The Petrosewicz Law Firm Estate Planning Blog

How a Letter to Your Executor Conveys Your Wishes

A detailed, informative letter can be invaluable to your executor to make your wishes known, says the article “Why You Should Write a Letter to Your Executor—and What to Say in It” from The Wall Street Journal. Your last will and testament does have many directions. However, there may be things you want your executor to know that may not be included in your will. This is especially important if death is sudden. The letter, which you should sign and date, can help prevent potential disputes, by minimizing any confusion around your intentions, priorities and goals.

Here are some things to consider when drafting a letter to your executor.

Your thoughts about wealth. Share your story about how you came to the assets that you are leaving in your will. How was your wealth created, what do you value and what are your long-term goals for your wealth? Do you want family members to invest the assets, so they grow over generations, or do you want them used for college education costs for grandchildren?

Describe key players in the family. It is best if your executor knows the members of your family.  However, they may not know the family dynamics or history. Giving them your insights, may help them anticipate issues. Does one child tend to take over and speak for everyone, without being asked? Are there substance abuse issues in the family that need to be considered? Present your executor with your concerns, so they can be mindful of how the family works (or doesn’t) as a unit.

What matters to you? This is especially important, if you don’t want your heirs to be dependent upon their inheritance, instead of becoming self-reliant. Share your values to encourage their earned success. Make it clear if you want to protect the family wealth, so it can be used to empower future generations and for family members to be responsible for their own financial well-being.

Give your executor the power to made decisions, even when that means saying no. Considering the size of your wealth and the family members who are your heirs, you probably have a good idea of who would do what with their inheritance. If you don’t want your wealth to be used for a start-up by a son who always bets on the wrong horse, say so in the letter to your executor. If you are hopeful that a daughter will use her inheritance for a down payment on a home for her family, you should also express that.

Some wishes for your wealth can be expressed through the use of trusts and other wealth planning tools. Your estate planning attorney will help create a plan that incorporates asset protection, tax planning and tools to distribute wealth in the way that you wish. An experienced estate planning attorney has worked with many families and understands the challenges and pitfalls that are presented any time wealth is transferred from one generation to the next.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The Wall Street Journal (April 8, 2020) “Why You Should Write a Letter to Your Executor—and What to Say in It”

Tips for Choosing a Fiduciary

One of the important tasks in creating a complete estate plan is selecting people (or financial institutions) to represent you, in case of incapacity or death. Most people think of naming an executor, but there are many more roles, advises the article “What to consider when appointing a fiduciary?” from The Ledger.

Here are the most common roles that an estate planning attorney will ask you to select:

• Executor or personal representative, who is named in your will and appointed by the court to administer your estate.
• Agent-in-fact (under a durable power of attorney) who manages your financial affairs while you are living, if you are unable to do so.
• Health care surrogate who makes health care decisions on your behalf while you are living, if you are incapacitated.
• Trustee of a trust document; administers the trust that you have created.
• Guardian: a person who makes health care and financial decisions on your behalf, if the court determines that other roles, like health care surrogate or agent-in-fact, are not sufficient.
• Guardian for minor children: person(s) who make decisions for your children, if you are not able to because of death or a loss of capacity before the children reach adulthood.

The individuals or financial institutions who take on financial roles are considered fiduciaries; that is, they have a legal duty to put your well-being first. Their responsibilities may include applying for government benefits, managing and invest your assets and income, deciding where you will live and working with your attorneys, financial advisors and accountants.

Many people name their spouse or eldest child to take on these roles. However, that’s not the only option. A few questions to consider before making this important decision include:

• Does this person have the experience, skill and maturity to manage my financial affairs?
• Does this person have the time to serve as a fiduciary?
• Would this person make the same health care decisions that I would make?
• Can this person make a difficult decision for my health care?
• Does this person live near enough to arrive quickly, if necessary?
• How old is this person, and will they be living when I may need them?
• What kind of response will my family have to this person being named?
• Are my assets substantial enough to require a financial institution or accountant to manage?

These are just a few of the questions to consider when choosing fiduciaries or health care agents in your estate plan. Speak with your estate planning attorney to help determine the best decision for you and your family.

The Petrosewicz Law Firm can assist you with your estate planning and trust needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The Ledger (Oct. 16, 2019) “What to consider when appointing a fiduciary?”

Death Is Very Taxing — What you Need to Know

When a person dies, their assets are gathered, their debts are paid, business affairs are settled and assets are distributed, as directed by their will. If there is no will, the intestate laws of their state will be used to determine how to distribute their assets. A big part of the process of settling an estate is dealing with taxes. A recent article from Wicked Local Westwood, titled “Five things to know about taxes after death,” explains the key things an executor or personal representative needs to know.

The Deceased Final Income Tax Returns. Yes, the dead pay taxes. The personal representative is responsible for filing the deceased final income tax return for both the year of death and prior year, if those returns have not been filed. The final income tax return includes any income earned or received by the decedent from January 1 of the year of death through the date of death. It’s common for a deceased person who is ill during the last months or year of their life to fail to file tax returns, so the executor needs to find out about the decedent’s tax status. Failure to do so, could lead to the representative being personally liable for paying those taxes.

Filing a Federal Estate Tax Return. The personal representative must file a federal estate tax return, if the value of the estate assets exceeds the federal estate tax exemption, which is $11.58 million in 2020. Even if the value of the estate does not exceed the federal estate tax exemption amount, a federal estate tax return should be filed if the decedent is survived by a spouse. This way, the deceased’s unused exemption can be used by the spouse at their death. Note that the filing deadline for the federal estate tax return is nine months after the date of death. An estate planning attorney can help with this.

Fiduciary income tax returns. A personal representative and trustee may have to file fiduciary income tax returns for an estate or a trust. The estate is a taxpayer and the representative must get a tax identification number and file a fiduciary income tax return for the estate, if income is earned on estate assets or received during the administration of the estate. A revocable trust becomes irrevocable after the death of the trust creator. A tax identification number must be obtained, and a fiduciary income tax return must be filed for any income earned by trust assets.

Estate taxes and trust taxes can become complex and confusing for people who don’t do this on a regular basis. An estate planning attorney can be a valuable resource, so that taxes are properly paid and to make the most of any tax planning opportunities for estates, trusts and their beneficiaries.

The Petrosewicz Law Firm can assist you with your estate planning and probate needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Wicked Local Westwood (Nov. 5, 2019) “Five things to know about taxes after death”

Start the New Year with Estate Planning To-Do’s

Families who wish their loved ones had not created an estate plan are far and few between. However, the number of families who have had to experience extra pain, unnecessary expenses and even family battles because of a lack of estate planning are many. While there are a number of aspects to an estate plan that take some time to accomplish, The Daily Sentinel recommends that readers tackle these tasks in the article “Consider These Items As Part of Your Year-End Plan.”

Review and update any beneficiary designations. This is one of the simplest parts of any estate plan to fix. Most people think that what’s in their will controls how all of their assets are distributed, but this is not true. Accounts with beneficiary designations—like life insurance policies, retirement accounts, and some bank accounts—are controlled by the beneficiary designation and not the will.

Proceeds from these assets are based on the instructions you have given to the institution, and not what your will or a trust directs. This is also true for real estate that is held in JTWROS (Joint Tenancy with Right of Survivorship) and any real property transferred through the use of a beneficiary deed. The start of a new year is the time to make sure that any assets with a beneficiary designation are aligned with your estate plan.

Take some time to speak with the people you have named as your agent, personal representative or successor trustee. These people will be managing all or a portion of your estate. Make sure they remember that they agreed to take on this responsibility. Make sure they have a copy of any relevant documents and ask if they have any questions.

Locate your original estate planning documents. When was the last time they were reviewed? New laws, and most recently the SECURE Act, may require a revision of many wills, especially if you own a large IRA. You’ll also want to let your executor know where your original will can be found. The probate court, which will review your will, prefers an original. A will can be probated without the original, but there will be more costs involved and it may require a few additional steps. Your will should be kept in a secure, fire and water-safe location. If you keep copies at home, make a note on the document as to where the original can be found.

Create an inventory of your online accounts and login data for each one. Most people open a new account practically every month, so keep track. That should include email, personal photos, social media and any financial accounts. This information also needs to be stored in a safe place. Your estate planning document file would be the logical place for this information but remember to update it when changing any information, like your password.

If you have a medical power of attorney and advance directive, ask your primary care physician if they have a means of keeping these documents, and explain how you wish the instructions on the documents to be carried out. If you don’t have these documents, make them part of your estate plan review process.

A cover letter to your executor and family that contains complete contact information for the various professionals—legal, financial, and medical—will be a help in the case of an unexpected event.

Remember that life is always changing, and the same estate plan that worked so well ten years ago, may be out of date now. Speak with an experienced estate planning attorney in your state who can help you create a plan to protect yourself and your loved ones.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The Daily Sentinel (Dec. 28, 2019) “Consider These Items As Part of Your Year-End Plan”

How Does an Executor Obtain a Credit Report for Decedent?

Obtaining the credit report for a decedent is important to protect their assets before any criminals target them for identity theft and credit card fraud, advises credit.com in the article “Dealing with a Credit Report for the Deceased.” Speed is of the essence for this estate task.

In most cases, the only person who is the subject of the credit report should have access to it. However, there are times when you need to pull someone else’s report, such as when a loved one dies. Other instances are when an employer is checking on a potential employee’s credit, or when a landlord wants to know more about a tenant.

To obtain a living person’s credit report, you must have permission. Permission can be granted on a rental or job application. You’ll also need their Social Security number, name and date of birth.

For someone who has passed, it is recommended that you notify the three credit bureaus as soon as possible after a death to make sure the account is marked as “deceased,” so no one can open a credit card account in the person’s name.

If you are the executor and you need to obtain a credit report of a person who has passed, here’s what you will need to do to protect their legacy and obtain their credit report. First, you’ll need certain documents:

• Proof that you have been named executor of the estate
• Testamentary letters from the probate court
• An official copy of the death certificate

You should get several copies of each of these documents, since you will also need them for other aspects of the estate.

Before you can obtain the credit report, the will needs to be filed with the probate court. Your estate planning attorney can do this for you, as part of settling the estate. Once all the documents are in order, you’ll need to report the death and contact the three bureaus: Experian, TransUnion, and Equifax. You’ll also want a cover letter explaining that the person has passed and that you need the reports to settle the estate.

The letter should include the decedent’s name, their last known address and their Social Security number. There may be a fee, depending on the company’s policies.

Review the report thoroughly and check for any inaccuracies. Make note of any open accounts that need to be paid with the estate or notified of the death. Debts are not all cleared when a person dies, so you’ll want to know what needs to be taken care of. Look for anything suspicious. It could be a sign of theft or fraud.

The last step is to notify the credit bureaus, outstanding creditors and the Social Security Administration of the person’s death. Once proper notification has taken place, the bureaus will mark the credit record as being deceased. No further credit will be extended in the person’s name and no additional accounts can be opened.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: credit.com (Aug. 27, 2019) “Dealing with a Credit Report for the Deceased.”

In Estate Planning, Fair and Equal are Different

What may work fine when you are raising children does not always work in estate planning, as reported in The Press Enterprise’s article “Why ‘fair’ and ‘equal’ aren’t always the same.” Thinking that treating children in the exact same way will avoid children arguing about who got more, who deserved more, etc., doesn’t apply here. Trying to treat kids the same, often ends up with parents feeling guilty and questioning their parenting skills. Sibling rivalry doesn’t always end, when kids grow up.

Adult children can have an emotionally charged and surprisingly juvenile response, when their parent’s estate planning comes to light, before or after a death. Beneficiaries often equate the terms of the will with how much they were loved—or treated unfairly.

When the older sibling who “was always Mom’s favorite” is put in charge of the estate, other siblings may hear “Mom didn’t love me as much” instead of recognizing that their older sibling has always been better at being organized and working through problems.

One of the hardest decisions in estate planning is often who should be in charge of managing the estate. In fact, this often leads to the entire estate plan grinding to a halt. Some parents elect to name several adult children as co-executors. Sometimes this works, and other times it turns into a complete disaster.

If you don’t want your children doing battle with each other in court and want them to continue functioning as a family, it’s best to have conversations in advance about your wishes. If you want them to work together, be realistic.

It may be necessary to choose a family member or friend to manage the estate, so as to avoid choosing one child over another. If the trusted person is a legal professional with trust administration experience, that may avoid years of family strife. However, if that family friend or relative also has their favorites or if there is any animosity between the children and this person, it may become even more complicated.

If a parent’s sibling is selected, will that person be able to perform the duties of their role, or might they be too infirm?

Another option is to name a professional executor, such as an attorney or trusted accountant. Some people consider using an institutional trustee, like a bank or a trust company, but they may only represent large estates.

Your estate plan needs to have clear instructions. Talk with your estate planning attorney about your family dynamics. They may have recommendations that you have not considered. Talk with your children, so they understand your thinking. A little information in advance could go a long way towards preserving family unity.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The Press Enterprise (Sep. 14, 2019) “Why ‘fair’ and ‘equal’ aren’t always the same”

Will a No-Contest Clause Protect Your Estate from Squabbling Kids?

We may enjoy watching courtroom drama in movies, TV and on stage, but when it comes to our own lives, most people will do just about anything to avoid an estate battle. A “No Contest” provision is an attempt to preclude this and to give anyone who might be thinking about an estate battle a clear message, according to the article “Why courts enforce a ‘No Contest’ clause” from The Daily Sentinel.

The simple answer to the question of “why would a court enforce a No Contest clause” is pretty straightforward. If that’s what you put in the will, that’s what the court wants to have happen.

An estate planning attorney will know the correct wording for your state, but the fundamental message in a No Contest clause is that anyone who attempts to contest or oppose the document will give up their share, lose any right or interest to the estate and will be treated as if they have died before the person who is signing the will.

You can have a will created without a No Contest clause, but if you want to make it very clear how you feel about anyone challenging your will, this is a good way to do it.

As you might imagine, it’s not always so cut and dried. There are limitations that courts need to consider, when they are being asked to enforce this type of clause. The red flag is whether there is “probable cause” to challenge provisions of the will or trust. Simply put, if there is language that either is against the law or against public policy, meaning it encourages behavior that is not legal or desired by our general society, then the court may accept a challenge to the will.

For instance, a provision of a will or trust that would result in discrimination or encourage deceitfulness could be challenged. If the language in the No Contest clause differs markedly from the language in the rest of the document, it could be open to challenge.

For the most part, courts are required to let people decide how they want their assets distributed. For someone who is considering making a statement with their will that may be a bit unconventional or that may not be received well by family members, a No Contest clause will enforce their wishes. It is highly recommended that if this is what someone has in mind, they consult with an estate planning attorney to be sure that their wish will be deemed valid by the court.

As with every part of your estate plan, it’s far better to have an estate plan in place with all your wishes carefully outlined, than to hope that your personal executive has the ability to handle your requests. If your will creates a mutiny, then the executor will bear the brunt of the plan. They’ll need to be fully supported by the law, if controversial wishes are going to stand firm.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The Daily Sentinel (August 24, 2019) “Why courts enforce a ‘No Contest’ clause”

What Debts Must Be Paid Before and After Probate?

Everything that must be addressed in settling an estate becomes more complicated, when there is no will and no estate planning has taken place before the person dies. Debts are a particular area of concern for the estate and the executor. What has to be paid, and who gets paid first? These are explained in the article “Dealing with Debts and Mortgages in Probate” from The Balance.

Probate is the process of gaining court approval of the estate and paying off final bills and expenses, before property can be transferred to beneficiaries. Dealing with the debts of a deceased person can be started, before probate officially begins.

Start by making a list of all of the decedent’s liabilities and look for the following bills or statements:

• Mortgages
• Reverse mortgages
• Home equity loans
• Lines of credit
• Condo fees
• Property taxes
• Federal and state income taxes
• Car and boat loans
• Personal loans
• Loans against life insurance policies
• Loans against retirement accounts
• Credit card bills
• Utility bills
• Cell phone bills

Next, divide those items into two categories: those that will be ongoing during probate—consider them administrative expenses—and those that can be paid off after the probate estate is opened. These are considered “final bills.” Administrative bills include things like mortgages, condo fees, property taxes and utility bills. They must be kept current. Final bills include income taxes, personal loans, credit card bills, cell phone bills and loans against retirement accounts and/or life insurance policies.

The executors and heirs should not pay any bills out of their own pockets. The executor deals with all of these liabilities in the process of settling the estate.

For some of the liabilities, heirs may have a decision to make about whether to keep the assets with loans. If the beneficiary wants to keep the house or a car, they may, but they have to keep paying down the debt. Otherwise, these payments should be made only by the estate.

The executor decides what bills to pay and which assets should be liquidated to pay final bills.

A far better plan for your beneficiaries, is to create a comprehensive estate plan that includes a will that details how you want your assets distributed and addresses what your wishes are. If you want to leave a house to a loved one, your estate planning attorney will be able to explain how to make that happen, while minimizing taxes on your estate.

The Petrosewicz Law Firm can assist you with your estate planning and probate needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The Balance (March 21, 2019) “Dealing with Debts and Mortgages in Probate”

Why Do I Need an Executor?

What would happen if someone you were close to, asked you to be their Executor? Would you be honored, or would you be uncomfortable with the responsibility? What do you need to do, when do you need to handle these tasks and how much time will it take?

These are the questions often asked about the role of an Executor, as reported in The Huntsville Item in the article “Role of an executor.”

A person having a will prepared is called the “Testator,” or sometimes “Testatrix” if female. The person they appoint to take care of distributing their assets and carrying out the instructions in their will is called the “Executor” (whether male or female). That person also pays the estate’s debts and taxes. Note that the debts and taxes are not paid from the Executor’s personal accounts, but from the proceeds of the estate.

The Executor has several responsibilities and powers. Therefore, it’s important to choose an individual who is organized, good with finances and knows how to get things done. An Executor could be a person or an institution, like a bank. Here are some things to consider when selecting an Executor:

• Are they good with handling their own personal business?
• Do they have some familiarity with your business, finances and property?
• Are they willing and able to act as your Executor?
• Do they have the time to devote to serving as Executor?
• Can they work with your estate planning attorney and your accountant?
• If you own a business, will they be able to keep it going during a transition period?

There should always be a Plan “B” and perhaps even a Plan “C,” if the first person you wish either cannot or will not serve as Executor. If you do not have a Plan “B” or “C,” the court may name an Executor. That may be a person you don’t know, who does not know you, your family or your business.

The Executor’s tasks vary, depending upon the laws of the state. However, in general, these are the Executor’s tasks. Note that an estate planning attorney usually assists with this process.

• The will is probated, which requires filing an application with the probate court in the decedent’s jurisdiction.
• The court issues Letters Testamentary to the individual designated in the will as the Executor.
• A general notice is given to unsecured creditors within 30 days of being appointed Executor.
• Notice is given to each secured creditor, by certified or registered mail.
• Documents need to be gathered, including insurance policies, bank statements, income tax returns, car titles, leases, home deeds, home titles, mortgage paperwork, property tax bills, birth, death and marriage certificates and unpaid bills.
• The post office, relatives, friends, employers, insurance agents, religious, fraternal, veterans’ organizations, unions, etc., all need to be notified.
• The personal property of the estate needs to be collected, preserved and appraised.
• The residence needs to be secured and maintained, including a review of insurance coverage.
• An inventory of the estate’s assets needs to be prepared.
• The Executor needs to apply for Social Security benefits and an employee identification number (EIN) for the estate’s bank account.
• Once the EIN number has been created, open a bank account on behalf of the estate and pay all valid debts from the estate account.
• Determine any tax liability and prepare for a final tax return to be filed.
• Distribute the assets and property of the estate, according to the directions in the will.

Usually the estate planning attorney handles many of these tasks and works closely with the Executor. Some Executors are compensated by the estate for their time and effort, but that is not always the case. Talk with your estate planning attorney in advance, about any compensation for your Executor.

The Petrosewicz Law Firm can assist you with your estate planning and probate needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The Huntsville Item (April 13, 2019) “Role of an executor”

Wills v. Trusts: What’s Right for You?

It’s a good idea to take the time and make the effort to create an estate plan to take care of your estate — no matter if it’s a condo apartment and a housecat or a big house and lots of money in the bank — just in case something unexpected occurs tomorrow. That’s the advice from AZ Big Media in the article “The pros and cons of wills vs. trusts.”

Estate planning is the area of the law that focuses on the disposition of assets and expenses, when a person dies. The goal is to take care of the “business side” of life while you are living, so your family and loved ones don’t have to pick up the pieces after you are gone. It’s much more expensive, time-consuming and stressful for the survivors to do this after death, than it is if you plan in advance.

You have likely heard the words “trust” and “will” as part of estate planning. What are the differences between the two, and how do you know which one you need?

A will is the most commonly used legal document for leaving instructions about your property after you die. It is also used to name an executor — the person who will be in charge of your assets, their distribution, paying taxes and any estate expenses after you die. The will is very important, if you have minor children. This is how you will name guardians to raise your children, if something unexpected occurs to you and your partner, spouse or co-parent. The will is also the document you use to name the person who you would like to care for your pets, if you have any.

Burial instructions are not included in wills, since the will is not usually probated for weeks or sometimes months after a person passes. It’s also not the right way to distribute funds that have been taken care of through the use of beneficiary designations or joint ownership on accounts or assets.

Another document used in estate planning is a trust. There are many different types of trusts, from revocable trusts, which you control as long as you are alive, and irrevocable trusts, which are controlled by trustees. There are too many to name in one article, but if there is something that needs to be accomplished in an estate plan, there’s a good chance there is a special trust designed to do it. An estate planning attorney will be able to tell you if you need a trust, and what purpose it will serve.

Trusts can be used by anyone with assets or property.

A will can be a very simple document. It requires proper formats and formalities to ensure that it is valid. If you try to do this on your own, your heirs will be the ones to find out if you have done it properly.  If it is not done correctly, the court will deem it invalid and your estate will be “intestate,” that is, without a will.

Many people believe that they should put all their assets into a trust to avoid probate. In some cases, this may be useful. However, there are many states where probate is not an onerous process, and this is not the reason for setting up trusts.

A trust won’t eliminate taxes completely, nor will it eliminate the need for any estate administration. However, it may make passing certain assets to another person or another generation easier. Your estate planning attorney will be able to guide you through this process.

Whether you use a will or a trust, or as is most common, a combination of the two, you need an estate plan that includes other documents, including power of attorney and health care power of attorney. These two particular documents are used while you are living, so that someone you name can make financial decisions (power of attorney) and medical health decisions (health care power of attorney) if you should become incapacitated, through illness or injury.

Speak with an estate planning attorney. Every person’s situation is a little different, and an estate planning attorney will create an estate plan that works for you and protects your family.

The Petrosewicz Law Firm can assist you with your estate planning and trust needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: AZ Big Media (March 21, 2019) “The pros and cons of wills vs. trusts”