Philadelphia Tax Accountant On Doing an Estate Plan WELL
May 22, 2015
A year from now you may wish you had started today.” – Karen Lamb
Over 50% of adults do NOT have a will or other estate planning instruments in place to protect themselves and their family. And, perhaps even worse, over 69% of parents have not yet named legal guardians who can raise their children if something happens to them.
Those are scary numbers. Estate plans provide great peace-of-mind for a family … and, of course, they can create a bunch of headaches if not handled correctly.
That’s why it always helps to have someone in your corner.
Here are some important things to keep in mind, whether starting a new plan, or working from an existing one…
First, have an up-to-date plan.
Most people are smart enough to keep their cars in good working order--it requires tune-ups, an annual physical check-up, etc. But I'm always surprised by the common misconception about how often they should have their estate plan reviewed.
You see, most people see estate planning as something you "do once" and never have to think about again. That's just flat incorrect.
Just like your health can take a dramatic turn (for the better or worse) in a year, your estate planning decisions can change dramatically in a short period. Sometimes, something as simple happens as the people you've identified to serve as the guardians for your minor children moving out of state. That's just one of many good reasons to revisit your estate planning decisions.
Plus, though there's been a lot of talk about the higher estate tax threshold, there are many ways in which out-of-date plans can be "burned", by not complying with new laws.
Your estate plan is a "living and breathing" plan (at least when done right) and therefore has to be maintained to reflect your life as it is today.
Second, ensure you have chosen the proper executor.
Whether you're dealing with significant sums, or with a more modest estate, choosing the person to handle these transaction is a critical decision for EVERY family.
Our clients, of course, have our trained staff handle every aspect of these concerns on their behalf (and much more, of course). But, if you choose to "go it alone" for some reason, here's what you need to keep in mind:
An executor must:
* Obtain certified copies of your death certificate
* Locate Will beneficiaries
* Examine and inventory your safe deposit boxes
* Collect your mail
* Cancel credit cards and subscriptions
* Notify the SSA and other benefit plan administrators of your death
* Learn about your property, which may involve examining bank statements, deeds, insurance policies, tax returns and other records
* Get bank accounts covered by the Will released
* Place notices in newspapers so creditors can make claims
* Hire a probate attorney
Either the executor or the probate attorney must:
* File court papers to start the probate process and obtain legal authority to act as your executor;
* Manage your assets during the probate process, which usually takes six months to a year;
* Handle court-supervised probate matters, including transfer of property to your beneficiaries and making sure your final debts and taxes are paid; and
* Have final income tax forms prepared, and, if necessary, have estate tax returns for your estate prepared and filed.
Of course, the open probate process is something we try to minimize and even avoid on behalf of our clients.
What To Look For in an Executor
Your executor is what is called a “fiduciary” which means he or she must act in good faith when handling your affairs. He or she cannot take advantage of his or her position or unfairly profit from financial transactions from your estate. The executor will meet the standard of a fiduciary duty if he or she does a competent, honest job.
You want your fiduciary to be both trustworthy and capable of handling the tasks. You have to have complete faith in him or her. Make sure he or she understands the responsibility of the job and is willing to accept it. This requires a discussion before you make your Will.
It sounds a bit strange, but name someone who is healthy and likely to be around after your death. To be secure, you should definitely select at least one successor executor to serve if your first choice is unable or unwilling to do so when the time comes.
For many people, the choice is obvious—their spouse. Others select a close friend, a grown child or other close relative. If no obvious person comes to mind, make a list of your possible selections and use common sense (and this article as your guide) to make the wisest choice.
Lastly, consider telling your family exactly what you plan.
This gives you the chance to head off any possible disagreements among your family about how things "should" be handled. If you happen to die or lose capacity, it's usually too late.
Eliminate surprises and keep those family fights at bay.
Perhaps the LAST thing to say, is make sure you have competent help by your side. And that, of course, is what we're here for.