Question. If today were your last, how would you be remembered regarding your estate planning? Would you be remembered for the estate mess you left behind for others to clean up? Or, would you be remembered for the thoughtfully drafted, thoroughly implemented and carefully maintained plan you left so your appointed fiduciaries could smoothly administer your estate?
As Stephen Covey noted in his classic titled “The Seven Habits of Highly Effective People,” when preparing for a project or task you should always begin with the end in mind. Assuming you want to finish well regarding your estate plan, it is essential that you prepare your appointed fiduciaries now for their future responsibilities. They should understand their general responsibilities as fiduciaries now before they administer your estate later. So, what are these responsibilities?
Upon your death, the post-mortem (i.e., after death) responsibilities of your appointed fiduciaries fall into three phases of estate administration. Whether they are serving under your Revocable Living Trust-based plan or under your Will-based plan, these responsibilities are to:
Fulfilling these responsibilities is serious business requiring a high level of responsibility, common sense and attention to detail. Your fiduciaries should seek appropriate legal counsel throughout the each of these three phases to ensure that all of the “i’s” are dotted and the “t’s’ are crossed. The scope of their responsibilities and authority will be contained in your estate planning legal instruments, as well as by applicable state laws regarding fiduciaries.
Without delay, the first responsibility of your fiduciaries is to protect and preserve your assets. This includes taking an inventory of the assets, insuring and safeguarding them, as well as determining their values as of the date of death. Make sure your fiduciaries know where you keep your asset inventory, as well as the account statements, certificates and titles to back it up.
If you have a funded Revocable Living Trust along with up-to-date records of the trust assets (and their respective values), then you will greatly ease this initial burden on your fiduciaries.
Even if you do not have a Revocable Living Trust-based estate plan, maintaining current financial records can save your fiduciaries considerable time (and therefore money) in fulfilling their Collection and Management responsibilities. In fact, your fiduciaries will have enough to do without sending them on an unnecessary paper chase or unpleasant treasure hunt.
Once your assets have been collected and are under management, the fiduciaries must arrange for the payment of your just debts, your tax liabilities and any expenses associated with the post-mortem administration of your estate. Again, time is of the essence.
Consider this: estate tax returns must be filed within nine months of death, and many post-mortem planning opportunities, such as disclaimers and certain elections (e.g., QTIP, alternate valuation, etc.), must be timely made or they are lost … and with them potentially unnecessary estate tax savings.
And the failure to comply with applicable legal deadlines can expose your fiduciaries to some rather unpleasant personal liabilities. Not only could they be held personally liable for the tax liabilities of your estate, but they also could be vulnerable to lawsuits from creditors for failing to make timely payments and from disgruntled heirs for failing to make timely elections. Administering your estate can quickly become a lose-lose proposition for your fiduciaries.
Whether your estate plan ultimately provides for the distribution of your assets to your beneficiaries in one lump sum, in multiple distributions or through ongoing trust administration (to protect your assets for and from them), your fiduciaries must ensure that accurate records are maintained and receipts obtained from each beneficiary. Consequently, the failure of your fiduciaries to account for all income, expenses and disbursements throughout each of the three phases of estate administration can subject them to civil and, potentially, criminal sanctions.
This has been a brief overview of a very complex subject. Before you select and appoint fiduciaries for your estate plan, or agree to serve as a fiduciary for someone else, you should seek appropriate legal counsel. You will be glad you did.
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