9 Things I Wish My Parents Knew About Estate Planning Before They Passed Away
I feel compelled to note that at the time I’m writing this I am fortunate enough that my parents are both still alive. I am writing this article from the perspective of several of my clients throughout my experience practicing as an estate planning and probate attorney.
Estate planning is a daunting task for most people. It involves discussing difficult subjects such as aging, mental incapacity, and death. However, avoiding the responsibility of creating a plan for these unpleasant, yet inevitable milestones of life, can put your heirs in regrettably unnecessary situations. This is a list of some of the most common things my clients have expressed when faced with the predetermined results of poor or no estate planning.
1. Without a Valid Last Will & Testament Their Heirs Are Predetermined by State Law
It is not uncommon for me to hear people say they do not need a Last Will & Testament for varying reasons, such as they have minimal assets, or they just want everything to go to their children anyway. Undoubtedly, these excuses, and most other excuses, almost
never contemplate the truly unfortunate possibility that those you were expecting to survive you don’t. Additionally, most excuses neglect to consider how the state has predetermined the “best” way to distribute estates in which the decedent failed to leave behind a valid will outlining his or her final wishes.
In one case, I had a couple who were estranged from four of their five children for decades— Dad legitimately could not remember the names of his twin daughters from a previous relationship because he hadn’t had any contact with them in over thirty years! They believed that, because their estate was small, a Last Will & Testament was unnecessary. Their unstated wish was for the single child that they did remain in contact with to inherit their entire, albeit small, estate. Upon learning this desire, I had to explain to my clients the law and that their desire for only one child to inherit the entirety of their estate would only come to fruition if they had valid wills in place. What’s more, that one child would have the arduous task of locating and contacting her estranged siblings and half-siblings upon her parents passing in order to satisfy state law and complete the administration of her parents’ estate.
Of course, estranged children aren’t the only family members who may be entitled to a piece of your estate if no estate plan was put into place. Depending on the circumstances, any estranged, or even unknown family members may have a vested interest in your estate as a matter of law.
2. Their Revocable Trust Becomes Irrevocable After Their Deaths
If your parents created a trust during their lifetimes, it’s safe to say they were likely aiming to avoid court proceedings and judicial intervention in the administration and distribution of their estate and assets. However, it’s not uncommon for those creating a trust to overlook the important fact that once the trust maker, or, if it’s a joint trust, the last surviving trust maker, passes away, that trust becomes irrevocable. Now, “irrevocable” doesn’t mean it’s impossible to make changes or terminate the trust, but it does mean that there are more steps required and it may be much more complicated to make desired, or necessary, changes to achieve a preferred result.
In one case, a client’s parents created a trust where a corporate trustee— a bank— was named as the successor trustee to continue administering the trust and distributing the assets to the beneficiaries after the client’s parents passed away. However, the client’s parents did not take care to consider the value of the trust assets and the cost of having a corporate trustee. In this instance, the bank would benefit from the trust more than the actual named beneficiaries by way of their fees! In order to remove the bank as the trustee and prevent it from effectively inheriting more than the trust makers’ own children, state law required petitioning the court and getting a judge to approve the removal. This doesn’t mean that you can’t make changes to the trust without court intervention, just that the likelihood that court intervention is necessary is much higher.
3. To Ask Me If I Would Have Been Comfortable Acting as Their Fiduciary
Probably one of the most common scenarios I experience with estate planning clients is the notion that they need to name their children as their fiduciaries (i.e., trustee, personal representative/executor, power of attorney, etc.). This is not true, and sometimes, not the best idea. I often hear expressions of doubt from nominated children-turned-clients regarding their belief in their ability to perform the duties expected or required of them in these roles. I would be remiss if I didn’t mention that with the assistance of a competent and compassionate attorney, there is no need for these nominated fiduciaries to be too worried. Having said that, not everyone is equally equipped to handle the responsibilities that come with these titles, which can be especially true when they are going through the already stressful experience of dealing with a loved one’s declining health or death.
It is prudent to talk to the person you are wanting to nominate to a fiduciary role in your estate plans, regardless of whether this person is your child or not. In some cases, those nominated don’t even know they were nominated, much less had the chance to consider whether he or she would be comfortable acting as such. Additionally, it is equally important to consider the skills and personality of your desired fiduciary as it is to consult with that person whether he or she would be comfortable acting in such a role that carries a great deal of trust and responsibility. For instance, you wouldn’t want to name a spendthrift as your financial power of attorney, which does happen when a person feels a superficial obligation to nominate an adult child to this role even though that child may not be financially savvy.
4. To Review and Update Their Documents After Major Life Changes Occur
It’s not enough to create an estate plan and never look at it again. Life is unpredictable and full of many changes that can be planned and unplanned.
A common example demonstrating the importance of revising outdated estate plans is when a person named as a beneficiary in your plan predeceases you. This complication can be even more onerous if multiple named beneficiaries predecease you. Depending on the way your Last Will is drafted regarding beneficiary succession, your surviving beneficiaries could be faced with searching for remote heirs who will end up receiving only a tiny fraction of the estate. Not to mention the complex math that can be involved in calculating those tiny fractions! Consider this example to illustrate this point:
Decedent’s last will leaves his estate to his eight siblings in equal shares (⅛ each). The will is written so that if a sibling dies before the Decedent, his or her ⅛ share of the estate will pass to his or her surviving children, or grandchildren if the children of said sibling have also passed away prior to our Decedent. If the predeceased sibling has three children, that ⅛ share is now being split three ways and each child is entitled to 1/24th. You can imagine how complicated things can become if any or all three of those surviving
children of Decedent’s sibling also predeceased, leaving behind children of their own. In this very real case, Decedent drafted his Last Will in 2003 and he passed away in 2020.
In those 17 years, six of the eight siblings passed away, and to complicate the matter even more, some of the children of those deceased siblings also predeceased the Decedent and left behind children of their own. Decedent’s estate is now being divided into many small fractions to be distributed to his two surviving siblings, the surviving children of the deceased siblings, and even to some of the deceased siblings’
grandchildren.
If you thought that was difficult to follow, then imagine being the person charged with contacting all these individuals and calculating the share of the estate to which each is entitled. The concern here isn’t that estate plans become legally invalid after so many years because that’s unlikely; rather, the concern is whether the plans you made years ago have changed. Review your estate plans regularly and update them when major life changes occur.
5. The Benefits of Prepaying Funeral Expenses
I’m not surprised that this item is often overlooked by most people. For starters, like drafting your last will, most people don’t want to think about death and planning for it makes a lot of people uncomfortable. If drafting your will makes you uncomfortable, I can’t imagine it’s any easier to go to a funeral parlor and prepay for your own funeral. In addition, it’s also not uncommon for people to not know how they want their remains to be handled after passing away. However, most people just don’t even think or even know about the benefit to their estate and their survivors prepaying for funeral expenses can have.
If you’ve planned a funeral before, this may not come as a surprise to you, but funerals are expensive, and it’s an expense that is generally paid out from your estate before your heirs receive any money. It follows that if the funeral expenses are paid for in advance, little or no funds will be coming out of the final estate assets to cover funeral expenses after death. Furthermore, paying for your funeral expenses now can help you save a lot of money in the end, because you will pay today’s price rather than whatever they are charging when you do pass away, which is guaranteed to be higher than today’s price. Finally, it prevents a grieving loved one from overspending on an extravagant funeral with all the bells and whistles that you never wanted in the first place.
Money-saving benefits prepaying for your funeral provides may be the most obvious reason to do so, but prepaying also benefits your loved ones emotionally because it will be one less thing for them to think about when they are mourning your loss.
6. The Effect Remarriage Could Have on the Distribution of Their Estate
This point aligns with the previously discussed necessity of reviewing and updating estate plans after major life changes; however, the potential impact this has on the distribution of an estate is worthy of its own section.
Remarriage has become more commonplace in modern society, and it is quite common for remarried spouses with children from prior relationships to want to provide specifically for their own children after death, so I would be remiss if I didn’t address the estate planning concerns that a subsequent marriage may have on the estate distribution to an individual’s surviving children upon the death of the first spouse.
When there is no estate plan in place and there is at least one child not common to a marriage (i.e., not the biological or adopted child of both spouses), the surviving spouse is automatically entitled to one-half of the decedent’s estate and all surviving children of both spouses will share the other half. Yes, you read that right, half of Decedent’s estate goes to all surviving children regardless of whether they are the offspring of the decedent or not. That means, if the deceased spouse had a single child from a prior relationship and the surviving spouse has four children from a prior relationship, all five children are splitting one-half of the deceased spouse’s estate, no matter how unfair that may seem.
Where there is an outdated or poorly drafted estate plan in place, the surviving spouse may walk away with more than the Decedent may have intended through statutory safeguards, such as the elective share, designed to protect spousal rights to a deceased spouse’s estate. In short, the elective share is 30% of the decedent’s estate and may include assets outside of a probate estate. The surviving spouse is entitled to an elective share where he or she is left out of the decedent’s will or left a substantially small share.
Spousal rights to the deceased spouse’s estate do not contemplate the length of the marriage—they are the same whether they were married a few days or a few decades. It is also important to note that estranged spouses are also entitled to the same rights. The only way to ensure that the estate passes exactly as desired is to create an estate plan or reevaluate an existing estate plan upon remarriage.
7. The Complications Involved When There’s a Minor Beneficiary
The complications and expenses involved when a beneficiary of an estate is a minor, regardless of whether it was intentional, is not without its consequences. And you can likely put a value on that consequence. Understanding those consequences and planning appropriately for such can put more money in the pockets of your beneficiaries.
When minors inherit from a decedent’s estate, a check for their portion isn’t just written out to them to simply take to the bank. There are a few extra steps involved in getting minors their inheritance. What are those steps? First, if no guardian of the minor’s property has been appointed in accordance with the decedent’s estate plan documents, then it will take a court proceeding to appoint one. Next, once the court appoints a guardian of the property, that guardian will have to open a restricted bank account in which to deposit said inheritance. A restricted bank account, in short, requires court approval to withdraw funds from (i.e., the bank will not write a check for any monies held in such account without being presented with an official order from the court, signed by a judge). Bear in mind, not all banks are willing to open and service a restricted bank account. This restricted account will be preserved and in existence until the minor beneficiary’s 18th birthday, and the court will require annual status reports of the restricted bank account be filed until then.
How much does setting up a minor guardianship of the property cost? A couple thousand dollars, at minimum.
8. The Potential Problems When Naming Co-Fiduciaries
I’ve had no shortage of estate planning clients that felt some sort of obligation in the name of fairness to appoint more than one, or all, their children as jointly acting or co-fiduciaries in their estate planning documents. There are a couple of problems this can give rise to, but the number one risk that comes with doing such a thing is disagreement. How detrimental to the acting fiduciaries, and the estate at hand, can this be? At best, thousands of dollars in avoidable attorney fees, and at worst, familial relationships that are irretrievably damaged. When co-fiduciaries disagree to an extent that there is no way to achieve harmony amongst the differing opinions, they will each need to obtain their own attorneys to represent them against each other. If they are represented by a single attorney, that attorney will be required to withdraw as counsel due to conflict of interest, and now at least three attorneys are involved. Even when you believe there is no way your children will ever disagree with each other, there is no way of knowing the effect an emotionally stressful situation will have on the closest of siblings. Of course, that’s not to say a disagreement is inevitable, but is the risk worth taking?
Another problem that I often see when there are co-fiduciaries named is a bank or financial institution requires both co-fiduciaries be present at the same time to complete a task. Sometimes it can be very difficult to coordinate both or all fiduciaries to be present, especially when those named live in different states, or even just different cities within the same state. More often than not, this is an internal policy of the specific institution and not one that can be negotiated easily, if at all.
Consider saving money and aggravation by naming a single individual to act on your behalf. If your other children, or anyone else for that matter, will become jealous over it, then take the time to have a conversation with them. In the end, if the client wants to name co-fiduciaries, even against the advice of the drafting attorney, their desire will be
honored.
9. Had a More Compassionate Attorney
I realize this may not be a priority for everyone when shopping for an attorney; however, I have gotten plenty of new clients because their previous attorneys displayed little or no compassion for their situation. While everyone’s stories are vastly different, the emotional impact each individual is experiencing is often quite similar. Commonly, whoever will be handling your affairs when you are no longer able to is likely to contact the attorney that drafted your estate plans for assistance. It follows that you will want the attorney you work with to create your estate plan to be someone your survivors will also be comfortable working with as well.
Conclusion
The above does not represent a conclusive list of things my clients wish their parents, or other loved ones, had known about estate planning prior to their deaths, and the intention of presenting this list was not to make an already intimidating task anymore uncomfortable than it needs to be. There is no way to know what the future holds and how the story of our lives will play out through to its end, but what we can control is not waiting to put an estate plan in place (or reviewing an outdated estate plan) that strives for the best possible outcome for our loved ones when they are going through an emotionally challenging time after we are gone.
