Private Client Services Update – Hindsight is 20-20: Simple Estate Planning Steps We Wish Clients Would Take Before Death
Attorneys in the Kaufman & Canoles Private Client Services Group regularly represent what lawyers call personal representatives: those who are administering decedents’ estates, serving as executor under a will or serving as trustee named in a living trust. Time and again we see estate and trust administration complicated or made more costly because of the failure of the decedent to take simple steps during life. Many people die without any planning in place. It is estimated that 40 percent of older Americans have no will. Abraham Lincoln (a lawyer), Sonny Bono and Pablo Picasso all died intestate. But once a person has taken the big important planning steps of creating estate plan documents, some simple, yet key follow up work will save a personal representative work and save the estate money. Some of the more notable or common missed planning opportunities are as follows:
Safe deposit box access. It is not uncommon for clients to create living trusts, structure beneficiary designations and account ownership carefully so as to avoid probate, and then lock their documents and other valuables away in a safe deposit box which no one can access without qualifying as executor, invoking the probate process. Adding a child, family member or trusted advisor to the safe deposit box signature card and revealing the location of the key are simple steps which can avoid significant expenses after death.
Multiple accounts. Our clients often die owning an unnecessarily large number of checking, savings, CD and brokerage accounts. There are sound reasons to hold a number of accounts: relationships with multiple banks or brokers, FDIC insurance coverage, taking advantage of attractive CD interest rates and asset allocation strategies are among those reasons. At death, however, a personal representative must find and access all of the different accounts of the decedent. Duplicitous, inactive, or unnecessary accounts create expenses and paperwork which can be avoided by consolidating accounts as a part of estate planning.
Failure to maintain a list of financial assets. Most folks can recite from memory a list of their significant investment assets, but many maintain no record of those holdings which a family member, executor or trustee can use in estate settlement. Piecing together a decedent’s financial statement using old files, account statements received in the mail after death, and recollections of family members is tedious, time-consuming, and invites omissions, revised tax returns and accountings. We advise clients to maintain a current asset list or financial statement, kept where a spouse, family member, attorney or named personal representative can access the information after death.
Incomplete funding of living trusts. Today the living trust is a time tested and widely accepted technique for simplifying estate settlement. Too many people sign the trust agreements and are then dilatory about the all-important process of trust funding: moving assets into the trust. That failure requires the personal representative to navigate the probate process despite the existence of a living trust designed to avoid probate. Attention to and regular follow up on the titling of accounts and real estate into living trusts is key.
A corollary problem might be called the “almost fully funded living trust.” We often see clients who have been diligent about moving assets into living trusts but have omitted a timeshare located in another state, an old life insurance policy, some savings bonds left in the safe deposit box, or their everyday checking account. There are, to be sure, good reasons why some assets are not moved immediately into a living trust. For example, creating a new household checking account requires time-consuming changes to automatic deposits and debits, updates to on-line banking, and new checks. Yet leaving one asset out of a living trust creates significant work for a personal representative. Attending to these hanging assets with pay on death (POD), transfer on death (TOD), joint ownership or other structures is a step which will pay big dividends later in terms of cost and headache savings for a personal representative.
Tangibles get short shrift. Jewelry, heirloom furniture, favorite family china, guns, farm equipment and collectibles often get little attention in estate planning but generate more hard feelings among family members after death than more valuable financial assets. Virginia law now allows the creation of a binding list or memorandum distributing tangible personal property, and this document can be created without attorneys, witnesses or a notary public. Some of our clients trust their family members to sort out these personal property details, but too often the courts become involved when those family members fail to agree.
Lawyers are often chided for dwelling on small details. In matters of estate settlement, however, such fine points make a difference in the ease and cost of managing a decedent’s affairs. – Greg Davis
The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2023.