Estate Planning Avoids Problems With Selling the Family Home

Estate planning can help avoid problems when selling the family home.
Estate planning can help avoid problems when selling the family home.

Family members who are overtaken with grief are often unable to move forward with selling the family home after a parent has passed away. If the family home was not being well maintained while the parent was ill or aging, it might fall into further disrepair. When siblings have emotional attachments to the family home, things can get even more complicated. The difficulty of selling a parent’s home after their passing, depends to a large degree on what kind of estate planning the parent has done.

Much also depends on the family’s ability to ask for help and work with the right professionals in handling the sale of the home and managing the estate. The earlier the process begins, the better.

Parents can take steps while they are still living to ward off unnecessary complications. It may be a difficult conversation but having it will make the process easier and allow the family time to focus on their emotions, rather than the sale of property. This is why is is important to address what happens to the family home in an estate plan.

Here are a few pointers:

Make sure your parents have a will or a living trust. Many Americans do not. A survey from Caring.com found that only 42% of American adults had a will or a trust, and other estate planning documents.

After a parent passes away, there may be costs associated with maintaining the property and fixing any overdue repairs. Make sure to save all receipts and estimates.

Also, the Executor or successor Trustee under the parent’s estate planning documents should secure the property immediately. That may mean having the locks changed as soon as possible. Once an heir (or someone who believes they are or should be an heir) moves in, getting them out adds another layer of complication.

Be realistic about the value of the property. Have a real estate agent run a competitive market analysis on the property and consider an appraisal from a licensed appraisal. Avoid any accusations of impropriety—don’t hire a friend or family member. This needs to be all business.

To keep disagreements to a minimum, the Executor or successor Trustee should frequently update the heirs on how the sale of the house is progressing.

The biggest roadblock to selling the family house is often the emotional attachment of the children. It’s hard to clean out a family home, with all of the mementos, large and small. The longer the process takes, the harder it is.

This is not the time for any major renovations. There may be some cosmetic repairs that will make the house more marketable, but substantial improvements won’t impact the sale price. Remove all family belongings and show the house either empty or with professional staging to show its possibilities. Clean carpets, paint, if needed and have the landscaping cleaned up.

Keep tax consequences in mind. Depending on where the property is, where the heirs live and how much money is being inherited, there can be estate, inheritance and income taxes.  It is usually better to sell an inherited property as quickly as possible. When a property is inherited at death, the property value is “stepped up” to fair market value at the time of the owner’s death. That means that you can sell a property that was purchased many years ago, but not pay taxes on the value gained over those years.

Talk with an experienced estate planning attorney about what will happen when the home needs to be sold. It may be better for parents to create a revocable trust in advance, which will direct the sale, allow a child to continue living in the home for a certain period of time, or instruct the one child who loves the home so much to buy it from the trust. Trusts are typically easier to administer after parents pass away and can be very helpful in preventing family fights.

Dealing with issues in advance through estate planning will help minimize conflicts after a parent passes away. Learn more avoiding estate planning mistakes.

Reference: The Washington Post (May 16, 2019) “With proper planning, selling a parent’s house can be a relatively painless process”

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Power of Attorney: Why It Is Important

Don't wait to create a power of attorney.
Don’t wait to create a power of attorney.

Unfortunately, you never know when a power of attorney will be needed to allow someone else to make financial and medical decisions for you. An accident or sudden illness can occur without warning. A power of attorney is a necessary document if your are too ill, injured, or lack the mental capacity to make your own decisions. The article, “Why you’re never too young for a power of attorney” from Lancaster Online, explains what these documents are, and what purpose they serve.

There are two basic power of attorney documents or “POA’s”: one for making financial decisions and one for making medical decisions. A financial POA may be effective immediately or when a doctor certifies that you are unable to handle your financial affairs. A medical POA  becomes effective when you cannot communicate a medical decision. Until then, you are completely in charge of decisions related to your medical care.

If you don’t have a POA and you are unable to make financial and medical decisions for yourself, a guardian must be appointed in a court proceeding to make decisions for you. This is an expensive and time consuming process and the outcome may not be what you would have wanted.

Anyone over the age of 18 should have a financial and medical power of attorney. Many parents start realizing this when their children go off to college. Parents are often surprised and frustrated when they find out that, because their college age children are considered adults, the parents no longer have access to their children’s financial and medical information, not even in an emergency.  That’s why our next client education seminar on June 26 is devoted to what estate planning documents students need to have in place before they go off to college. (See our website at www.galliganmanning.com for more details and information on how to register.)

While it’s never too early for a person 18 years of age or older to have medical and financial powers of attorney in place, you could wait until it’s too late. If you become incapacitated, you cannot sign a POA. We often see this when children of aging parents contact us in a panic because their parents never executed powers of attorney. If the aging parent lacks capacity and cannot sign a POA, the family is faced with the need to pursue a guardianship.

You should work with an estate planning attorney to create the powers of attorney you need.  An estate planning attorney will be able to tailor your POA to your exact needs. They will also make sure to create a document that gives proper powers to the people you select.

Review your POA’s at least annually to be sure that the people you have selected are still the people you want taking care of your financial and medical matters, if the need should ever arise.

Most important of all, don’t wait to have powers of attorney created for you. They are even more important than a Will because the powers of attorney affect your care while you are alive.

Learn more about powers of attorney and other estate planning documents.

Reference: Lancaster Online (May 15, 2019) “Why you’re never too young for a power of attorney”

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Probate Lawyers Say Talk to Your Parents About Estate Planning

Probate lawyers say it's important to talk to your parents about estate planning.
Probate lawyers say it’s important to talk to your parents about estate planning.

Probate lawyers often meet with adult children who are trying to settle their parents’ estates. Many times these children are surprised by their parents’ financial situation and the lack of estate planning that their parents have done. When little or no estate planning has been done, it can be expensive and time consuming to deal with all the unresolved issues that  result. That’s why probate lawyers strongly encourage adult children to talk to their aging parents about their finances, their feelings about health care decisions, and whether they have an estate plan in place. But this is easier said than done. How do you start a conversation that includes a discussion of a family member’s mortality?

Sometimes the way to ease into a conversation with aging parents about money and their estate plan, is to discuss your own. If you want to know about their will or estate plan, start by explaining your own estate plan, how you’ve decided to set up your estate and then ask what they’ve done for themselves.

The conversation may feel awkward the first time you start it, says the Daily Local News in the article “Ask your folks about their financial plans,” but you need to get to where everyone is comfortable having the conversation. Your parents’ plans might impact yours, and visa versa. So, it’s good to talk “early and often” not only about your parents’ estate plan, but how they are planning for the costs of retirement, including health care.

It’s important for aging parents to understand that, if something happens to them, their children are the most likely ones to step in and take charge. Your parents need to understand that the more you know in advance, the better equipped you’ll be to make sure that their wishes are followed.

A good opening is to talk about your plans to save for retirement. Ask your parents what they did, or do, about 401(k) contributions. This will give you insight into how well-prepared and knowledgeable they are about retirement savings. If you’re house hunting, that’s an excellent opportunity to get them talking about their furture plans for living arrangements. Do you need to buy a home with a possible “in-law” suite in mind? It’s not a bad question to ask. It shows that you are thinking about their future needs.

Probate lawyers have seen how untangling an estate when there’s no will and no advance planning has been done can tear a family apart. That’s the last thing you or your parents want. Talking openly with them about money, trusts, wills, life insurance and advance medical directives, will give you an idea of what they have or have not done to plan for the future. It may spur your parents on to move forward with their estate plan, if they have been procrastinating.

Even if you learn that they haven’t done any planning and don’t have a will, that is better than not knowing until it’s too late. If you learn that this is the case, you can start educating them about what will happen if they don’t meet with an estate planning attorney. You can offer to take them to meet your estate planning attorney or to give them a few names so that they can decide who they are most comfortable with. This could help them avoid some common estate planning mistakes.

Setting up your own estate plan is another opportunity to ask your parents what they did and what their thoughts are about your  estate plan. Their family may have never done any estate planning, and they might have more than a few family horror stories to share. In that case, you can help them change the family’s dynamic by encouraging them to take a different path.

Reference: Barchart (April 16, 2019) “Ask your folks about their financial plans”

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