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As a financial planner, my mission is to help you grow and protect your resources to live your best life. While working on your estate plan is certainly not as joyful as planning how to fund your next vacation, your retirement years, or your family legacy, it is a vital part of your comprehensive plan because it lays out how your wealth will be transferred to your heirs. A great plan ensures this transfer happens smoothly. A plan that isn’t so great creates a host of headaches and complications down the road during what’s called the ‘estate plan administration’ which takes place immediately after your death. This is when your plan is put into action, and it’s when, in my role as a Trust Advisor, I can help.
Whenever a client dies, I am often the best-positioned and most knowledgeable person to help the trustees achieve the goals of the estate plan as efficiently as possible. In most cases, successor trustees are spouses and adult children who (while grieving, and without skills and experience in the process) must wade through the many perplexing details of estate administration. All too often, this work gives me a close-up view of the problems that can occur when a plan is less than perfect.
To help you avoid some common problems and set the stage for a cleaner, smoother process, here are five basic guidelines. Follow them carefully and administering your estate will be less perplexing and more successful—and your heirs will have one more reason to bless your memory:
1. Work with an estate and trust attorney who is experienced with administration.
Drafting documents is an essential role of estate planners. Most craft them with precise language, technical diligence, and attention to taxes. Clients pay the fee, put the binder on the shelf, and consider the job done. Then life goes on… and on. Problems occur when successors are tasked with implementing obsolete plans. Great estate attorneys know the value of collaborating with the client and their financial advisor to keep their plans relevant and up to date. Others I've worked with take the easy road by simply drafting amendments, sending an invoice, and wishing the client good luck. As a Trust Advisor, I can help administer any plan, but I can’t do magic! For my sake and the sake of your heirs, choose an attorney who will gently walk your trustees through the complicated process of administering the trust following your death. I have seen both extremes and prefer those who take care with estate administration.
2. Pick your trustees carefully.
Picking the right person to act as trustee is tricky business. Should it be your oldest child? Your sister, who is a high-powered (and very busy) attorney? All of your children? Serving as trustee is not an honorary title, nor is it an expression of love. It is a time-consuming and challenging job. Select someone who willing to take on the task and who has the skills, time, and perseverance to do the job well. That may rule out your oldest child (who is a wonderful person but has no administration skills) and your sister (who may understand legalese but has no time to focus on administering your trust). Lastly, don't be tempted to name all your children as trustees. While this approach may feel simpler, it adds unnecessary complexity—especially if the trustees are geographically or otherwise distanced. Choose wisely, explain the job clearly, and reserve the right to make a change if necessary.
3. Be sure everything is titled accurately.
Even with a well-written trust, your beneficiaries will run into legal problems if you don't properly ‘fund’ your trust during your lifetime. Funding a trust may sound complicated, but it simply means that the name on every asset that belongs in the trust says ‘family trust.’ Not all of your assets are controlled by the trust when you die. Retirement accounts, joint accounts, transfer on death (TOD) accounts, insurance, and more are not ‘trust assets.’ Unfortunately, there is plenty of opportunity for error with those that are—including any time you purchase or refinance a property, and especially with the initial titling of a property if you fail to follow your attorney's instructions. Check each title carefully or have your attorney or financial planner do the checking for you. The extra effort can make all the difference—horror stories abound when titles are not done right.
4. Review your trust every two years—and when life happens!
An out-of-date trust is a nightmare. I've seen trusts that include assets that no longer exist, trusts that don't include significant assets that do exist, trusts that bequeath assets to heirs who are no longer living… the list goes on and on. When a trust is not kept current, the trustee who graciously accepted the job on your behalf is handed a second job as a detective. The result can be disastrous and expensive. The cost of updating a trust after you die can put a significant dent in the trust’s value. The cost of reviewing your assets regularly and adding amendments to reflect any changes in property, beneficiaries, or other details is minimal—and priceless.
5. Make communication a priority.
Some of the biggest problems I've seen when helping my clients and their families administer trusts result from a communication breakdown. Parents who don't communicate their wishes to their children before they die. Siblings who don't communicate with each other (which is an even bigger problem if they are joint trustees!). Estate planning attorneys who don't share information with their clients’ financial planners and CPA/EAs. Trust owners who don't communicate changes concerning their assets or circumstances to their attorneys—or who never informed their trustee that they'd been given the job! So many problems can be avoided with some basic communication.
Reducing complexity is the key to minimizing perplexity. The most important thing you can do to support the process of estate administration is to review your estate plan with the end in mind. This will ease the way for your loved one who is tasked with carrying out your instructions and intentions. Taking steps now to organize and plan will reduce potential errors, omissions, and frustrations throughout the process.
Of course, these guidelines are only a starting point. To dive deeper, I've put estate planning on the agenda for my spring client meetings, and I'm planning to create a comprehensive guide, complete with checklists and pitfalls. Watch for it in the next few months. Until then, you can read my blog posts on the estate implications of California's Proposition 19, and on whether it's best to distribute your assets Per Capita or Per Stirpes. You can also visit nolo.com, a great website that provides clear explanations on many estate planning topics. If you have further questions in the meantime, please reach out. I am always here to help!