Michigan Estate Planning Blog

Who Is the Best Choice for Executor?

 

Parents do so much to make sure they are treating their children equally. This is all good when it comes to buying bicycles or sharing candy. However, when it comes to naming your executor, equal is not always best, says a recent article titled “3 Mistakes to Avoid When Choosing Your Personal Representative of Your Estate” from The Street.

The most common mistake parents make is naming all of their children, with the hope they’ll set aside any differences and rise to the occasion. Another is to make an age-based decision and name the oldest child as the executor. Maybe worse: tossing names into a hat and picking one.

The wrong decision can lead to more than fighting among siblings. Fighting often escalates to litigation and wounds that never heal.

The decision of who to name as a personal representative, agent or executor needs to have a business approach. Remove emotions from the equation and examine your children’s strengths and weaknesses.

Your executor, the agent named to carry out instructions in your will, has many responsibilities, including:

Obtain the last will and testament and file it with the court.

Obtain multiple original copies of a death certificate.

Inform heirs and relatives of your death and of the open contest period when they may challenge the validity of the will.

Use estate funds to settle outstanding debts.

Maintain any real property, until the estate is settled.

Notify banks, government agencies, insurance companies and creditors of your death.

File final personal income tax.

Create a complete inventory of the estate and, when the will is deemed valid by the court and creditors have been paid, distribute assets.

Make court appearances on behalf of the estate during probate.

File estate taxes.

The executor must be able to manage these and other matters, while keeping the peace in the family and standing up to any challenges. Not everyone is up to the task.

Naming more than one personal representative so no feelings get hurt.

If your children have a history of working well together and are all equally versed in personal finance, this might work. However, more often than not, it’s a recipe for disaster. By asking so much of them during a highly emotional time, even the best sibling relationships will be tested.

Picking the wrong child for the job.

Not only does the person need to be responsible, reliable, organized and trustworthy, but they need to live close enough or be able to travel if you live far away. If none of your children are good candidates, speak with an estate planning attorney to explore other options.

Not preparing the person ahead of time.

Someone who has never served as an executor before is not likely to fully understand what their role will be, what tasks need to be accomplished and how much time it will take out of their schedule. Talk with the person you chose as your executor and provide them with all the details. Tell them where personal property is located and where you are storing your last will and testament. Share the names of your estate planning attorney, financial advisor and CPA.

Good estate planning and clear communication is the best bet to avoid acrimony between siblings after parents die. Make sure that they understand your desire for the family to stay together and give them the tools to do so.

Reference: The Street (July 28, 2022) “3 Mistakes to Avoid When Choosing Your Personal Representative of Your Estate”

When Comedians Tackle Estate Planning Issues

Americans increasingly get the news and social commentary from comedians, such as Jon Stewart and Stephen Colbert. More and more Americans, especially younger Americans, want to be entertained when they are listening to the news. One new television show in this category is HBO's Last Week Tonight hosted by John Oliver. A recent Los Angeles Times article titled “John Oliver Tackles Income Inequality on 'Last Week Tonight'” describes a recent Oliver show that tackled the estate tax and income inequality. Oliver suggested during the show that whether a viewer would agree with his opinions depended on whether they subscribed to HBO or watched his show by getting it illegally. The implication was that people who were wealthy enough to afford HBO would have one opinion and those who were not would have another opinion. Oliver later went on to compare the American promise to a lottery system where the already rich get multiple fantastic opportunities to win and the poor cannot even get a draw because the machine is broken. Naturally, opinions are not as black and white as Oliver suggests. Some wealthy people support high estate taxes. Some poor people do not think income inequality is necessarily bad. Oliver is of course exaggerating for comedic effect. The important thing to consider is what you believe to be the truth and whether or not you think income inequality and the estate tax are good or bad. Or, perhaps, you agree with Oliver?

Reference: Los Angeles Times (July 14, 2014) “John Oliver Tackles Income Inequality on 'Last Week Tonight'”

For more information, see www.jerryreiflawyer.com

Filing a “Protective Claim” for Same-Sex Estate Planning

The legality and constitutionality of same-sex marriage has not been far from the news or the estate planning of some who are affected. This particularly is true after the ruling of U.S. District Court Judge Barbara S. Jones in Windsor v. United States. When it comes to “same-sex” estate planning, there are significant tax burdens at play. However, according to a recent article in MarketWatch titled “Ruling poses tax issues for same-sex couples,” that doesn’t mean that you have to consider the protective claim. So, what is a protective claim? Any form of taxation is subject to a sort of protective claim. All that is required is that you pay your tax and then file an amended return. It should be filed on the basis of what your return should be if current litigation is decided in that favor. Still, the stakes are simply that much higher in this case with the many tax benefits that marriage as a federally-recognized institution brings. Some may consider it premature, but, in the case of either income taxes or estate taxes, taking the defensive position of a protective claim may be worth it. At the very least, there’s nothing to lose.

Reference: MarketWatch (July 10, 2012) “Ruling poses tax issues for same-sex couples

Filing a “Protective Claim” for Same-Sex Estate Planning

The legality and constitutionality of same-sex marriage has not been far from the news or the estate planning of some who are affected. This particularly is true after the ruling of U.S. District Court Judge Barbara S. Jones in Windsor v. United States. When it comes to “same-sex” estate planning, there are significant tax burdens at play. However, according to a recent article in MarketWatch titled “Ruling poses tax issues for same-sex couples,” that doesn’t mean that you have to consider the protective claim. So, what is a protective claim? Any form of taxation is subject to a sort of protective claim. All that is required is that you pay your tax and then file an amended return. It should be filed on the basis of what your return should be if current litigation is decided in that favor. Still, the stakes are simply that much higher in this case with the many tax benefits that marriage as a federally-recognized institution brings. Some may consider it premature, but, in the case of either income taxes or estate taxes, taking the defensive position of a protective claim may be worth it. At the very least, there’s nothing to lose.

Reference: MarketWatch (July 10, 2012) “Ruling poses tax issues for same-sex couples”

Death & (Income) Taxes

Of the two certainties in life – that is, of death and of taxes –the taxman always gets the grim last word. End-of-life taxes are, moreover, easily among the most onerous. For many loved ones, writing those last few checks to the IRS can be especially tough … and seem to never end. Enter the postmortem income tax return. The death taxes are one thing, and inheritance taxes are generally another, since they are paid by the inheritor. However, as a recent article in Kiplinger makes clear, there usually is one final income tax return to file for the decedent. I recommend the article, titled Death and Taxes, for your reading. The burden of filing this final income tax return is something you assign in your will, usually to the executor or administrator, or failing that it falls upon a survivor. Regardless, do not neglect that duty if you occupy one of those roles. Why? Because it is just basic estate planning and administration. If you are planning your estate or if you are administrating one, this burden is not one to be taken lightly. To make matters worse, the fiduciary is on the hook for any sins of commission or omission. If ever there was a time to retain appropriate legal, accounting and tax advice, then this is one of them. Bottom line: The income taxes likely are the least of your taxation concerns with the estate, inheritance, gift, and generation-skipping taxes all vying for attention. Unfortunately, that doesn’t diminish the importance of income taxes. Even if an estate will not be subject to extra taxation, this last rite to the IRS has to be observed.

Reference: Kiplinger (March 2012) “Death and Taxes