Ten Top Reasons to Make Your Will

There are undoubtedly more than ten reasons why it is a good idea for you to have a Will.  But I recently heard an attorney in another state make a presentation on some of the top reasons why he suggests clients prepare a Will.  I thought those reasons were worth sharing.top-ten

  1. Choose who receives your estate.  If you don’t have a Will, the laws of the state of Texas will determine who receives your property and that may not be who you want to receive it.  In a Will you can direct who is to receive your estate.
  2. Choose who administers your estate.  If you don’t have a Will, a court will determine who should administer your estate.  In a Will you can direct who you would like to administer your estate.  The court still has to make the appointment, but it usually follows your direction in your Will.
  3. Designate guardians for your minor or incapacitated children.  Within your Will you can say who you would like to have serve as guardian of your children if they are minors or incapacitated upon your death.  If you do not make such a designation, the court will have to select someone to serve in that capacity without your input.
  4. Reduce expenses of probate.  A properly drafted Will can provide for a streamlined form of probate that minimizes the expenses of handling probate.
  5. Save time in probate.  The same streamlined form of probate selected to minimize expenses will also usually result in a more quickly completed probate.  If you have no Will it becomes much more difficult to get the court to allow you to use the streamlined form of probate.
  6. Minimize the chance of disputes.  There is no way to guarantee that disputes will not arise during the administration of your estate.  But setting out your wishes in a well drafted Will should greatly reduce the likelihood of your beneficiaries raising issues after your death because of disagreements about what your wishes were.
  7. Avoid burdens.  The lack of a Will often leads to confusion on the part of those who are appointed to administer your estate as to how they should handle your affairs and wrap up your estate.  It can also create confusion among those who receive parts of your estate and those who don’t receive part of your estate, but think they should have.  The burdens of dealing with this confusion can be quite hard on your loved ones.
  8. Protect minors.  In addition to protecting your children through the appointment of a guardian, you may also establish trusts for your minor or incapacitated children and other beneficiaries.  The trust will be administered by a trustee you select.  The trust can provide for funds to be paid out as your children need it while growing up, as they go to college and then those funds to be paid out at a particular age or upon the occurrence of specified events.
  9. Protect your business.  Your Will can designate how you wish a business to be handled after your death, and who should manage it.
  10. The state won’t receive your estate.  The state won’t receive your estate unless an exhaustive search is unable to locate any of your heirs.  It may not be likely that none of your heirs will be able to be located after you die, but if that does occur, your estate could end up going to the state of Texas.  If you don’t have close family, you may wish to provide that your estate go to particular friends or charities.  That can only happen if you prepare a Will.
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One Thing to Do for Your Children Now That They Are Adults.

Amazing how quickly time passes.  This post was originally written seven years ago, but for those with children graduating from high school soon, it is worth repeating.

graduationMy son just graduated from high school and will be off to college soon.  We are already deciding what computer, rugs, curtains, posters, shelves, etc. he will need.  We are looking at a bank account and debit card for his incidentals.  Is there anything else to consider?  Well, yes there is.

Now that your child is over 18, he is an adult – scary thought!  If your child should have an accident at school and need medical care, the health care providers may be reluctant to provide you information or take direction from you unless your “child” has granted you that right.

Here are some important documents to prepare:

Durable Power of Attorney.  This document gives another person the authority to make personal and financial decisions on your behalf. A Durable Power of Attorney can cover all aspects of your personal and financial affairs, or may be limited to specific situations and activities. Of all the documents listed here, this one probably has the most options for specific tailoring.

Medical Power of Attorney.  This document designates a person your child trusts (presumably you, but may be others, also) to make health care decisions on his behalf should he be unable to make such decisions. It is effective immediately after it is executed and is typically effective indefinitely.  The agent may make health care decisions on your child’s behalf only if your child’s attending physician certifies in writing that your child is incompetent to make those decisions. The physician must file the certification in the medical record. Treatment may not be given to or withheld from your child if he objects. This is true whether or not your child is incompetent.

Directive to Physicians and Family.  This document is sometimes referred to as a living will.  It is used to prohibit or authorize the use of life-prolonging treatments when a person’s condition is terminal (doctor has diagnosed the person with less than six months to live) or irreversible (condition, injury, or illness that may be treated, but is never cured or eliminated; that leaves a person unable to care for or make decisions for the person’s own self; and that, without life-sustaining treatment provided in accordance with the prevailing standard of medical care, is fatal).

HIPAA Release.  This is a critical document.  It allows medical providers to release to the designated persons medical and health related information about the patient that would otherwise be protected under federal law from being disclosed.

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Mistakes Executors Make

An article published in the Wall Street Journal several years ago is still one of my favorites.  It is particularly relevant to those who are serving or have been designated as executor executor2in friends’ or family members’ wills, but it is also important for those who are doing the appointing.  Are you designating someone who is likely to fall into some of these traps?  If so, you may want to alert them ahead of time.

The article is reprinted below in full.

The Biggest Mistakes Executors Make

Settling an estate is often a thankless task.

Here’s how to avoid some common pitfalls.

Veronica Dagher
The Wall Street Journal
Jan. 31, 2016

Serving as an estate executor isn’t for the faint of heart.

It can seem like an honor, at first. When people make out their wills, they typically name a trusted person as their executor, who then has a legal responsibility to distribute their property according to the wishes of the deceased, and make sure all debts and creditors are paid.

But in addition to lots of paperwork and deadlines, the job often comes with a minefield of family issues. And worst of all, executors can be sued.

Here are some of the biggest mistakes executors want to avoid:

Paying bills too quickly

Often an executor will start receiving the deceased’s mail and paying credit-card bills and other invoices as they arrive, says Debra Doyle, shareholder at the law firm Greenberg Traurig in Chicago. They do this, Ms. Doyle says, in the mistaken belief that timely payment is required.  In truth, such bills are well down the list of priorities for payment. Paying these debts before all other classes is a breach of fiduciary duty and potentially exposes the executor to personal liability, Ms. Doyle says.

Ms. Doyle recalls one estate that carried a significant federal income-tax liability the executor knew nothing about. Once the tax bill became known, there wasn’t enough money left in the estate to pay it since the executor had first paid other debts.

In cases like this, the executor potentially has a personal liability to pay the outstanding tax liability because the executor improperly paid estate assets to satisfy lower-class creditor claims before settling the IRS claims, Ms. Doyle says. In some cases, the IRS may be willing to settle with the executor, but not in all cases, she adds.

Before paying any creditors, executors should consult with a trust and estate attorney to understand the priority of payments. For example, funeral expenses and federal and state taxes take priority over other debts such as the cable bill, she says.

In addition, the executor should consult with the estate’s accountant for an estimate of all tax liabilities, and consult with the estate’s attorney to estimate all administration expenses and payments, if any, due to the surviving spouse or children under a spousal or child’s award from the probate court.

Even after setting aside sufficient estate assets to satisfy the highest priority creditors, executors should consider satisfying all other debts and creditors only after the entire estate administration has been completed and all tax returns filed and taxes paid. This process may take nine months to two years, depending on the complexities involved, Ms. Doyle says.

Playing the market

Some executors are tempted to invest an estate’s assets—in an attempt to increase the value of the estate—during the settlement process. That can be a risky tactic. For one, an executor generally has no obligation to increase the value of an estate’s holdings, even if the distribution to heirs is prolonged.

It’s especially risky when an estate plan calls for giving a trust or individual a “pecuniary” amount, which is a precise amount based upon the value of assets reported on the estate tax return, says Hugh Magill, Northern Trust NTRS -3.48 % ’s chief fiduciary officer. That specific amount must be distributed to the trust or individual, regardless of fluctuations in the value of the assets before funding.

One father named his three adult sons as executors under his estate plan, which included a pecuniary formula for funding the trust for the surviving spouse, with the balance of the estate passing to the sons. The estate consisted largely of high-quality bonds, which the sons sold shortly after their father’s death to invest in a much riskier portfolio of small-cap stocks, which they hoped would grow, Mr. Magill says. But the value of those stocks declined more than 50% before the spouse’s trust was funded at the full amount required. The sons’ resulting share bore the entire decline in the stocks’ value, resulting in a loss to them of more than $5 million.

If the decline in the stock portfolio had been so large that the spouse’s trust could not be fully funded, the sons’ actions could have subjected them to a lawsuit for breach of fiduciary duty, he says.

Don’t “play the market” during the estate-settlement process, Mr. Magill says. In most states, the executor has an obligation to conserve, but not to increase, the value of the assets during estate settlement.

Mishandling real estate

Real estate is often one of the hardest assets to administer, says Ms. Doyle. One beneficiary might be living in the house, while another might want it sold quickly. The executor must decide the listing price and the commission to pay the real-estate agent, Ms. Doyle says. Unless amicable decisions can be reached among all of the beneficiaries, the executor may be forced to seek probate-court assistance, she says.

In addition, real-estate agents may recommend certain improvements to the property before the sale. Before authorizing any improvement, the executor needs to consider whether he or she is authorized to spend estate assets to make such improvements.

Executors also should be careful not to hold on to a house for too long. Insurance companies don’t like to insure empty houses for extended periods, Ms. Doyle says. If the home is vacant, the executor also needs to beware of maintenance issues. If a pipe breaks, significant damage can be done before anyone discovers it. Repairs can cost thousands of dollars and delay a property’s sale.

Executors should maintain the homeowner’s insurance on the decedent’s house in case of a fire or accident, says Avi Kestenbaum, partner at the Meltzer, Lippe, Goldstein & Breitstone law firm in Mineola, N.Y.

Losing tangible assets

Executors sometimes don’t realize that assets—tangible and intangible—belong to a new entity, the estate, as of the date of death. It’s the executor’s responsibility to keep the assets safe while arrangements are made to distribute them according to the decedent’s plan, says Paulina Mejia, managing director and head of wealth strategies at Atlantic Trust in New York.

Ms. Mejia says she knew an executor who was a family friend of the deceased and didn’t realize the son was helping himself to his late father’s works of art and valuable items while the estate was being settled. This caused many problems, because the will bequeathed the art to a museum. The executor could have been sued, she adds.  The executor should have immediately taken an inventory of the assets and arranged to appraise and securely store the art until it was ready to be distributed to the museum, Ms. Mejia says.

Executors must find all of the deceased’s assets and sort through all of their personal belongings to account for the entire estate, says Victor Ngai, an executive at Guardian Life Insurance Co. of America in New York. They also may need to get security for the home.

One other word of advice from Mr. Ngai: Don’t succumb to family pressure to make distributions too soon. It may result in insufficient assets to pay off creditors, he says.

“Money has a habit of changing the attitudes of a lot of people,” Mr. Ngai says, “but an executor’s job isn’t simply to distribute wealth.”

Ms. Dagher is a Wall Street Journal reporter and host of the Watching Your Wealth podcast. Email: veronica.dagher@wsj.com.

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Signed My Will – Now What?

If you have had a will prepared and signed it with the appropriate formalities, don’t allow communicationsyour family to be the one calling the attorney and saying, “Dad said he had a will, but we cannot find it.”

Family communication is key to many aspects of life and estate planning. If your will leaves your estate in a manner that might seem strange to your family, be sure to tell them ahead of time. Don’t surprise them with a substantial bequest to unfamiliar friends or charities unless you have told them ahead of time. Don’t appoint an unusual executor, trustee or guardian unless you have told family members ahead of time. If you don’t communicate, family members are likely to challenge the will, quarrel among themselves, or have long term strained relationships.

Another key communication issue is to tell your family members, especially the executor, where the original of your will is kept. You might have it in a bank safe deposit box that will never be found. Or it might be thrown out with a bunch of miscellaneous papers that no one thought was important. Be sure the file or envelope you have it in is appropriately and conspicuously labeled and at least a couple trusted people know where it is. If you have no trusted friends, consider filing your will with the county clerk.

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Is It Really a Free Dinner???

Have you received the mailings or seen the notices in your local newspaper or periodical?  Free Lunch Seminar on the Critical Elements of Estate Planning.  Free Dinner (at a fancy restaurant) on what you need to know to maximize your government benefits.  These and similar offers usually focus on the great dinner you will get or the intriguing topics, but only in the smallest of print at the bottom of the page give you any hint as to who might be giving you this information.

trap-860x450_cThe one I recently saw caught my attention because it included a statement that “Financial Professionals, Insurance Agents and Attorneys will be charged a $2500.00 educational fee.”  Let me tell you, each of those professions put on hundreds of educational programs for their members every year and even the more expensive of them are frequently priced at a tenth or less of that figure.  The real translation of that statement is “We don’t want educated people who might be able to poke holes in our presentation to attend.”

That should concern you.  Groups like this want to get you one-on-one to pressure you into spending much more money than you need to spend for something you will likely be left not understanding, but feel like you got all your needs covered.  Or they are primarily interested in getting you to move your investments to their company so they can charge you ongoing fees.

I am not saying all of these seminars are bad.  I have seen some good informational presentations, but you need to understand that most likely there is going to be some sort of sale presentation included – immediately or as a follow up.  And you should investigate the qualifications of the presenters.  Is a financial person advising you on estate planning laws?  Is a lawyer talking about how to manage your money?  Are the presenters experienced in the field in which they speak?

Bottom line, there is no truly free dinner.  Be cautious.  Investigate who you are dealing with before you accept what they say or pay them any money.  And take your time before moving forward with any decision.

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