Everyday Estate Planning

The trustees of a living trust have a tough job after a death. They have a duty to the beneficiaries of that trust to invest and manage the trust's assets prudently and to distribute them as directed by the trust document.

But what do you do if the trust's main asset is the deceased's house? What do you do if you have to sell the house and nobody's buying? And what if the market just keeps getting worse as time goes on?

There's no easy answer here. As a trustee, you have a duty to get the best price that you can, but it's not your fault if the bottom's fallen out of the market. The longer you wait, the less you might get, so sitting on the house isn't a realistic solution. The beneficiaries are eager to get their inheritance and they don't want you to wait either. So, sell you must. But be smart about it. Expect trouble from disappointed heirs; make them your allies (if you can) to head off any rumblings that somehow they could have done better.

What you need to do is to communicate with the beneficiaries and keep them in the loop in terms of what you're doing to get the best price. Formally notifying them of any offers you intend to accept, or the price you're asking on the market, is one way to protect yourself -- such formal notification gives the beneficiaries a limited period of time to object to what you're planning to do. Find out if your state provides this -- it's often called a "Notice of Proposed Action."

And of course, keep really good records of what you're doing. If the beneficiaries ask for these, provide them (if they sue you, you'll have to produce these records anyway, after all).

Those of us with young children and older parents know all about the stress involved in caring for two generations at the same time. It's not easy juggling soccer games, school open houses, and parents who need looking after.

One thing you can do to make things easier in the long run is to talk to your parents -- now -- about whether they've done any estate planning. Although it is difficult to have that conversation, it can make a huge difference to what happens after a parent dies. Planning now means that you'll have a lot less to juggle later. You might even discover that your parents really appreciate your help in getting their affairs together.

Here (with thanks to Leanna Hamill and her estate planning blog) are 10 good questions, from Real Simple Magazine, that you can use to get the conversation started:

• Do you feel comfortable about your financial situation? Would a financial planner be helpful?
• Do you have an estate plan?
• Who should handle your finances if you become ill?
• In the event you become seriously ill, what sort of interventions would you like?
• Do you have enough health insurance?
• Do you feel your doctor is well-informed about the issues facing older patients?
• Can we help make your home more comfortable?
• Are you feeling secure about driving?
• Can you share your thoughts about your funeral?
• Can you compile a list of all your important information?

It is possible (likely) that your parents don't have answers to all of these. But it's a great place to start working with them to get things in place. And one EXCELLENT way to get the process started, of course, is for you to do your estate plan and use that as a way to begin the conversation with them. 

It's autumn. Your kids are in school, the garden needs cleaning up, the leaves are turning beautiful colors, it's time to get that Halloween costume ready, and -- one more thing -- take a moment to make sure that your beneficiary designations are up to date.

It's open enrollment season, so that's a great excuse to take a look and see who you've named as your beneficiaries for your retirement plans and life insurance policies. Many people forget to do this, leaving out children, or worse, naming ex-spouses.

This can be a big deal: for many people these are some of the largest assets you'll leave behind at death. And your will or trust doesn't control where this money goes after you die -- it's that beneficiary form that matters in most cases. While some states do have laws that automatically revoke some estate planning documents naming ex-spouses, it's just a better idea to make sure that yours are up to date.

You should check to make sure you've still got the right people named for all of the plans listed below at least every two or three years or when you've had a major life change (been divorced, or had a new child for example):

• Pension plan accounts
• 401(k), 403(b) or 457 plan accounts
• Self-employed QRP/Keogh plan accounts
• Individual retirement accounts (IRAs)
• Credit union plan accounts
• Disability insurance policies
• Life insurance policies
• Annuities

Another reason to create a living trust: did you know that bank accounts owned by living trusts can get more FDIC insurance than accounts owned by individuals? It's true. Trust accounts get the maximum FDIC insurance for every qualified beneficiary.

The FDIC now insures qualifying beneficiaries for $250,000 each, at least until December 31, 2009, when the financial bail-out package expires. A qualifying beneficiary is a spouse, child, grandchild, parent, or sibling of the account owner. The account must be owned by the living trust.

Here's how it works:

If a single mom sets up a living trust, naming her two children as the beneficiaries after she dies, the bank account owned by the trust is insured up to $500,000: 2 beneficiaries at $250,000 each.

If a husband and a wife set up a living trust and their three children will be the beneficiaries after they both die, the trust account is ensured for up to $1,500,000: $250,000 for each beneficiary for each owner, or 250,000 x 6.

These FDIC limits are per bank not per account. If a trust owner has more than one account at the same bank, these limits apply to all their accounts there.

Assembly Bill 2747, signed by Gov. Arnold Schwarzenegger on September 30, 2008, requires doctors to provide terminally ill patients with disclosure and counseling about their options for end-of-life care.

What does that mean for patients and their families? Simply put, health care providers are now required to let them know about their choices when they've been diagnosed with a terminal condition, including:

• hospice care
• their prognosis, with and without disease-targeted treatment
• their right to continue such treatment with or without palliative care (treatment to relieve, rather than cure, symptoms caused by cancer), and
  
• their right to give individual health care instructions in their Advance Health Care Directive.

This is the first bill of its kind to pass in the country. Its advocates say that it shifts the decision-making power to the patient. Its opponents insist that it sets the stage for future assisted-suicide legislation. Whatever your opinion, the result is the same: patients now have a legal right to know their end-of-life options.

In my neighborhood, I see ads and fliers for low-cost living trust seminars nearly every month. Since I draft living trusts and charge considerably more for my services, I am suspicious of what these seminars really offer.

Often, such seminars are scams designed to lure in senior citizens with the promise of bargain-rate estate planning. Here's how it works: A low-cost trust is offered, but it's just a pretext for getting people to reveal their confidential personal financial information. These companies then send unscrupulous insurance sales agents to people's homes to follow up with offers of annuities and other financial products that can mean disaster for those who buy them.

How? From a Jacksonville, North Carolina newspaper: A woman cashed out her IRA and purchased an annuity. The sales agent didn't tell her that her monthly payments would fall from $1700 to $300 per month. A couple put their savings into an annuity with a "guaranteed" 7% interest rate. The sales agent didn't tell them that was only a first-year rate or that they would face a nearly 20% penalty for any withdrawal of their money.

To avoid these scams, use common sense:

• Don't buy a financial product that you don't understand.
• Don't work with estate planners who aren't licensed to practice law.
• Don't work with anyone who uses high pressure sales tactics.
• Be suspicious of any living trust that's marketed at an extremely low price.

It's natural enough that, as parents age, their adult children begin to think about what they'll inherit and how. This can make parents feel uncomfortable and adult children feel ghoulish. Some families -- I suspect many -- just don't discuss it. How do you tell your kids that you feel one should inherit more, and that another's already gotten all the support they'll need? How do you broach the entire topic with a parent that you love very much, but see fading? But, like so many family issues, it's a conversation very much worth having, and not just for the wealthy.

Estate planning is an act of love, after all. It's about the orderly transfer of what you've managed to accumulate. If you've taken the time to think hard about who needs what you've got and the best way to transfer it to them responsibly, you've gone a very long way to making that transition easier for everyone.

So why not take the next step and at least outline the plan to those concerned? You don't, of course, have to disclose the details if that's uncomfortable. But you can communicate the broad outlines: Are there charities that you intend to support? Are you planning to treat all of your children equally, or are there reasons not to? 

According to a recent article in the New York Times by David Cay Johnston, it's not just a good idea to talk to your kids -- it can significantly lessen the chance that they will challenge your estate plan in court after your death. In his article, Johnston quotes Gerald Le Van, one of the few family wealth mediators in the country, who says, "[T]he children and grandchildren may not like your choices, but at least they feel like you treated them as adults, that you genuinely asked what they wanted and they can then say to themselves, 'O.K., this is not what I wanted, but you don't always get what you want.'"

In second marriages, where there can be deep tension between the adult children of a first marriage and the often much-younger spouse of a second marriage, clear communication can be even more important.

The Times article also quotes Olivia Mellan, a psychotherapist who runs the Web site MoneyHarmony.com, who said that even middle-aged children tended to "interpret the absence of money in a will as being the absence of love from a parent."

When children cannot accept an uneven split or some of the money going to a stepparent, Ms. Mellan recommends telling them: "This is the only way I can die peacefully. I love you, but when it comes to my money, this is what I have to do."

Recently, the New York Times published an article, at once fascinating and chilling -- at least for those of us with parents who "collect" things. Imagine having to go through your deceased father's house to cull out what's valuable and what's not --especially when your father was a noted collector of historical relics, kept few or no records, and had amassed a collection of more than 3,000 objects, including the purported remains of the severed penis of Napoleon Bonaparte!

Says his daughter, Evan Lattimer, about the job of researching and cataloging the objects: "I sleep about three to five hours a night. This is all I do."

Most of us, of course, don't have quite that task in front of us, but most of us, sooner or later, will have to deal with the lifetime of things left behind by our parents, or assist them in downsizing when they decide to move to a smaller home or to an assisted living facility.

The AARP, in one of its most requested articles, Conquering Clutter, gets to the root of why this can be such a painful and difficult process: the objects aren't just clutter. In fact, "the items that had been used the least were the hardest to throw out, symbolizing as they did not fond memory but never-tapped potential. They were... artifacts of unused life." 

Here are some handy tips to help a parent (or anyone, really) get rid of some of that stuff now.

Continue reading "Cleaning Out The House: Dealing With Dad's Weird Stuff" »

Here's something to think about when you're planning your estate: More than 90,000 Americans are currently on national transplant lists, waiting for organs that will save their lives. One-third of them will die before getting what they need. You can help by becoming an organ, eye or tissue donor. It will make a real difference. One donor can benefit as many as eight other people. Consider these statistics:

• Every 12 minutes, another name is added to the national organ transplant waiting list.
  
• In 2005, there were 7,593 deceased organ donors and 6,895 living organ donors, resulting in 28,108 organ transplants.
• 90% of Americans say they support donation, but only 30% know the essential steps to take to be a donor.
  

State laws differ on exactly what you need to do to make an organ donation as part of your estate plan. Many allow you to register in an online donor registry, or when you renew your drivers license or state ID card. To find out the requirements in your state, go to www.donateforlife.org.

It can happen in any family, even famous ones: One sibling ends up administering the family estate and before long, the other siblings feel shut-out, suspicious, or just mad. They ask for information about how the assets are being managed or distributed and don't get answers. Since no one knows how the money's been invested or spent, everyone assumes the worst. Pretty soon, no one is talking to each other, only to attorneys. Then the lawsuits get filed.

A recent AP story reports that two of Martin Luther King's children, Bernice and Martin Luther King Jr. III, have filed a lawsuit against the third, Dexter King, who is the administrator of his father's estate. They claim that he has failed to provide them with essential documents, including financial records and contracts.

If you are serving as a trustee or executor of your parent's estate, or, if you know that you have been named to serve by your parents, but your siblings have not, take note of this classic family feud. Make sure that you understand what your duties are, be careful not to use any estate money for your own use, and, above all, keep really good records of what you've spent and how you've spent it.

When your siblings ask you for accounting information, provide it. In this case, silence is not golden.