Estate planning reduces financial frustrations when settling an estate.
Perhaps you have heard the phrase, “failing to prepare is preparing to fail.”
Although many attribute this to educational, business, or athletic endeavors, it applies to estate planning.
The stakes are often higher with estate planning.
There is no learning from your mistakes after you have died.
According to a recent Business Insider article titled “I thought I was ready to wrap up my parents’ finances when they died. I was wrong,“ estate executors suffer from poor planning.
Many parents choose their adult children to settle their estates or serve as agents appointed under their power of attorney documents.
After the death of one parent, the children may assume the next estate settlement will work the same way.
This assumption could prove costly in terms of time and money.
Consider this example of a woman who was given the authority to manage the affairs of both parents.
She was able to complete all financial and tax responsibilities for the estate of her mother in a matter of months.
The woman was the appointed agent under her parents’ power of attorney documents, who had an irrevocable living trust.
The trust provided that one-third of the assets be given to the surviving spouse and the other two-thirds be distributed to this daughter and her sister.
The investment company made the transfer after a simple phone call.
She was able to pay outstanding bills and file the final tax return quickly.
Although the woman anticipated a similar simple financial situation after her father’s death, she was unpleasantly surprised.
Most of his assets were in the trust, but not all were in it.
Although the woman could quickly transfer the remaining trust assets to herself and her sister and pay the outstanding medical bills, handling his personal bank account proved problematic.
His bank account was not in a trust and had no payable-on-death designation.
As a result, it required a last will and testament to govern its distribution.
Unfortunately, her father did not have a last will to clean up this oversight.
To rectify this financial issue, the sister had to request to be named next of kin by the court to close the bank account.
Taxes were also a challenge.
The woman could not log into his accounts online because he never organized his digital assets.
The woman had to request a transcript from the IRS for the appropriate tax information to file an extension for the tax return.
To avoid creating similar financial problems for your loved ones, have your trust and last will be prepared by an experienced estate planning attorney.
You can minimize conflict among your loved ones by naming trustees and executors in advance.
Gather and organize your financial documents and paperwork for banks, credit cards, and tax records.
If you have online accounts, compile login information for these while you are still alive.
Even if you have everything in order, it may still take months for your executor to accomplish all the responsibilities to settle your estate.
By setting realistic expectations and working with an experienced estate planning attorney, you can minimize the financial frustrations for your estate executor.
Reference: Business Insider (Sep. 19, 2023) “I thought I was ready to wrap up my parents’ finances when they died. I was wrong.“