Estate Planning Basics: November 2008 Archives

November 16, 2008

Between a Rock and A Hard Spot: Trustees and the Falling Real Estate Market

house for sale.jpg

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).

To learn exactly how to proceed as a trustee, keeping in mind the legal, personal and practical aspects of administering a living trust, see The Trustee's Legal Companion, by Liza Hanks and Carol Elias Zolla (Nolo).

November 2, 2008

Talking to Your Parents About Estate Planning

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.