the right thing,” not having contingencies if the named person predeceased, and so on. They also write their own rules on contingencies.  So, if you leave your IRA to 3 named children, but one of them is deceased, their portion may go to their siblings, or maybe their children, or even possibly your estate.  The answer lies in the plan documents, so it is important to consider them in your estate plan.

Also, clients may have excellent wills that address all form of concerns.  But, then names one child as beneficiary of their assets.  That typically means the will has to be probated (did you have a beneficiary on your house?), but zero cash to fund it.  That is not an enviable position for the executor.  Plus, if the will establishes trusts, plans for minors or incapacitated beneficiaries, or any of the many other problems you can proactively plan for, but the asset goes directly to a person instead, all of those protections and solutions were circumvented.  So, speak with your estate planning attorney to ensure the beneficiary designations work with your estate plan.

Make your wishes crystal clear. Legal documents are often challenged if they are not prepared by an experienced estate planning attorney or if they are vaguely worded. You want to be sure there are no ambiguities in your will or trust documents. Consider the use of “if, then” statements. For example, “If my husband predeceases me, then I leave my house to my children.”  This is especially true in contingencies, which I’ve found people typically haven’t considered.

Trusts may be more important than you think in estate planning. Trusts allow you to take assets out of your probate estate and have these assets managed by a trustee of your choice, who distributes assets directly to beneficiaries. You don’t have to have millions to benefit from a trust.  I’ve written extensively about the benefits of trusts, so you can find several articles elsewhere on that topic.

List your debts. This is not as much fun as listing assets, but still important for your executor and heirs. Mortgage payments, car payments, credit cards and personal loans are to be paid first out of estate accounts before funds can be distributed to beneficiaries. Having this information will make your executor’s tasks easier.

Plan for digital assets. If you want your social media accounts to be deleted or emails available to a designated person after you die, you’ll need to start with a list of the accounts, usernames, passwords, whether the platform allows you to designate another person to have access to your accounts and how you want your digital assets handled after death. This plan should be in place in case of incapacity as well.

Plan for Incapacity.  All too often, clients only think of estate planning in the context of their passing.  That is of course part of it, but sometimes it is even more critical to consider incapacity.  What happens with your assets if your health doesn’t permit you to handle your own finances?  Who would speak for you?  Do you want them to do whatever they want, or do you want to give them direction?  This is extremely important as it directly affects your well-being as this person will pay for your daily needs and medical expenses.

Plan for Long Term Care. The Department of Health and Human Services estimates that about 70% of Americans will need some type of long-term care during their lifetimes. Some options are private LTC insurance, government programs and self-funding.

The more planning done in advance, the more likely your loved ones will know what to do if you become incapacitated and know what you wanted when you die.

Resource: Maryland Reporter (Sep. 27, 2022) “Estate Planning 101: 10 Tips for Success”

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What If You Don’t have a Will?

Studies suggest that a majority of adults do not have an estate plan of any kind, even a will.  The issue of what happens when a person doesn’t have a will comes up frequently in our practice.  The answer to the question, which is what I’ll discuss here, provide lots of reasons to have one.  You can see a recent article entitled “Placing the puzzle pieces of long-term care and planning a will” from the Pittsburgh Post-Gazette for a bit more background, although state processes vary.

First, a will is a written document stating wishes and directions for dealing with the property you own after your death, also known as your “estate.” When someone dies without a will, property is distributed according to their state’s intestacy laws.  Intestacy sets who your beneficiaries will be since you haven’t chosen them, and generally are next of kin (with some wrinkles). If your next of kin is someone you loathe, or even just dislike, they may become an heir, whether you or the rest of your family likes it or not. If you are part of an unmarried couple, your partner has no legal rights, unless you’ve created a will and an estate plan to provide for them.

Intestacy rules vary greatly from state to state, especially in a community property state like Texas.  In general, intestacy laws distribute property to a surviving spouse or certain descendants. A very common exception, which many people don’t know and are surprised to learn, is that if you have children from outside of the current marriage, not everything goes to that spouse.  I frequently encounter families who assume spouse gets everything, regardless of family makeup, and this often leads to conflicts with family.

While practicing in Pennsylvania I actually had a situation in which one spouse died young without children and with living parents.  Not everything goes to the spouse in that situation, but instead, partially to spouse and the rest would have been divided between the surviving spouse and parents.  The surviving spouse was not pleased to learn that.

This may also lead to a difficult result for the beneficiary.  If they have disabilities and are using government benefits, receiving the inheritance may cause them to lose those benefits, which may be critical for that person’s care.  Wills and other estate planning documents can prevent that outcome.

If you don’t have a will, at least in Texas, it may be necessary to have a proceeding to determine who the heirs even are.  This is called an heirship proceeding and can be quite expensive as the court appoints another attorney (who you pay) to look for unknown heirs.  This whole process also adds time and uncertainty to a process which is already difficult due to the loss of a loved one.

Additionally, a will designates a person to handle the estate, often called an executor, and typically names successors should the first named person be unable or unwilling to serve.  In the absence of these directions, the heirs will have to figure it out among themselves, hopefully amicably and without litigation.

Many states also have limited proceedings that may or may not be helpful when a person doesn’t have a will.  For example, Texas has affidavits of heirship which can address retitling of land interests, such as the residence.  However, that won’t help for bank accounts.  Pennsylvania actually has a rule permitting small bank accounts to be distributed to next of kin after the funeral is paid.  That too may help, unless the account is $10,000 and is useless for land.  Many states have small estate proceedings that can work, but in practice are often cumbersome.

A much better solution: speak with an experienced estate planning attorney to have a will and other estate planning documents prepared to protect yourself and those you love.

Start by determining your goals and speaking with family members. You may be surprised to learn an adult child doesn’t need or want what you want to leave them. If you have a vacation home you want to leave to the next generation, ask to see if they want it. It may reveal new information about your family and change how you distribute your estate. A grandchild who has already picked out a Ferrari, for instance, might make you consider setting up a trust with distributions over time, so they can’t blow their inheritance in one purchase.

Determining who will be your executor is another important decision for your will. They are a fiduciary, with a legal obligation to put the estate’s interest above their own. They need to be able to manage money, make sound decisions and equally important, stick to your wishes, even when your surviving loved ones have other opinions about “what you would have wanted.”  See this article for further ideas:  https://galligan-law.com/what-are-the-duties-of-an-executor/  

If there is no one suitable or willing, your estate planning attorney will have some suggestions. Depending on the size of the estate, a bank or trust company may be able to serve as executor.

The will is just the first step. An estate plan includes planning for incapacity. With a Will, a Power of Attorney, Medical Powers of Attorney and other documents appropriate for your state, you and your loved ones will be better positioned to address the inevitable events of life.

Reference: Pittsburgh Post-Gazette (April 24, 2022) “Placing the puzzle pieces of long-term care and planning a will”

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What are the Duties of an Executor?

Many clients struggle with who can serve as an executor for their estate plan.  They may not have an easy option amongst their family, and are hesitant to ask others to serve as executor.  Many times clients want to know what are the duties of an executor so they can convey that to a potential candidate for the role.  It isn’t easy to explain everything an executor needs to do as they have to react to the circumstances as the time, but there are some general steps they will address.  A recent US News article entitled “How to Prepare to Be an Executor of an Estate” takes a further look into what is expected of an executor.

First, keep in mind that an executor is the person who helps wrap up the finances, assets and affairs for a deceased person. An executor is a person named in a will, and that is the scenario I’ll address.  If you are using trusts, many of the steps will overlap.

As executor of an estate, you will need to get copies of the death certificate and the will, and take both to an attorney well versed in probate law.  That attorney can help you probate the will through court.

Once appointed, you will follow the instructions in the will to administer the estate.  As executor, you are acting in a fiduciary capacity, and your efforts are directed toward the interests of the beneficiaries of the decedent’s the estate.

You will identify the assets of the estate, determine their value, pay off any valid debts, close accounts like utilities and cable or phone plans and distribute money and possessions to beneficiaries.  Depending on the terms of the will and the situation, you’ll have to file tax returns, make tax elections, and potentially sell property and the like.  You may also establish trusts for beneficiaries, or make arrangements to deliver assets such as personal property, real property, vehicles and more.

The duties of an executor also include reporting what assets they found in the estate through the filing of an inventory, to notify creditors or other essential parties.  Attorneys help with this process to ensure compliance with state laws.

The time required to be an executor can be extensive.  Any court process is not a fast one, and for that reason many clients choose to avoid it through the use of trusts in their plans.  Trusts do not require a court process and can be far more immediate for the family.  As I said before, the duties of an executor overlap with the trustee, so the issues for consideration when picking a trustee are similar.   You can see this article for more detail on the differences.  https://galligan-law.com/the-difference-between-an-executor-a-trustee-and-other-fiduciaries/ 

Finally, executors may be compensated for their work. Some states have commission schedules listed in their statutes that the executor can collect, while other states require that you keep track of your time and the judge will authorize “reasonable” compensation for your actual efforts.

Ask for help if tasks seem overwhelming or you do not understand certain instructions on accounts or the will. An experienced estate planning attorney can assist.

Reference: US News (Dec. 22, 2021) “How to Prepare to Be an Executor of an Estate”

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