Things to consider when picking your successor trustees, executors, attorneys-in-fact and health care agents.

Dear Readers:

Many of you have not yet created your estate plan. Many others already have estate plans that haven’t been looked at for a long time. When considering your estate plan, the most important decisions to make are who should be your successor trustees, executors, attorneys-in-fact and health care agents.

There is a tendency for parents to default to the first-born male child, you know, the new “patriarch” of the family when you’re gone. This can be a horrible mistake, because your eldest son may not be a good fit for the job.

Rule #1 about picking trustees and executors is that if they aren’t good with their own money, they won’t be any good with yours. We’re not saying they should be well off. It’s qualification enough to live within one’s means.

Rule #2: A trustee of a Trust, an executor of a Will, or an or attorneys-in-fact under a Durable Power of Attorney should be honest, moderately organized and diplomatic, the latter qualification being the most important. An important goal in a trust administration or probate is to get the beneficiaries to cooperate and agree to waive an accounting. This saves everyone time and money. If your trustee is has an arrogant and commanding attitude, and isn’t so good at letting the beneficiaries know what’s going on, he or she will create a lack of trust. It may become so bad that your other children hire lawyers because they think they are being taken advantage of.

It’s also important to recognize that sometimes you cannot avoid problems within your family when you are gone. It may be a good idea to name a bank or trust company as trustee, even though there will be added expense. Another alternative is to name a Professional Fiduciary as trustee or executor. Professional Fiduciaries are regulated by the state and they won’t be sloppy about it. Administering trusts and estates is that they do as a career. Naming a friend as trustee does not always work out so well. They have a tendency to think it is simpler than it is and cut corners when it’s not appropriate.

Naming health care agents on your Advance Health Care Directive is even more important, as it is a matter of your life and death. To put it bluntly, your health care agent is likely to be called on to tell the doctors to let you live or die. If your health care agent disagrees with your decisions regarding life sustaining treatment, he or she can override your stated wishes, even if you have instructed your physicians to not resuscitate you. They can do this is because you’ll be incapacitated at the time and your doctors don’t want to get sued.

One more point about advance health care directives is that if you know what you want done with your remains, add that to the document. Doing so could prevent or at least put an end to family arguments over how best to honor your memory after you are gone.

Len & Rosie

What should you title in your trust.

Dear Len & Rosie,

We are having our trust updated and have had two different opinions on checking accounts and CD’s.  Should we have our regular checkingaccount in the trust?  Should we have the money market account in the trust?  Should we have the CD in the trust?

Frank

Dear Frank,

As a general rule, you should retitle all of your assets into your trust, but there are exceptions. Don’t bother going to the DMV to transfer your vehicles into the trust. If you die owning an automobile, your heirs can retitle it in their names at the DMV forty days or more after your death. All they need is your death certificates, the vehicle’s title, and DMV Form REG-5.

Unless your lawyer advises you to do otherwise, do not transfer any retirement account into your trust or name your trust as a retirement account beneficiary. Transferring a retirement account into a trust means you’re cashing in the account, and you’ll have to pay income tax on all of that money all at once. And in many cases, IRAs, 401Ks and other retirement accounts paying into a trust must be cashed out within five years of your death.

It is possible for a trust to roll over a retirement account into an Inherited IRA, but most of the time it isn’t worthwhile. The only time you should seriously consider doing so is if you have a minor or disabled child, or a spendthrift child who will spend a buck fifty for every dollar you leave them.

If you and your wife name one another as primary beneficiary of each of your retirement accounts, and you name your children or other chosen heirs are named as contingent beneficiaries, then they will be able to roll over the accounts into Inherited IRAs, allowing them tocash in your retirement accounts over their own lives.

As for your checking account, it is usually a good idea to keep the account outside of your trust. Instead, title the account in you and your wife’s names. Then, when one of you starts slowing down, add someone you trust to the account so he or she may write checks in the event of a death or incapacity.

When you and your wife die or become incapacitated, your successor trustee will take over, but that cannot happen overnight. It takes a couple of weeks to round up certificates of death or doctor letters to allow for your removal as trustee. If you add someone to your checking account now, it will make that person’s job easier when the time comes.

Len & Rosie