Now that the empty champagne bottles and party hats have been put away (hopefully), we can finally breathe and work towards our goals for the new year. If you don’t have an estate plan in place yet, working on getting one should be a top priority for 2015. A common misconception is that estate planning is for the wealthy, but anyone with a house or have children needs to make a plan for what happens if they become incapacitated or pass away. And it actually involves a wide array of estate planning options. This involves using trusts to distribute your property without the probate court and health care directives to express your wishes regarding medical treatment
If you do have an estate plan in place already, GREAT! It’s the perfect time to review and see if there any are life changes that may require a few modifications to your estate plan. Some things to consider:
1) Are you able to easily locate your estate planning documents? And does your trustee, representative or agent know about them and where they are located?
2) Did you get married or divorce?
3) Did you have a child or a grandchild that needs to be mentioned in your plan?
4) Are there any significant changes in your children’s guardian nominations? Has anything happened either in your children’s lives or your guardian’s lives that may make you rethink things? Has the named guardian moved, get a divorce, remarry?
5) Did you buy a house? One of the most common mistakes is failure to update a plan after a home has been purchased or sold. Forgetting to transfer the new house into the trust may force your estate into probate, which is why a trust may have been created to avoid.
6) Did you move to another state?
7) Did you sell your business, retire, have significant change in assets or win the lottery? Any significant assets that you acquire should be transferred into your trust to avoid probate.
8) Have you lost a family member or friend who was named as a trustee, personal representative or agent in your estate plan? Or has anything happened in the past year that would impact your decision to have them administer your plan?
Estate planning is not a one shot done deal – it’s a continuing process because our life journey is full of constant changes. While every milestone in your life does not mean that you need to update your estate plan, it’s important to think through the past year’s events to make sure that your estate plan will still take care of your family and loved ones just as you desired.
Choosing a Trustee
One of the most important and often difficult decisions you will make in estate planning is choosing a trustee to manage your affairs and provide for your loved ones when you become disabled or after your passing. Typically, if you have a revocable living trust, you may be your own trustee. And if you are married, you and your spouse may be co-trustees of your revocable living trust.
But when you and your spouse pass away, the question as to who will be the successor trustee can be daunting. People usually would choose an adult child, relative or a close friend. But would they be up to the task? The ones closest to us may not always be the best qualified to be your trustee.
When choosing a trustee, here are some factors to think about.
Locality: It would be ideal if your trustee lives nearby to perform his or her trustee duties efficiently, especially if real property is involved. For example, if the trustee has to sell your house, it would be better if your trustee was in the area to meet with the local real estate agent, appraiser, home inspector, etc.
Work Ethic: Being the trustee of someone’s estate can be overwhelming with the numerous tasks. Is your trustee responsible to manage your bank accounts, pay bills, maintain insurance, etc.? The person should also be honest, fair, detail-oriented, organized, dependable and a good communicator.
Ability to Use Good Judgment: Your trustee does not have to be a professional or have an MBA degree, but he or she should be business savvy and be able to use good judgment and common sense when managing the affairs of your estate. Also, this person should not be afraid to ask for help and should be sensitive to your desires and the needs of the beneficiaries.
Number of Co-Trustees: Choosing more than one trustee may be a good idea so they can help each other and not have one person bear the burden of handling the affairs alone. But you would have to consider whether the co-trustees would get along. Oftentimes, people would designate their children as co-trustees and have them serve equally. However, if you choose to go this route, consider if the children can get along and be able to make decisions without any conflict.
Availability: Is the person too busy to handle your estate or are there other aspects of his or her life that would distract him or her from managing your affairs?
Professional Corporate Trustee: Of course, you can always choose a professional who may charge more than a relative or close friend. Corporate trustees would be banks or financial service firms. If you can’t name someone qualified to serve or you foresee potential family conflict, you can avoid these problems by hiring a professional to handle the affairs.
About the Author
Christine Chung, Esq.