Who Will Protect Your Estate?

posted 4/14/2015 in Trust

Who will protect your estate?

Few people appreciate how complicated the job of an estate executor can be. The estate plan of Robin Williams was quite thorough, including separate trusts for his widow, Susan, and his children from earlier marriages. Susan received lifetime use of a home, and the children received other real estate.

The children also were given certain collectibles, including a valuable watch collection, that were located in Susan’s home. The independent trustees (Williams’ accountant and lawyer) went to the home fairly soon after his death to begin the process of inventorying these items for purposes of estate settlement. Susan became upset, concerned that an attempt to strip the home of its contents might be under way. She brought a lawsuit over interpreting the trust language, and the children were forced to hire their own lawyers in defense. The case remains unresolved at this writing.

Although Robin Williams seems to have done a very good job of preparing his estate plan, he (or his advisors) may not have prepared the beneficiaries for the implementation of that plan. Perhaps this is not surprising, especially when one considers how many people have done no estate planning at all. Had the beneficiaries been advised, they would have learned that conducting an inventory of assets is an essential first step in settling an estate. For death tax purposes, all assets must be valued at the date of death, so the inventory is not something that should be put off for several months, even if grieving relatives feel otherwise. The federal estate tax for Robin Williams will be due nine months after his death.

Elements of estate settlement

Winding up the financial affairs of an affluent individual is not an easy undertaking. The steps include:

  • Inventory the assets;
  • Obtain insurance as necessary;
  • Manage investments;
  • Collect debts owed to the decedent;
  • Pay debts owed by the decedent;
  • Raise cash;
  • File death tax returns (federal estate tax and state estate or inheritance tax) if needed;
  • File decedent’s final income tax return;
  • Distribute assets or fund trusts in accordance with the will; and
  • Provide an accounting for the management of the estate.

Someone coming into this task for the first time is likely to find it daunting. There are companies, such as us, that include estate settlement as a core business function. We have the recordkeeping systems in place, and we have the experience and expertise required to make estate settlement as painless as possible.

If you die without a will

Tax planning is one element of estate planning, and in many estates it is the least important factor. The larger issue is: Who will inherit and what will they inherit?

In the absence of a will, each state has provided for a plan to distribute property to heirs. There is surprising variability from state to state. If there is a surviving spouse and no children from a prior marriage, the surviving spouse inherits everything in 16 states. Other states provide one-third or one-half for the surviving spouse, with the balance divided equally among the children.
What if there is no surviving spouse or children? Siblings, parents and more remote relatives may then lay a claim to a share of the estate. If no relatives come forward, the assets will pass to the state.

Finally, a will is the place where a person or company is nominated for the position of executor (also called personal representative in some states). In the absence of a will, the probate court is forced to appoint someone to oversee the process.

Will substitutes

A will controls only a portion of one’s property at death, the part that goes through probate. Property with named beneficiaries may pass to them automatically. Examples of such property include:

  • jointly owned property, such as real estate, bank accounts and brokerage accounts;
  • pay-on-death accounts;
  • life insurance;
  • qualified retirement accounts, such as IRAs and 401(k)s; and
  • revocable living trusts established for lifetime financial management.

Understanding the role of such assets in the composition of the estate is an essential element of will planning.

We are ready to serve you

Who should you choose to settle your estate? We have the skills, the experience and the knowledge to handle properly the job of estate settlement. We are available, and we are impartial. We understand the nature of fiduciary responsibilities, and we know how to discharge them.

And for all this, our fee for settling an estate is generally comparable to what an inexperienced individual would receive. In some cases our experience will help to reduce estate shrinkage, increasing the amount available for beneficiaries.

Would you like to learn more? Please call on us for more details about our estate settlement service.

Questions to ask your executor

Here are a few key characteristics to look for as you evaluate the candidates for settling your estate:

  • Experience. Have the individuals or organization settled estates before? Is it part of their daily business routine? Have they been exposed to a wide range of estate settlement issues over the years?
  • Skills. Is the executor candidate familiar with modern portfolio theory? How about the prudent man rule? Will investment management issues be a problem, or can they be handled routinely?
  • Availability. Will the proposed executor be ready to take on the job at any time? Is there a chance that illnesses, vacations or career issues will interfere with the job of estate settlement?
  • Impartiality. Does the prospective executor have a financial interest in the estate? Will all parties consider the executor fair and impartial? Can the executor play a constructive role in settling any disputes that arise among beneficiaries?

Choosing an executor is similar to hiring an employee, but the stakes are much higher.

Advanced planning with trusts

In addition to identifying heirs and their inheritances, a will can provide a financial management plan for that inheritance. This may be achieved with a trust. For example, there are:

  • marital trusts for a surviving spouse;
  • qualified terminable interest property trusts for spouses and children from prior marriages;
  • qualified domestic trusts for spouses who are not American citizens;
  • credit shelter trusts for maximum protection from federal estate taxes, in the years when that tax applies;
  • testamentary trusts to protect a child’s inheritance from creditor claims;
  • charitable trusts to meld philanthropic and private interests.

LSB Financial serves a geographical footprint extending over much of East Central Iowa. Our LSB Financial representatives serve communities extending from Tama to Nashua. Our Waterloo office is in the heart of the Cedar Valley, making us easily accessible to serve the Trust & Fiduciary Services of Waterloo, Cedar Falls, and surrounding communities.

We choose to conduct our business based on a timeless set of guiding principles we refer to as “Core Values”:

  • Honesty, Integrity, & Quality
  • Engaging, Supportive Relationships
  • Pride & Commitment
  • Continuous Improvement
  • Passionate Community Stewardship
  • Excellence in Reputation

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