John Lane Law

What Happens to My Debt When I Die? - John M. Lane Law, PLLC

“When we think about retirement planning, our focus often keys on the question of how to maintain a monthly paycheck after we stop working.”

A retirement plan isn’t set without some thought and planning on how to transfer any unspent assets to people we’d like to benefit after we die, and to whom we can entrust important financial and health care decisions in the event we’re unable to manage those affairs.

fosters.com explores this in a recent article, “What happens to your debt in estate planning?” The article reminds us that this is where estate planning is needed. An estate plan is a set of instructions that lets us designate certain individuals to act on our behalf after we die, or while we’re living but incapacitated, and provides guidance about how our assets should be distributed to beneficiaries at death, or managed for us while we are alive but unable to do so on our own.

Wills, trusts, and beneficiary forms set out our instructions as to who will receive any assets that we leave behind. Wills name an executor who is responsible for an accounting of all of our assets and liabilities at death. The executor also works with the probate court to get our creditors paid, and distribute the remaining funds to our heirs. Trusts are similar, but don’t involve oversight by the probate court. When a trust is set up to own assets during your lifetime, a successor trustee is named at your death or incapacity to manage the trust assets and then distribute them at the specified time to the named beneficiaries.

Wills and trusts don’t have any control over accounts that have a joint owner or beneficiary designation, unless the estate or trust has specifically been named as beneficiary. IRAs, 401(k)s, life insurance, annuity contracts, and brokerage and bank accounts can all be created with beneficiary designations that serve as the instructions to their custodians, regarding who is to receive them after death.

Durable power of attorney documents for both financial matters and health care are also important components of a retiree’s estate plan. Because IRAs, 401(k)s and other retirement accounts can’t be owned by a revocable trust, trustees can’t manage them for you. An agent designated in a durable power of attorney can take any actions you authorize on these sources of retirement cash flow. A durable power for health care will specify the individual you authorize to make care decisions for you and what your wishes are regarding life-sustaining treatments.

It is not unusual for those approaching retirement to either delay creating wills, trusts and power of attorney documents or not to have reviewed them for many years. Because laws and relationships change over time, it is important to review estate planning documents regularly and consult with an estate planning attorney when updates are needed.

What happens to the debt? With good planning, there hopefully is no debt. But if there is, beneficiaries generally do not have to pay the obligation, unless the debt was owned jointly with a spouse or a co-signer. Unsecured debts, like credit cards, however, do become liabilities of the estate and payment of these debts will be overseen by the probate court. The executor will need to pay them from any assets passing via the decedent’s will. An experienced estate planning attorney should work through these items with you and your heirs to take care of your affairs while you are living.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: fosters.com (November 22, 2017) “What happens to your debt in estate planning?”

Should I Use a Trust? - John M. Lane Law, PLLC

“A proper estate plan is critical to ensuring that the success you’ve worked so hard to build over your lifetime, is passed on in a way that benefits your family and supports the values you want to leave behind when you’re gone.”

Planning for the transfer of wealth to younger generations is a challenging process for successful families. Many want to leave their children enough so they can do anything, but not so much that they can do nothing. What’s “enough” or “too much” is unique to each family.

BizWest ‘s recent article, “To Trustee or not to Trustee,” says that many families of wealth choose to leave some, or all, of their wealth to future generations in trusts. Trusts can be created in many ways and can specify exactly how and when the assets are to be passed to the beneficiaries. If you go with a trust, you’ll need to select a trustee. A trustee is a person, board, or corporation that you designate with the task of overseeing the administration of your trust after you pass away. They’re tasked with making decisions about distributions to your beneficiaries and ensuring they meet the directions defined in your trust. It can be a challenging job, so it is crucial to select the right trustee to carry out your wishes.

Opting for a family member or friend to serve as your trustee is common, because the relationship is personal, and they may be well-suited to understanding the needs of the beneficiaries. However, most individual trustees don’t have the experience, time, or financial or business background to manage the tax and administrative duties associated with a modern trust. It can also change the personal relationship between the individual trustee and the beneficiary.

If you go with a corporate trustee, like a bank, it can help you sidestep pitfalls often associated with an individual trustee. That’s because corporate trustees have expertise that individual trustees often don’t possess. A corporate trustee must also comply with internal audits and is scrutinized by both federal and state regulatory agencies. That ensures protection of the trust beneficiaries.

For some, using an individual trustee and a corporate trustee may be a good solution. Acting in concert, the individual trustee can bring the knowledge of the personal relationships, and the corporate trustee can apply the safeguards needed for making sound investment and administrative decisions.

Regardless of the direction you take, here are three thoughts which you should consider when evaluating which trustee is right for you and your family:

1. Trustees must be diplomatic. A trustee must work with beneficiaries of vastly different character and levels of sophistication including: children, grandchildren, friends, and other beneficiaries who all have different backgrounds, expectations and goals. An individual trustee must weigh the needs of the individual trust beneficiaries versus the terms of the trust. Itis critical for the trustee to recognize the differences between beneficiaries and administer the trust in a way that both supports their needs and satisfies the intent of the trust.
2. Siblings will always fight. One sibling may have a lifelong belief that “Mom always liked you best.” It’s important to explain to your trustee and your beneficiaries what will occur when you’re gone, before you’re actually gone. This can make a huge difference in preserving family harmony. It may seem uncomfortable, but it’s a gift to your family that’s far more valuable than money.
3. What you can expect. Working with a beneficiary who depends substantially on trust distributions for support can be a challenge for any trustee. A trustee has to be prepared to be the “bad guy”, when beneficiary behavior runs up against prudent trust administration. Someone has to be the one to say no.

As you think about what type of trustee to use, you still need to work with an experienced estate planning attorney, who will ensure that your trust is set up properly.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: BizWest (November 27, 2017) “To Trustee or not to Trustee”

As an Executor, How Fast Do I Need to Settle an Estate? - John M. Lane Law, PLLC

“How quickly do you need to settle an estate when you are serving as an executor?”

If you’re accustomed to setting timelines in your life, when it comes to serving in the executor role, you’ll likely find it difficult because settling an estate can be impacted by many things far beyond your control.

The probate process is discussed in executor.com’s “How Quickly Do I Need to Settle an Estate?”

The answer to how long it takes to settle an estate when you are serving as an executor is, well, it depends. The process can typically take about a year, but there are several factors to think about.

When a will is filed with the court, it starts the process called probate. The probate court oversees the executor’s actions as he or she completes every step of closing the decedent’s estate. There are many things the probate court does, including making sure that the assets are properly distributed to beneficiaries. Of course, you have no control over the pace of the court. This includes such things as when your file will be reviewed, when hearings will take place and so on. That’s all up to the judge and his or her staff.

As executor, you’ll need to get letters of testamentary from the probate court before you can do anything with estate assets, such as bank accounts, autos, property, and investment accounts. You have to wait for the court’s approval to proceed. On the other hand, the probate court may set deadlines for the executor to accomplish specific tasks, like the distribution of the estate assets after an accounting of those assets has been completed.

 Larger estates obviously take more time to settle than smaller ones. As the asset types become more complex, the time required to spend settling the estate can increase dramatically. For example, if the deceased had ownership interests in a small business, extensive property holdings, or complex investments, it may take longer to organize these, so the beneficiaries receive their distributions as outlined in the will.

Another factor impacting the time to settle an estate has to do with whether or not the person died without a will. If that happens, it can take longer because the probate court has to appoint an estate administrator and more closely monitor the estate.

Some people are great about keeping records in their lifetime. This can really help to expedite the work of an executor.

Beneficiaries and surviving family members who are set to inherit, can delay things for several reasons. Some may be grieving and unable to provide required paperwork and information. Others may dispute the will, and some beneficiaries may be hard to locate. Keeping beneficiaries updated about the process and understanding that there will likely be obstacles can be useful, when it comes to both dealing with and avoiding beneficiary-related issues.

Patience, flexibility, and understanding will be vital to you when working through this challenging, complex process.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: executor.com (November 1, 2017) “How Quickly Do I Need to Settle an Estate?”