Does Your Executor Know What to Do?

Don't leave a mess for your executor clean up. There are ways to make your executor's job easier.
Don’t leave a mess for your executor clean up. There are ways to make your executor’s job easier.

Next Avenue’s recent article entitled “Is Your Estate as Planned As You Think?” explains that when you pass away your executor will have many tasks to perform when settling your estate.

It’s helpful to add clarity and lessen the burden of your executor’s work in advance. Look at this list of things to make sure your estate is as planned as you think it is:

Is your will current? If you’ve written your will, how long has it been since you drafted it? Have there been any major changes in your life since that time? If so, it’s likely time to update it. Review your will to make certain that it’s an accurate representation of your assets and your wishes now.

Is your will detailed? Yes, you’ve addressed the big stuff, but what about smaller items with sentimental value? You should list who gets what, to avoid fighting, especially if the executor is one of your beneficiaries.

Do you have a way to distribute your other personal items? You should determine how your family will divide up the possessions not explicitly listed in your will, such as the lawnmower, dishes and photographs. All of it will need to be either distributed by the executor to one of your beneficiaries, donated, or sold.

Are your financial affairs organized? Your executor will need to know if you have any recurring payments, as well as your account number, and online passwords. Create a list of regular monthly bills, along with your account numbers and access codes to simplify your executor’s job.

You will also need to let the executor know about any automatic deductions or charges on your credit card, internet-based subscriptions, club memberships, recurring charitable donations and automatic utility payments.

Making your wishes clear for your executor can help ensure that there’s less stress and an easy distribution of your assets.

Your estate planning attorney can help you address these issues to make things easier for your executor and your family. And while speaking with your estate planning attorney, ask about advance medical directives such as a medical power of attorney, a living will, a HIPAA waiver and whether you should have a trust.

For more information on wills see https://galligan-law.com/understanding-why-a-will-is-important/.

Reference: Next Avenue (Feb. 25, 2020) “Is Your Estate as Planned As You Think?”

 

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Removing your House from your Trust

There are ways to remove your house from your trust, but work with an estate planning attorney to do so while preserving the trust benefits!

Occasionally clients ask for assistance in removing their house from their trust.  They do so to facilitate refinancing the house, the client wants to add a relative to the title, to ensure the home is considered a residence for Medicaid purposes or some other similar issue.  There are a number of issues to consider before doing so as the recent nj.com article entitled “I want to revoke a trust on my house. What do I do?”  points out.  Whether it is a good idea to remove your home from your trust and actually doing so will require the assistance of an experienced estate planning attorney.

The answer to a question about how to get a house out of your trust is going to be in the trust terms themselves. However, if the terms of the trust are silent, the answer may be found in the trust laws in the state statutes.  If answering the question in general terms, the primary concern is whether the trust is revocable or irrevocable.

The first step is to determine whether the trust is revocable.   Most clients use revocable trusts, so assuming it is a revocable trust, the trustor (person who set up the trust) has the right to remove the house from the trust.  The trustee (probably the same person) can execute a deed conveying the property from the trust to the trustor.  That takes the property out of the trust.

In the majority of cases, this will solve the problem.  Also, if the property was removed to refinance, you can safely convey it back to the trust once the refinance is done.  Similarly, if a client wants to add someone to title to change where the property goes at death, it is often better to just change the trust terms to leave the residence to the beneficiary.  This is often better for taxes as well.

If the trust is irrevocable, it means that the house can’t be removed from the trust unless the terms of the trust permit it.  There are exceptions, such as asking a Court’s permission to revoke the trust or remove the property, or in some cases, terminating the trust with agreement of the trustee and beneficiaries, but these are more difficult options and not guaranteed.

Next, let’s look at the reason why the home was initially put in a trust.  It is important to keep these ideas in mind as removing the property from the trust may negate important benefits.   See here for the benefits https://galligan-law.com/category/trusts/page/6/      There may be alternatives which accomplish the same goals as well.

If the purpose was to lower estate taxes, it may make sense to remove the house from the trust. This is especially the case if the property is in a state that doesn’t have state estate taxes.  Very few states still do.  An estate rarely meets the threshold for federal estate taxes, so clients actually save taxes by removing the property from trust.

If the property is owned by an irrevocable trust for asset protection in long-term care planning, it might make sense to keep the property in the trust.  However, if you are using a revocable trust and want to consider asset protection in long-term care planning, it is often better to keep the property in your name. This is because Medicaid may exempt your residence if you own it personally.  In our office, we prepare “Lady Bird deeds” for Texas residences which allow a client to own the residence personally, and transfer it to the trust automatically when they pass away.  This works with both asset protection planning and probate planning.

If the trust owned the property for probate avoidance, the property often will be put back into the trust or conveyed at death to the trust such as with the Lady Bird deed.

In sum, there are some reasons to remove property from a trust, but doing so should always involve an experienced estate planning to preserve the benefits of the trust and to ensure your goals are met.

Reference: nj.com (Feb. 4, 2020) “I want to revoke a trust on my house. What do I do?”

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Estate Planning Mistakes by Famous People

Many estate planning mistakes by famous people illustrate on a grand scale what applies to all of us; the need for an up-to-date, quality estate plan.

The instructions for the disposition and management of one’s estate at death through the use of wills, trusts, and other devices can cover almost about any topic you can think of. While the majority of instructions in estate planning concern finances, wills and trusts frequently guide decisions regarding health care, guardianships, business, education and even which heir gets the entire Barry Manilow record collection.

Born2Invest’s recent article entitled “The biggest estate planning blunders of all time” looks at a few colossal estate planning mistakes by the rich and famous.  Estate planning mistakes by famous people show you what can go wrong in the worst of ways.

Estate planning usually conjures up thoughts of drafting a will by an attorney. Although the cost of drafting an estate plan varies significantly based on location and complexity, it can range from a few hundred dollars to several thousand. Regardless of the cost, hiring an experienced estate planning attorney will save your family time, money and anguish after your death.

With that said, let’s take a look at some estate planning mistakes by famous people who simply didn’t get around to this very important task.

Ted Williams (Baseball Legend). When Ted died in 2002, he had one will that said his body should be cremated, and another that instructed he should be cryogenically frozen. As you can imagine, there was a fight among his children. This resulted in Ted’s decapitation (postmortem). Therefore, the Splendid Splinter, the greatest baseball hitter of all time, had his body and head frozen in Arizona at Alcor Life Extension Foundation.

Sonny Bono (Singer and Congressman). Sonny didn’t create a will. As a result, he passed away intestate. A lawsuit was initiated by ex-wife and singing star, Cher, to collect $1.6 million in unpaid alimony, along with a fraudulent claim by an illegitimate child (disproven by DNA testing), and Sonny’s widow, Mary.

Heath Ledger (Actor). Heath failed to revise his will after the birth of his daughter. At his death in 2003, his entire estate was split between his parents and sisters, but they agreed to give all the money to his daughter.

Philip Seymour Hoffman (Actor). The Oscar-winning actor also never updated his will after the birth of his two daughters. Since he wasn’t married to his then girlfriend, there was an approximate $12 million estate tax that was owed.

Joe Robbie (the owner of the NFL Miami Dolphins). Robbie had a substandard estate plan that contained a pour-over will and revocable inter vivos trust. This was designed to defer estate taxes until after the death of his wife. However, it didn’t work as planned. She demanded her “elective share” as spouse, 30% of the husband’s illiquid estate, which created a $47 million tax bill that could only be settled by selling off his football team. His 11 children also went to court to fight over his estate.

James Brown (Singer). The “Godfather of Soul” wasn’t around to witness the 12-year epic legal battle among several blended families over his estate.

Barry White (Singer). White died in 2003 in the middle of divorce proceedings. Legally speaking, he was still only separated from his wife. As a result, she got it all, instead of his current girlfriend and mother of nine kids.

There are many more famous people who posthumously became members of this dubious club. Their eligibility for membership was poor estate planning that resulted in unintended—and in some cases, tragic—consequences. Although many Americans can’t really identify with these mega-wealthy or public icons, they do have assets and families and friends, and everyone should expect to need an estate plan.  See here for ideas on how to do it properly https://galligan-law.com/a-will-is-the-way-to-have-your-wishes-followed/

The club of estate planning mistakes by famous people shows the rest of us the need for proactive professional planning. Be certain that you work with a qualified estate planning attorney, so that your estate plan doesn’t end up like the ones above.

Reference: Born2Invest (January 27, 2020) “The biggest estate planning blunders of all time”

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