Have you been named Executor? Trustee? Possibly both?

When clients have estate plans prepared, they must choose people they trust to fill certain roles in estate plan documents.  The biggest shoes to fill are the executor of a will, and the trustee of a trust (if the client is getting a trust).  The duties for both roles are different because the documents do different things.  Sometimes the same person fills both roles, if that’s what the client wants and if the person they choose agrees.

Executor

An “executor” is the person named in your Last Will and Testament to wrap up your affairs after you die.  You might be expected to:

  • Pay financial obligations including taxes of the decedent from estate assets
  • Manage the estate by possibly submitting a will for probate, gathering the decedent’s assets and holding them until they are sold or distributed
  • Contacting government institutions and agencies to stop benefit payments
  • Represent the estate in legal matters

The role of an executor typically lasts for 13 months or under in Ohio.   You are wrapping up someone’s affairs and distributing their assets as their will dictates.  Once bills are paid and assets are sold or distributed, your role ends.

Trustee

A “trustee” is the person named in your trust (often, a “revocable living trust”) to perform the duties stated in your trust.  You might be expected to:

  • Manage the assets in the trust, which might be monetary assets, a home, etc.
  • Distribute trust assets according to the terms of the trust.  Common terms include the trustee paying for a beneficiary’s college expenses, distributing portions of the assets of the trust at certain ages
  • Communicating with the beneficiaries

The role of a trustee lasts for the lifetime of the trust.  A trust ends once final distributions are made or assets are exhausted.  A trust can also be terminated, which mostly happens when the value of the assets of the trust make administering the trust impossible–the trust’s assets diminish in value to the point of the trust not being able to pay trustee fees or other expenses.

Both roles carry some amount of personal liability, impose fiduciary responsibility, and can be time consuming.  If you were named in either role, then the person creating the documents trusts you, your abilities and judgment.

If you have been named the executor or trustee in someone’s will or trust, and you have questions or need guidance, please email me at julie@juliemillslaw.com.

Misconceptions you might have with estate planning

I have heard all of these misconceptions mentioned, including just today.

  1.  The attorney who prepared my will must handle my probate.  No.  Many estate planning attorneys prepare wills with an eye toward being called upon to handle a probate if the client dies, but there is absolutely no requirement that the drafting attorney who prepared your will must handle your probate.  This includes if the attorney who prepared your will holds your original will for safekeeping.
  2. My will dispenses with all of my property. Some documents override a will.  If you have a will, and you leave all real (house, land) and personal property to John, yet you have a deed that is held somehow with Jane, Jane will get the house because she is on the deed, not John, even though your will gives it to John.  Generally, titled and deeded assets go to the person listed on the title, or beneficiary designation, or deed.  “I leave everything I own to Bob.”  At my death, I have a life insurance policy that lists Joanne on the beneficiary designation.  Who gets my life insurance?  Joanne.
  3. I had a trust prepared so I don’t have to worry about probate.  It is so frustrating to see clients come to me with trusts they had prepared (and paid a lot to have prepared), only to learn that the trusts are unfunded.  What the client has, then, is a stack of papers that likely will not do what was intended.  Funding your trust involves titling or deeding assets to your trust.  You can accomplish this by naming your trust on beneficiary designations so that asset goes into your trust at your death, or having a “transfer on death affidavit” prepared that puts your home into your trust at your death.  For example, you would have a deed prepared granting your home from Jenny Jones to “The Jenny Jones Revocable Living Trust.”   However you accomplish it, a discussion of “funding your trust” should be a critical part of planning from your attorney.  If you have a trust prepared and then never prepare a new deed putting your home into your trust, and you die, your home will likely require a probate to be opened, defeating one of the important reasons for having a trust prepared (avoiding probate, privacy).
  4. A will (last will and testament) is different than a “living will.”  A last will and testament is what we think of as a “will”–we state who is to inherit what, we name a guardian for our kids if they’re young, we name an executor.  On the other very different hand, a “living will” is a healthcare document stating whether we want artificial life support if (1) we are terminally ill and death is imminent, or (2) if we are in a permanently unconscious state (i.e., brain dead).  This is popularly known as “pulling the plug.”

Contact me at julie@juliemillslaw.com to discuss estate planning.

The Poor Man’s Trust

A “Poor Man’s Trust” (I’ve seen it called “Poor Man’s Will” also) is the estate plan you create by naming beneficiaries on accounts, and titling property as transfer-on-death to have it pass to the person you name, all to avoid probate.  Your bank accounts are payable-on-death (POD), your life insurance and retirement policies all have named beneficiaries, and the deed to your house has a transfer-on-death affidavit recorded leaving your home to a named person on your death, resulting in these assets passing to the people you have designated outside of probate.  Why, then, would you need a will, or revocable trust?

This planning method might work for some.  I am in the group of attorneys who believe that access to legal help should be more affordable, and that living trusts are often over-hyped.  So in some limited circumstances, this method of planning might be acceptable.

If you are leaving everything outright to certain people, then designating beneficiaries like this might accomplish your goals.  For example, Joan is an older single woman whose husband died decades ago, she has an adult child or two.  John never married and has no children.  Perhaps beneficiary-planning might work for them.  However, few people have such an uncomplicated situation to make this method of planning workable.  It might not work for “uncomplicated” Joan or John, either.

The Poor Man’s Trust is certainly less expensive short-cut to having a will or trust.  As with most short-cuts, however, there will be a cost:

  • Stories of fraud are common with people convincing elderly people to change beneficiaries on their beneficiary forms
  • If you leave everything to a beneficiary, the administrator of your estate might have to go after the beneficiary to pay back money for your funeral and last expenses
  • If your beneficiary predeceases you, the state laws of descent and distribution decide who gets your assets, not you
  • Your beneficiary’s creditors can go after everything you leave him or her the minute it comes into their possession
  • If you have a surviving spouse, he or she could change the beneficiaries you have named
  • If Joan above left life insurance to her son with wishes that he distribute some to charity, or another relative, there is nothing to ensure that he does so

Having a will ensures that your assets reach their intended destination—your executor and the court will see to that—as well as pay your final expenses so beneficiaries aren’t forced to repay your estate.  A living trust will provide for you during periods of incapacity, unlike beneficiary planning.  If your desire is to avoid probate, a trust does that.  Additionally, a trust would ensure that people are not unintentionally disinherited through fraud, or changing beneficiaries on a form, as well as distribute to beneficiaries at certain times to avoid creditors attaching.

Most importantly, a Poor Man’s Trust is absolutely inadequate if you have minor children.  You need a will to name a guardian, and you need a living trust to provide for their education and future without you (a will distributes everything to a child once they reach 18).

If you still believe beneficiary-planning is for you, I would recommend at least a Last Will and Testament that names an executor to ensure final bills are paid, particularly funeral expenses.

See this article on Poor Man’s Trust method of planning.

Contact me at julie@juliemillslaw.com to discuss this and other methods of estate planning.

Guest Post from attorney Kevin Spence: What is Revocable Living Trust?

In my previous post, “Just married, no kids–do we need a will?” I advised that you might not need a will under certain circumstances.  One circumstance, in my opinion, necessitates not only a will but a living trust:  having a minor child.  If you have just a will, your minor child would inherit everything at age 18 from his or her deceased parents.  Very few 18 year-old young adults would be capable of managing money from an inheritance, let alone saving it for college and a secure future.

If you have young children please take a moment to read this post, “What is Revocable Living Trust,” from guest blogger and attorney Kevin Spence.