Parents Estate Plan -Advice requested

[FLSUnFIRE]

I'm trying to help/prod my parents (P1 is receptive and forthcoming if not highly motivated) to get their affairs in order. I'm the sibling most willing and "qualified" to do the administrative work and it will be no doubt the worst time of my life so I want to make it as easy on future me as possible. Currently I am listed as the executor of their last will from the 1990s -to include living wills.



I value any comments but specifically, will value informed opinions and especially links to reputable resources (I've done a bit of my own research but so much chaff out there on these topics):


1: Recommendations for an attorney in Virginia (ideally Tidewater area) for estate/elderly law or reputable referral/rating service that's not just promotional garbage. I'm hoping to have a plan and appointment with a vetted attorney and will visit and help P1 get things set up.



2: Thoughts on Trust vs Wills/POA (I'm really leaning towards a trust given condition of P2 and potential for elder abuse if P1 passes first although low exposure -not online, stays at home but lots of horror stories out there)


3: Anything I, or they, can do to make things easier.


Situation:


Estate is probably $1.5-3M liquid plus ~$500K house.


P1: 80, pretty good health but noticing some decline
P2: 79, Alzheimer diagnosis, noticeable decline; would not be able to live alone at this point IMO but not declared incompetent/no legal restrictions



P1: Pension/SS with survivor benefits. Most assets jointly held.
P2: Has some not insignificant assets in name only (mix of good and bad MF and individual stocks inherited over the years).


Record keeping is spotty, have been trying to get cost basis for the bad MFs to liquidate, most have had decades of reinvesting and mergers/splits to make things messy. -Worst case wait till step up basis.



Both have LTC insurance, not sure of the details but have declined some of the inflation increases to keep premiums "reasonable".


No family drama and none expected with the intention to split estate evenly to children upon passing of second. -I know it will be stressful and there might be some minor bickering but we are all established with good values and get along so there is nothing foreseeable we would fight over.



Pre-approval for burial in National Cemetery but no prearranged funeral.



My current thought is to get everything in a revocable trust (or with the trust as beneficiary) with P1 as the Trustee and me to take over as Trustee to manage the trust for P2's benefit until death if P1 passes first.



Appreciate your thoughts/experiences/advice! Thank you.

 

[38Chevy454]

I think your plan is sound and especially having P1 as the RLT trustee and you as successor trustee. If P2 is showing some Alzheimers it won't get any better and having you to be POA over medical and financial is a good idea. Having the trust will help you avoid probate time and costs, and the hassles being out of the area. Splitting estate equally between heirs is good and should avoid any squabbling. It is good that P1 wants to get things set up now, I assume that P2 is also agreeable?

The biggest issue would be if P1 passes first, and you being out of state to get the proper care for P2. Do you have siblings in the area that can help with this? No matter what the more Alzheimers affects P2 the more difficult it will be.

 

[athena53]

A minor part of your issues, but if the mutual funds are truly awful and you think you can do better elsewhere, I'd do an intelligent estimate of the cost basis. Maybe current value/average annual return the last X years, which you can usually get in their statements for 5 and 10 years. If you think they bought it earlier than that, "deflate" the cost basis by some reasonable annual %. That may overstate the cost basis if they didn't reinvest dividends, but it's a reasonable guess. This will likely generate a nice LTCG and the IRS is unlikely to argue with you on it because determining the true value is unlikely to generate much additional revenue. Just keep your documentation.

 

[pb4uski]

Putting aside the control concerns, if the estate is all liquid assets and a house, then you probably don't need a trust. Liquid asset accounts could have beneficiary designations to the surviving spouse and contingent beneficiary designation so the offspring and from what I googled Virginia allows TOD deeds so that could be TOD to the offspring (assumed home is jointly owned)... so there should be no need to go through probate.

It might be easiest if everything is changed to joint ownership with beneficiary designations for the offspring.

The other benefit of this approach compared to the trust that there would be no need to transfer or retitle assets in the name of the trust, which is a bit of a hassle. IOW, no need to set up investment accounts n the name of the trust and have assets transferred from individual and joint accounts to the trust and no ned to have the home retitled to the trust.

On the control piece, do either have any interest in managing the liquid assets? My experience is that there is often little interest and they are content to have a trusted child who is capable take over that and you could do that through POAs on the various liquid asset accounts.

My parents each had revocable living trusts to avoid estate tax back when the exemption limits were much lower. Dad died 17 years ago so his living turst is now irrevocable. DM, DSister and I are co-trustees, with the approval of any two of us sufficent to act on the trust's behalf. I pretty much manage everything and just keep them informed of any significant changes I want to do before I do them so we are all onboard.

 

[Souschef]

My parents each had revocable living trusts to avoid estate tax back when the exemption limits were much lower. Dad died 17 years ago so his living trust is now irrevocable. DM, DSister and I are co-trustees, with the approval of any two of us sufficient to act on the trust's behalf. I pretty much manage everything and just keep them informed of any significant changes I want to do before I do them so we are all onboard.

I had the same situation, fortunately, there was a clause in the trust that if the balance is less than a certain amount, the trust could be dissolved. It took a while, but I finally dissolved it, and filed a final 1041 and 541.

 

[FLSUnFIRE]

Putting aside the control concerns, if the estate is all liquid assets and a house, then you probably don't need a trust. Liquid asset accounts could have beneficiary designations to the surviving spouse and contingent beneficiary designation so the offspring and from what I googled Virginia allows TOD deeds so that could be TOD to the offspring (assumed home is jointly owned)... so there should be no need to go through probate.

It might be easiest if everything is changed to joint ownership with beneficiary designations for the offspring.

The other benefit of this approach compared to the trust that there would be no need to transfer or retitle assets in the name of the trust, which is a bit of a hassle. IOW, no need to set up investment accounts n the name of the trust and have assets transferred from individual and joint accounts to the trust and no ned to have the home retitled to the trust.

On the control piece, do either have any interest in managing the liquid assets? My experience is that there is often little interest and they are content to have a trusted child who is capable take over that and you could do that through POAs on the various liquid asset accounts.

My parents each had revocable living trusts to avoid estate tax back when the exemption limits were much lower. Dad died 17 years ago so his living turst is now irrevocable. DM, DSister and I are co-trustees, with the approval of any two of us sufficent to act on the trust's behalf. I pretty much manage everything and just keep them informed of any significant changes I want to do before I do them so we are all onboard.

I've thought about that too and will discuss with an attorney (again, how to find one that will not just try to sell the biggest package). Biggest concern I have is control (by control, making sure P2 is not taken advantage of). P1 "manages" now but it's all passive other than moving cash from one CD to another. What was inherited was left invested but very little in the market otherwise. -One was a nice early entry into a Dow stock with a 2 basis point cost basis (wasn't a lot then but is significant now). One of P1's homework assignments before we meet is to list accounts and beneficiaries.


Thank you!

 

[Spock]

What I'm going to suggest is brutal. But I've dropped over 80K on 4 lawyers and a 3rd party conservator (mine, 2 of his, and the 3rd party conservator's) since 2020 and ignoring the money the experience itself was absolute brutal as well.


Dad had done everything right in the estate plan. Trust in place since early 2000's and named me as co-trustee, POA, and joint on all accounts back in 2014 when he started to fade. But all of that planning was out the window when he started developing executive function cognitive impairment (likely Alzheimer's) accelerated by a fall with brain injury.


All of the POAs, co-trusteeships, and joint account "stuff" went out the window quickly. Until the patient is ruled incompetent, all of that prior work just creates an administrative tie... they can still override anything you do on their behalf. Even when joint on the checking account, the bank had to get Dad's permission to call me when Dad went in to withdraw all funds to give to a guy on the phone for safekeeping.


And while you may be POA/co-trustee, there is nothing that stops the patient from removing all of that without your knowledge. Even something innocent with no ill intent... Dad would lose his checkbook so he'd go into the bank and the teller would close the account and open a new one, scraping me off the account in the process and I'd have to start the dance all over again. Even after being declared incompetent to enter contracts the dementia patient is still allowed to re-write the estate plan as long as they are able to roughly ID their assets and their immediate kin (potential heirs). Google "testamentary capacity".


If possible, I would put everything possible in a trust for their benefit but with you as trustee. Maybe that's an irrevocable trust, I never explored those as I had to deal with a revocable trust.



Maybe the normal trust/POA/joint route would work if your parents decline in a peaceable way. My Dad turned extremely nasty as his memory (frustration) and cognitive abilities declined and made all of the estate planning moot. He used to be a calm, easy going guy (former marriage councilor with a MS in social work). But those parts of his brain faded first.


Tl/dr: In the vein of "if you're not going to trust your trustee, chose a different trustee" meaning it sounds like your parents are in need of help now. If you're willing to provide that help, take full control now.

As for those who advocate for POD/TOD/beneficiaries only, those work for the end case of death only. When there is a dementia patient involved all bets are off while the dementia patient is alive and in control

 

[pb4uski]

What if you just assume portfolio management for P2 using POA with instructions to P2 not make any moves before you discuss the move.

I manage my DM's portfolio. She has zero interest. In fact, when I'm going to make some sort of change she seems disinterested. As long as there is plenty of money in her checking account then she is happy.

 

[rodi]

Similar (bad) situation as Spock with my in-laws. MIL was primary caretaker for FIL - though he hadn't been declared incompetent - he had aphasia and 'stroke like symptoms' along with being wheel chair bound after a broken hip and super-botched surgery (that triggered the aphasia.)

MIL had POA for FIL and medical directive power. That worked well for many years. Then MIL started showing signs of dementia. Her ability to care for FIL declined as her mental capabilities declined, and he developed some medical issues (bedsores) that triggered Adult Protective Services involvement. Because she had POA for him and was in full denial there was any issue with his care or her dementia - there was no good solution to get FIL into a nursing home with wound treatment capacity. APS said a family member had to sue for guardianship of both ILs or the state would become FIL's guardian. MIL fought it. It was ugly. DH became guardian, and FIL was placed in a nursing home and his bedsores healed up. He died a year or so later, with no wounds, but still had mobility issues, aphasia, etc. MIL is now in memory care and hanging in there at age 96. As the years have gone by the one blessing of dementia is that she has forgotten to be angry about the situation.

 

[OldShooter]

Not mentioned so far: If you have any financial discretion as executor,there is the risk of family friction or outright fights. For example if one heir wants the house you may be called on to assign a value to it. The other heirs may object, saying that the value is too low and they are getting shortchanged in their shares. Timing of disbursements may be too slow for some. Your chosen method for allocating heirlooms may be an issue, particularly if you are assigning values. If you anticipate serious family friction, you may want to consider hiring a professional as executor or co-executor to be the bad cop.

 

[FLSUnFIRE]

Not mentioned so far: If you have any financial discretion as executor,there is the risk of family friction or outright fights. For example if one heir wants the house you may be called on to assign a value to it. The other heirs may object, saying that the value is too low and they are getting shortchanged in their shares. Timing of disbursements may be too slow for some. Your chosen method for allocating heirlooms may be an issue, particularly if you are assigning values. If you anticipate serious family friction, you may want to consider hiring a professional as executor or co-executor to be the bad cop.

Fortunately, I don't anticipate this being an issue at all... Of course stressful situations can make things weird but I don't think there will be any fighting on monetary assets and I don't think there will be much on the "stuff" either. They'd do best not to tick me off as an early retiree with significant assets and no offspring I might adjust my estate to account for their bad behavior when I pass.

 

[FLSUnFIRE]

Putting aside the control concerns, if the estate is all liquid assets and a house, then you probably don't need a trust. Liquid asset accounts could have beneficiary designations to the surviving spouse and contingent beneficiary designation so the offspring and from what I googled Virginia allows TOD deeds so that could be TOD to the offspring (assumed home is jointly owned)... so there should be no need to go through probate.

It might be easiest if everything is changed to joint ownership with beneficiary designations for the offspring.

The other benefit of this approach compared to the trust that there would be no need to transfer or retitle assets in the name of the trust, which is a bit of a hassle. IOW, no need to set up investment accounts n the name of the trust and have assets transferred from individual and joint accounts to the trust and no ned to have the home retitled to the trust.

On the control piece, do either have any interest in managing the liquid assets? My experience is that there is often little interest and they are content to have a trusted child who is capable take over that and you could do that through POAs on the various liquid asset accounts.

My parents each had revocable living trusts to avoid estate tax back when the exemption limits were much lower. Dad died 17 years ago so his living turst is now irrevocable. DM, DSister and I are co-trustees, with the approval of any two of us sufficent to act on the trust's behalf. I pretty much manage everything and just keep them informed of any significant changes I want to do before I do them so we are all onboard.

One of the primary benefits of a trust (to me) would be ease of transition and control when the time comes as I'd be the "owner" from a transaction aspect (technically not as the assets belong to the trust and I am a fiduciary). Will providing a POA or death certificate repeatedly get frustrating/be a hassle when dealing with out of state MF and transfer agents? Will doing taxes for the trust be a hassle (for me or P1)?

 

[Spock]

One of the primary benefits of a trust (to me) would be ease of transition and control when the time comes as I'd be the "owner" from a transaction aspect (technically not as the assets belong to the trust and I am a fiduciary). Will providing a POA or death certificate repeatedly get frustrating/be a hassle when dealing with out of state MF and transfer agents? Will doing taxes for the trust be a hassle (for me or P1)?

If its a revocable trust, the taxes are the same as if there wasn't a trust. Any interest/income generated by the trust are reported on the grantor/trustors SSN and shown on their tax return. Overly simplified, from an income tax perspective it's as though the trust doesn't exist. The only time taxes get involved is when the trustor dies and IF their assets are subject to estate tax.

 

[SecondCor521]

General suggestions:

0. Remember that for as long as they are competent, it's their money, their decisions. Sometimes we think into the future (because some of us here are more oriented that way) about that point in the future where we're the executor, and we can shift that future state into the present. But I think if I'm acting on their behalf, I need to be very clear that I'm doing what they would want and how they would want. It's also good to be mindful of conflict of interest if we're also a beneficiary. One good practice is to be very transparent and communicative with other interested parties and let them know about what is going on, and why, and perhaps even solicit input before making transactions, especially about the bigger items.

1. Simplify as much as you can. Fewer accounts is usually better - less to lose track of, fewer custodians to give a POA to, fewer custodians to deal with during the probate process.

2. Automate as much as you can. Less time and hassle for you to manage, fewer occasions where you need to exercise your POA, and maybe fewer occasions to generate discussion among other interested parties.

3. If appropriate, consider a durable general POA. If written properly, this should enable you to manage your parents affairs even if they lose mental capacity. A durable general POA works whether you also happen to have trusts or not. Note that POAs extinguish on death, at which point the executor (who may be the same person as the POA) becomes responsible.

4. Once you have POA, you can set up your own POA login to their financial accounts. I suggest monitoring transactions and activity on a regular basis - monthly, maybe, or weekly if things are dicey. This helps you make sure someone isn't taken advantage of, helps you get to know what's going on in more detail. This can also alert you to changes (possibly medical) if their financial habits change, and maybe you can get them medical care sooner.

Specifically to your situation, if their wills have any sort of complexity, you might want to review them with an estate planning attorney. Potential changes in tax law and their situation might induce changes. My Mom passed away in 2016 with a last will from 1999, and there were a few changes that could have been made to save us time / hassle / money.

HTH.

 

[pb4uski]

One of the primary benefits of a trust (to me) would be ease of transition and control when the time comes as I'd be the "owner" from a transaction aspect (technically not as the assets belong to the trust and I am a fiduciary). Will providing a POA or death certificate repeatedly get frustrating/be a hassle when dealing with out of state MF and transfer agents? Will doing taxes for the trust be a hassle (for me or P1)?

From posts that I have seen here, posters have had problems with financial institutions recognizing not only POAs but also trusts, especially if there is an amendment of the trust changing who the trustees are.

A POA terminates when the owner of the account dies. At the date of death the beneficiaries are baked in and in theory once you provide proof of death the financial institution distributes the account to the beneficiaries based on the beneficiaries designation.

For revocable trust, taxes are no different from holding the assets.. essentially a pass through in all respects. For revocable living trusts, once the owner dies the trust becomes irrevocable and from that point forward trust tax returns are required. For my DF's living trust, the terms of the trust pass all income to my DM so it is the same as if she held those assets but on a K-1 from the trust rather than on a 1099.