Estate Planning Problems

[Packman]

I have been trying to decide on how to update our estate plans for over a year and I am in the "paralysis by analysis" mode now. My DW and I have wills that are outdated and have to be redone.

Problem #1 is deciding on a will or trust. Every attorney I speak with says to do a trust without even knowing our full situation. That makes me leary since they charge more for a trust and some don't even do wills. We have no children. Our remaining siblings are all older than us and in poorer health. Beyond that are neices and nephews that we are not really close with. 85% of our assets are in individual financial accounts with primary (the spouse) and contingent beneficiaries named. Bank accounts are POD/TOD. No joint financial accounts which we prefer to stay that way since we were married in our late 40's and had individual savings. Other assets are simply a home and two cars that are in both of our names. No debt. I can't seem to find good reasoning to get a trust.

Problem #2 is naming a secondary executor or trustee, beyond each spouse naming each other as primary. I think settling the estate will be relatively straightforward, however none of our families live anywhere near us making the job much more difficult. And I don't think any of them have the particular ability to do a decent job. That may leave us with the possibility of using a corporate executor or trustee. I don't know much about that option and it doesn't seem very appealing.

I have a call next week with our Fidelity estate planning department. They should be a good unbiased source since they don't do estate planning directly and I've found Fidelity to be very helpful to us. I do all of our financial planning and tax work, but this estate stuff has me frustrated. I have done a lot of research but find our situation to be somewhat unique. Any suggestions would be appreciated.

 

[swakyaby]

Following this thread as I share similar circumstances with the OP.

 

[SecondCor521]

I think you're right to be wary of professionals recommending high cost services before listening to your situation. Even if you did choose a trust, I think generally most would also recommend what is called a "pour over will" also to handle any assets which are not or cannot be put into a trust. Perhaps that is included in any trust package since it's a short and simple document.

There are some reasons to have a trust, but if they don't apply to you or you don't care about them, then there's no reason to get one. My Dad has one, I don't currently but may. It just depends. You need to read up on those reasons and see if they apply to you. I like Nolo press books on the topic, which should be available through your local library.

(As an aside, there are lots of different kinds of trusts used for different reasons and in different circumstances. The most common is a RLT, revocable living trust, which is what I'm assuming you mean here.)

Your second problem is hard if you don't have younger family who is capable and willing. And corporate executors or trustees can charge high fees and drag things out unnecessarily, contrary to your likely intent. I would suggest considering if you have anyone close to you and younger than you who is not family who you could trust in that role. Do you have long time friends through any social outlet like golf or bridge or tennis or church or charity?

I'd be really surprised if Fidelity gave you anything resembling advice. They might point you to some general educational resources, but they should and probably will refrain from giving legal advice, which is what most estate planning questions will involve.

The other thing to remember is that estate planning can be impacted by state laws. If I gave you specific advice, it would erroneously be in the context of Idaho inheritance laws, with which I have a passing familiarity. But you don't live in Idaho (nobody does), and your state laws very likely differ. For this reason, the general advice is to consult an estate planning attorney who is licensed to practice in your state of residence.

 

[Texas Proud]

IMO the big question is where you want your assets to go if both of you pass...

You said there are secondary beneficiaries.... so you have an idea...

The other thing is what are you trying to accomplish? If all you want to do is move the assets to someone else there is no need for a trust unless you want to reduce taxes in some way... Just leave them the assets..

Remember, what you list as beneficiaries on any of your accounts remove them from your will... and probably trust...

 

[Dash man]

One big reason to have a trust is to give the successor trustee ability to handle your finances should you (or both of you) become incapacitated. We use Charles Schwab Trust Company whose fees are very good compared to local banks.
Power of Attorney’s may not be accepted in all cases, so a Trust works better.
A second reason is to avoid probate for the executor of the estate and beneficiaries. Things transfer much more easily through a trust.

Find an experienced Estate Planning Attorney, not just a general practice attorney that doesn’t specialize. They will be familiar with applicable state laws and spend time asking you questions about your situation.
Once the trust is in place, don’t forget to fund the trust by changing your home’s deed and the titles of your financial accounts.
Ask questions about how best to manage your IRAs according to your wishes.
There needs to be a pour over will to cover anything not in the trust or without beneficiaries.

 

[all4j]

I think you are thinking in the right direction. I also think perhaps the key is what is desired for after 2nd spouse dies? Impacts both of your issues. I doubt you need a trust, but will mention some possible reasons depending on your circumstances. If your estate would likely be over the exemption in force at the time, then a trust might be used to get assets out of surviving spouse’s estate. Sometimes, the assets of the 1st spouse to die are moved into a trust, used for benefit of surviving spouse until their death at which time they are distributed per wishes of 1st spouse. Since you handle financial affairs now, it may be a relief to your spouse to have someone else involved. Not a comprehensive list & none of these may apply in your situation

Also, consider the need for someone to handle things in the event of incapacitation. That could be while both still living as well

The selling of the house may be the biggest executor job based on what you say. Again, depending on who ultimately gets the benefit may determine who is best choice for power of attorney, trustee, and/or executor.

 

[Packman]

Just a couple of responses so far from the OP.

Our estate is below the current federal estate tax limits. We live in Arizona and their estate laws seem to be easier than most states.

Texas Proud hit the nail on the head about what happens if both spouses die simultaneously. That almost makes my head exlode with thinking about the complexity! Especially if a family member had to settle the estate. If only one of us pass the surviving spouse will need to update beneficiaries and their will or trust immediately. We have agreed on how that should be done but we both know there are no legal guarantees if using just a will, and we are okay with that.

When I have referred to a will or a trust, I am assuming all of the normal documents would be included, a pour over will, living will, poa's, etc.

I have been told that POA's are not always accepted for incapacity or if over a couple of years old. If that is true, what is the point of the document?

This is all far more complex than normal financial planning. A couple of years ago, when thinking of estate planning, I used to say "I don't care, I'm dead"!

 

[frank05]

I think you are thinking in the right direction. I also think perhaps the key is what is desired for after 2nd spouse dies? Impacts both of your issues. I doubt you need a trust, but will mention some possible reasons depending on your circumstances. If your estate would likely be over the exemption in force at the time, then a trust might be used to get assets out of surviving spouse’s estate. Sometimes, the assets of the 1st spouse to die are moved into a trust, used for benefit of surviving spouse until their death at which time they are distributed per wishes of 1st spouse. Since you handle financial affairs now, it may be a relief to your spouse to have someone else involved. Not a comprehensive list & none of these may apply in your situation

Also, consider the need for someone to handle things in the event of incapacitation. That could be while both still living as well

The selling of the house may be the biggest executor job based on what you say. Again, depending on who ultimately gets the benefit may determine who is best choice for power of attorney, trustee, and/or executor.

Speaking from experience, the house was easy. It was the personal property that was hard in both the emotional area and selling or tossing.

 

[RetMD21]

... Other assets are simply a home and two cars that are in both of our names. No debt. I can't seem to find good reasoning to get a trust.....

If you die and your spouse becomes incapacitated (perhaps a stroke) the court can appoint a guardian and manage her affairs. I'd rather involve a family member in control of the finances.

It is considerate of you through to save on legal expenses to leave your heirs a larger estate.

 

[walkinwood]

We're in the same situation as the OP. Our IRAs have secondary beneficiaries. The rest, we want to give to charity. We have a Donor Advised Fund and are thinking that it will be the beneficiary for everything else. I can set up our investment & banking accounts to be PoD/ToD to the DAF (I think.)

Our main concern is to minimize the inconvenience to the executor (a friend who is about 10 years younger than us) should we both die together. I thought that was the only reason to have a trust.

Now, with the previous posts, a trust seems like a good idea if we need someone to handle our affairs while we're incapacitated.

We need to get moving with this since its been on my mind for a while. Our current wills are out of date with regards to our current thinking & were drafted in another state.

 

[Route246]

All good advice. You really can't over prepare for this. There are so many corner cases so you need to think of as many of those as possible. One huge vulnerability is if one spouse dies and the other spouse remarries and both has adult children who are step-siblings. The case where the subsequent marriage runs a long time, sometimes many decades and then one or the other dies it can be a mess for the unlucky step-siblings who lost their surviving parent. It happened to a friend of a friend. Frozen out of any of their long remarried father's estate as both were elderly and unable to even think about how his portion would be passed on to his children. His assets went to his second wife when he died and she lived for quite some time. When she died her children got everything, her adult stepchildren who she really didn't know as they lived on the other side of the country and rarely visited their father. The frozen out step-children were OK financially but the concept left a very bad taste in their mouth to think their father's assets went to strangers (at least to them).

 

[OldShooter]

... Find an experienced Estate Planning Attorney, not just a general practice attorney that doesn’t specialize. They will be familiar with applicable state laws and spend time asking you questions about your situation. ...

Amen!! Not always easy, of course, but critically important. There are no do-overs on botched estate plans. You are already dead.

 

[SecondCor521]

Just a couple of responses so far from the OP.

Our estate is below the current federal estate tax limits. We live in Arizona and their estate laws seem to be easier than most states.

Texas Proud hit the nail on the head about what happens if both spouses die simultaneously. That almost makes my head exlode with thinking about the complexity!

Simultaneous death should be addressed in any competently drafted will or perhaps by state law. It's not complex - it's just a matter of deciding who is treated as dying first then following the inheritance process according to that decision.

Especially if a family member had to settle the estate. If only one of us pass the surviving spouse will need to update beneficiaries and their will or trust immediately.

Again, a competently drafted will or trust should make an immediate update unnecessary. Although it is good practice to review estate planning documents after the first spouse's death, it shouldn't need to be rushed.

We have agreed on how that should be done but we both know there are no legal guarantees if using just a will, and we are okay with that.

When I have referred to a will or a trust, I am assuming all of the normal documents would be included, a pour over will, living will, poa's, etc.

I have been told that POA's are not always accepted for incapacity or if over a couple of years old. If that is true, what is the point of the document?

I'm sure people's experience varies. I had no troubles at all with my Dad's 2017 POA being accepted by everyone quite easily in 2023. If it is a durable power of attorney, it should be accepted in spite of incapacity - that's the whole point of a durable POA.

If your state has adopted the uniform probate code (easy to check), then there are consequences and penalties in that law for institutions which refuse to accept a valid POA.

This is all far more complex than normal financial planning. A couple of years ago, when thinking of estate planning, I used to say "I don't care, I'm dead"!

There also are a lot of people out there with different opinions, understandings, assumptions, circumstances, goals, and state law. So you'll get responses all over the map.

For those who survive you, having a good plan in place is probably greatly appreciated. It decreases their stress in so many ways, and if well crafted can pass along more of your wealth instead of being paid out in legal fees, accounting fees, probate costs, taxes, and being lost in state escheat offices.

 

[Texas Proud]

All good advice. You really can't over prepare for this. There are so many corner cases so you need to think of as many of those as possible. One huge vulnerability is if one spouse dies and the other spouse remarries and both has adult children who are step-siblings. The case where the subsequent marriage runs a long time, sometimes many decades and then one or the other dies it can be a mess for the unlucky step-siblings who lost their surviving parent. It happened to a friend of a friend. Frozen out of any of their long remarried father's estate as both were elderly and unable to even think about how his portion would be passed on to his children. His assets went to his second wife when he died and she lived for quite some time. When she died her children got everything, her adult stepchildren who she really didn't know as they lived on the other side of the country and rarely visited their father. The frozen out step-children were OK financially but the concept left a very bad taste in their mouth to think their father's assets went to strangers (at least to them).

Yes... when asked about this I will always bring up the blond bimbo

It is always a possibility and if you do not want something like this to happen you need to plan ahead...

Most people do not have enough assets to really worry about this...

 

[all4j]

I have been told that POA's are not always accepted for incapacity or if over a couple of years old. If that is true, what is the point of the document?

A good lawyer will be charging more than sgoti (like me), but I am sure you’ll get better, more accurate advice/results. They should interview you to uncover likely situations, you/spouse’s wants, etc They can address these concerns you have, but I’ll throw in 2 cents.

I imagine much of the war stories you’ve heard have not given you all the necessary info. For example, it hasn’t been explicitly covered that I’ve seen, but there are different kinds of poa. Some are for health care, some financial, & some “spring’ when an event happens, etc. It might be in your better interest for the hospital to question your cpa brother since you gave that responsibility to your oncologist sister. Let’s say that you gave your cpa brother poa which ‘springs’ into effect once you have dementia (but not before) & further suppose he’s been angry with you since you wouldn’t put a sign in your yard for his candidate. Would you want your broker to turn over the portfolio to him based on his word only?

My (limited) experience has been that poa’s are usually not flatly refused, but presenter will be asked to provide further info. That can be time consuming. I think there are times when a state law changes & older poas, or those from another state are simply not legal. Lawyer can help you understand how to keep them fresh. Makes it clear that your intentions haven’t changed. Also, it is usually good to give these in advance to keep roles (ie primary care doc, broker, etc) & get there feedback.

 

[Texas Proud]

I have had one flatly refused... by a number of firms... I had one on my mom that was 20 years old... we were going to sell her condo but it was almost impossible to get title insurance or a RE broker to do the transfer...

Finally got one but had to wait a bit... sent a copy into their legal department and they asked for a few other items... since mom was in a memory care place at the time I had no way of getting a new one...

The buyer of he condo wanted assurance that I was also going to be the executor in case she passed before we could get the deal done...

 

[Lorenzo]

We're in the same situation as the OP. Our IRAs have secondary beneficiaries. The rest, we want to give to charity. We have a Donor Advised Fund and are thinking that it will be the beneficiary for everything else. I can set up our investment & banking accounts to be PoD/ToD to the DAF (I think.)

Our main concern is to minimize the inconvenience to the executor (a friend who is about 10 years younger than us) should we both die together. I thought that was the only reason to have a trust.

Same situation here. Under the wills that our estate planning attorney drafted, when the last survivor between the two of us dies, the remainder that is not already passed outside the wills (e.g., PoD) goes to a charity. No trust was needed to do that. We don't care how inefficient the distribution of that remainder to the charity may be--we're dead and have no heirs. We don't have any close friend or family member who can reliably serve as executor, so we designated our attorney. There are minor conflict-of-interest issues in doing so, but again, we're dead at that point and do not care what happens to the remainder so long as the bulk of it goes to charity. Our goal is for the last survivor between us to die with zero. Simultaneous death is a low probability event, but in that case the charity would benefit. A trust might make the remainder pass to the charity more efficiently in the simultaneous death scenario, but again, efficiency is not all that important to us.

 

[walkinwood]

Same situation here. Under the wills that our estate planning attorney drafted, when the last survivor between the two of us dies, the remainder that is not already passed outside the wills (e.g., PoD) goes to a charity. No trust was needed to do that. We don't care how inefficient the distribution of that remainder to the charity may be--we're dead and have no heirs. We don't have any close friend or family member who can reliably serve as executor, so we designated our attorney. There are minor conflict-of-interest issues in doing so, but again, we're dead at that point and do not care what happens to the remainder so long as the bulk of it goes to charity. Our goal is for the last survivor between us to die with zero. Simultaneous death is a low probability event, but in that case the charity would benefit. A trust might make the remainder pass to the charity more efficiently in the simultaneous death scenario, but again, efficiency is not all that important to us.

Thanks for this post. I think making the attorney the executor may be the best solution for us. Keeps us from burdening friends and like you say - "we're dead at that point and do not care what happens to the remainder so long as the bulk of it goes to charity."

 

[athena53]

We're in the same situation as the OP. Our IRAs have secondary beneficiaries. The rest, we want to give to charity. We have a Donor Advised Fund and are thinking that it will be the beneficiary for everything else. I can set up our investment & banking accounts to be PoD/ToD to the DAF (I think.)

But then what happens to the DAF? I have one and I love it but when the donor is gone, who directs where the balance goes?

 

[CaliKid]

Just be sure to get it done before you die... or become incompetent and unable to sign documents.

 

[joesxm3]

But then what happens to the DAF? I have one and I love it but when the donor is gone, who directs where the balance goes?

You probably can designate a successor and tell them what to do. That is what I have done.

 

[walkinwood]

With my DAF, I can designate charities that the money will be disbursed to on our death. I haven't set it up yet, so don't know the limitations.

 

[TrvlBug]

But then what happens to the DAF? I have one and I love it but when the donor is gone, who directs where the balance goes?

We have one at Fidelity. We can name a successor or direct Fidelity how to disburse the funds. We are currently using QCDs for our charitable contributions, most of which go to local non-profits. Our plan is to, within the next couple of years, make some massive distributions into the DAF (it's currently at $150K), and set it on autopilot after our demise to continue with yearly contributions to the charities we designate.

 

[RetMD21]

We have one at Fidelity. We can name a successor or direct Fidelity how to disburse the funds.....

Vanguard also allows successor advisors which is what we have done

 

[levindb]

We just went through updating/replacing our 15 year old trusts in 2024. We used a firm called OATH Law and they have offices in a number of states, including Arizona. They drew up all of the documents (trusts, Pour Over Wills, Deeds, medical POAs and more). We liked their process and breadth of discussions in finding out what we wanted to do with our assets. We were in our early 50's when we were married, and wanted to deal with protecting each other as well as being fair to heirs on both sides. Our cost was about $5K for everything, and this law group will provide free updates to the trust every 3 years.