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Lessons from 2013 May Prevent Problems for Your Heirs

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Posted on Jan 31, 2014 | Share this post: Like Us on Facebook Join Us on Google Follow Us on Twitter

If you are reading this article, you probably have some interest in estate planning.  You then are likely the type of person who hopes to leave your loved ones with as little to do as possible — and not a messy state of affairs.  With that in mind, we have compiled some lessons we learned from the experiences of clients, family members, friends, and the rumor mill that could help all of us plan a bit better.

Check your beneficiary designations.  Check every account or policy: life insurance, annuities, retirement plans, IRAs, 401(k)’s, bank and brokerage accounts (which can have pay on death or transfer on death designations).  Make sure the beneficiaries are clearly identified – your current trust, your current spouse/children/siblings/friends/charities.  Take special precautions if the beneficiary is a minor (naming a guardian or leaving in trust may be necessary to avoid a court proceeding) or you have divorced (your beneficiaries should be consistent with your divorce agreement).

Provide for your pets.  One of the many poignant moments from the year was a chance encounter with a man at a pet adoption event.  He shared that he had been to the adoption event for weeks on end hoping to adopt out his late mothers three beloved dogs – together, if at all possible – because he could not keep them.  On the other hand, we know of relatives who, without a second thought, had pets carted off by city officials without considering where they ended up.

Take action if you have divorced.  Talk to your estate planning attorney, and don’t delay.  Your ex-spouse and his or her relatives will be eliminated from your will or trust, but don’t rely on that – or the divorce decree.  Have new documents done, and if you have a trust, make sure to formally revoke the old one when the new one is drafted.  Then, attend to your beneficiary designations (see above).

Provide access to your safe deposit box.  Be sure to communicate its location and its contents.  If your will is in the box, make sure your executor has access.  Note that if you name someone other than your executor as a joint owner, the executor will have to rely on the cooperation of the joint owner to gain access to the box.

Beware of joint accounts.  Remember that if you add someone (whether your child or secretary) as a joint owner of your bank account (say, for the convenience of paying bills), that person generally becomes a joint owner of the account – with equal rights to the contents.  At your death, it will pass to the joint owner – not the designated beneficiary or according to your will or trust.  More on this issue.

Consider funds for your executor.  If your executor or successor trustee will not have the ability or the inclination to advance funds until a death certificate is issued, consider pre-paying your burial/cremation plan or leaving sufficient funds in a joint account with the named fiduciary.

Reassess assets.  If you are getting close to the $5.34 million exemption level, consider additional planning.  On the other hand, if your plan was designed to take advantage of the exemption (which was much lower not that long ago), but it’s unlikely you’ll ever get above the current exemption, consider simplifying.  Even so-called “irrevocable” trusts can be undone under the appropriate circumstances.

Inventory your assets.  Consider, if you were to die or become incapacitated, would your loved ones be able to sort out what’s what?  Every now and then, make a list of current accounts, including (and especially) those paid or maintained via digital means such as e-mailed statements, automatic payments via accounts or credit cards.

Toss unneeded papers.  If you want to be kind to those handling your estate, clean up.  Don’t keep every document ever signed and every bill ever paid.  Sorting through decades of paper is exhausting – and important documents may inadvertently get tossed.  Go here for a guide on what to keep and for how long.

Edit, document your legacy.  Consider why you keep what you keep and whether you would like your relatives rifling through it when you are gone.  Do you really want your brother’s wife reading your diary from junior high?  Similarly, consider whether what you leave will have meaning to anyone else.  If not, document why something is meaningful.  That trip toParis?  Make a quick note as to what it meant to you; then some day that shot of theEiffelTowerwill help share your story.  Otherwise, it’s just another in a pile of snapshots.

Know your duties.  If you are trustee of a trust, find the document and read it.  Consult with an attorney if there are provisions you do not understand.  Also read relevant Arizona statutes.  Again, consult with an attorney if there are provisions you do not understand.

Read your documents.  Errors happen; don’t blindly sign your documents, and if you were rushed, go back and read them to ensure they are accurate.  Make sure all the dispositive provisions are there.  Make sure your will is signed and includes signatures of two witnesses.  If your will or trust references a separate list for tangible personal property, make sure you have followed the main document’s directions – usually, that means signing AND dating the list to make it valid.

Name back-up fiduciaries.  You don’t expect those you name as your agents under powers of attorney or as successor trustees to die first, but it happens, and when it does, family infighting can ensue, possibly leading to an expensive court fight – which may be avoided by naming a back-up (or two).