Maintaining and Executing An Estate Plan

You make your will and trust. The real test for whether they worked or not only comes after you die. Between now and then you have to keep your will and trust updated. Reader Steve kindly shared his experience in maintaining his parents’ estate plan and executing the plan after they passed away. Here’s the guest post from Steve:

Funding the Trust

The attorney handled getting my parents’ home transferred to the trust. He wrote letters for transferring life insurance policies, bank accounts, and brokerage account to the trust. My parents signed those letters, with necessary attachments, and mailed them in.

I later found that some insurance policies and particularly broker/financial accounts had not completed the title transfers. I had to follow-up with the brokers’ and insurance companies’ back office to get the accounts and policies transferred. It’s very important to follow-up on this. The job is not over until you see account statements titled properly in the name of the trust.

Their car was not transferred to the trust. Some experts advise not transferring ownership of assets like cars to trusts, for liability reasons.

Moving To Another State

When my parents relocated to my state, we had another estate planning attorney review the trust and other documents to see if changes needed to be made. The trust document did not have to be changed, but I believe he recommended revising the healthcare power of attorney and the general power of attorney to comply with this state’s laws.

What the Trust Did and Didn’t Do

The trust reduced my parents’ state estate tax bill, after both of them died. In years since, state estate tax law changes have eliminated this benefit.

The trust allowed faster disposition of assets and distributions to beneficiaries than their non-trust assets which were controlled by probate.

The trust also allowed more privacy than for non-trust assets.

However, the trust did not eliminate the need for an attorney. The trust was complex enough that when my parents died, I needed to consult an attorney to understand proper steps. Also, laws change and a trust established earlier may need to be reviewed/updated over time.

The trust did not eliminate probate and the related costs. Assets outside of the trust such as personal effects, automobile, auto insurance policy refunds, other miscellaneous post-death income get included in the probate estate, even if the will says such probate assets “pour over” into the trust. This means filings with the court, and approvals from the court.

The trust did not simplify tax preparation. Once a trust owner dies, the trust becomes irrevocable and a separate tax entity, requiring trust income tax returns if the post-death income is over a small amount. Same for estate income tax returns for income from the probate estate. These are income tax returns, not estate tax returns.

The trust did not simplify acquiring control of assets in the trust. When the trust owners die, getting distributions from broker accounts and insurance policies titled in the trust takes extra paperwork and hassle. I needed not only the death certificate, but documents relating to the trust. With some financial institutions, this can take a lot of follow-up.

Other Lessons Learned

1. Choosing the trustee. The paralegal at the attorney’s office told me that the most important part of the term “trustee” is trust. With little supervision by the court, an untrustworthy trustee has the ability to misuse trust assets. Pick your trustee carefully.

2. The more the trustee and the executor know about the details of the trust and the other estate planning documents, the better. Because my parents lived locally and they involved me before they died, I was able to understand the situation and their wishes.

3. A middle class estate took about a year to settle and distribute all assets from the trust. There were no conflicts or problems. It was just the time required to do the steps required.

4. Make sure original, signed copies of the trust documents and other estate documents are in a safe place, and survivors know where they are located.

5. The role of an attorney at death. The attorney’s staff billed on an hourly basis. I told the attorney I would handle gathering information, dealing with financial institutions, and other paperwork, except any filings for the court. The attorney handled court filings, and preparation of the state estate tax return. This separation of duties reduced attorney fees. I had the time and knowledge to do this.

6. Watch out about naming co-trustees and co-executors. Name successor trustees/executors instead. Settling a trust and estate with multiple trustees/executors needing to understand and sign documents will slow things down.

7. Some wills are considered self-proving, meaning that they can be filed with a court with relatively little hassle. If the will is not self-proving, it will likely need an attorney to get it accepted by a probate court. Ask your attorney about this.

Say No To Management Fees

If an advisor is charging you a percentage of your assets, you are paying 5-10x too much. Learn how to find an independent advisor, pay for advice, and only the advice: Find Advice-Only.

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