Wake–up call

Last week, in the wee hours of Wednesday morning, I rushed my husband to the emergency room with chest pain. It was a heart attack.  He was treated promptly and successfully and is now home recovering. 

In the emergency room, they asked if he had a power of attorney for health care or Living Will. The unsigned forms were in my computer.  I had prepared the documents months ago, but was always too busy with other people’s work to print them out for him to sign. Fortunately, my husband was conscious and able to consent to treatment himself.

The saying “the cobbler’s children have no shoes” comes to mind.  In this case, the estate planning attorney has not been following the advice she gives to others.  Our Wills and POAs are old and out of date.  Preparing new documents for us has just moved to the top of my priority list.

My husband’s medical crisis was like sharp poke in the ribs for me. We never know when those documents will be needed.  Get it done now while you can.  A medical emergency can happen any time.  Be prepared.

    As you may know, under current law, there will be no federal estate tax assessed against the estates of those who die in 2010.  However, the federal estate tax will be reinstated with a $1 million exemption and a 45% tax rate on January 1, 2011.  Many thought that Congress would have acted by now to set a higher exemption for the estate tax for 2010 and beyond, but so far no action has been taken.  If Congress does act this year, whatever changes they enact may be retroactive to January 1^st.

    How does this affect the average person who already has a Will or Trust in place?  It depends.  For those with simple Wills and no tax planning, there will be no problem.  There is more cause for concern if you have documents that include tax planning language that divides estate assets by referring to estate tax credits and exemptions.  Most of these credits and exemptions do not exist for those who die in 2010.  It is unclear what will happen if someone dies in 2010 with this type of language in their Will or trust.  However, it is certain that in some situations, there will be undesirable results.   

    If you have existing wills or trusts with tax planning and you are able to make changes, you should review your existing estate planning documents with your estate planning attorney.  If your documents divide assets into marital trusts and shares, and “family trusts” or “credit shelter trusts,” and these trusts have different beneficiaries, you may need to amend your documents.  Second marriage situations in particular may require review. Elderly persons or others in poor health are more likely to be impacted by the 2010 situation than others and may want to have an estate planning “check-up”.

            Most people will not need to take any corrective action. If you live until 2011 when the estate tax is restored, the 2010 issues go away.  Hovever, it is a good idea to have your estate planning documents reviewed regularly and adjusted for changes in the law, changing family situations, increasing or decreasing asset values, and other changes.   You should consider making an appointment with your estate planning attorney to have your documents reviewed for 2010 issues and for any other changes that have occurred since the documents were prepared.

Q:  Who should I name to be Executor of my Will?

A:

Choosing an Executor is one of the most important decisions you make when you plan your estate.   When you name someone as Executor you are giving them a job with substantial responsibilities, not just an honorary title.  Being Executor can be time-consuming and difficult, and holds the potential of personal liability for mistakes made.

The Executor is responsible for carrying out the administration of the estate, filing necessary documents in Probate Court, collecting the assets of the deceased, paying debts, distributing the assets as directed by the Will, and filing any necessary tax returns.    The job can last 9 to 12 months if there are no problems.  In a complex estate with assets that may be hard to manage or sell or where family relationships complicate the administration, the job of the Executor can last for several years.  The Executor can be held personally liable for mistakes such as distributing all the assets before the taxes are paid.

Most people choose a trusted family member or friend to be Executor.  Some choose a professional advisor or a corporate entity as their Executor.   If you prefer to name a family member or friend, choose someone with a business  or financial background, someone who is good with paperwork and attention to detail.   Once appointed by the court, an individual Executor can hire an attorney, an accountant, appraisers, investment advisors and others they will need to advise them in various aspects of the job.

A bank or trust company is the type of corporate entity that can serve as Executor.   A corporate entity will have staff who carry out this type of work routinely.  Corporate estate administrators are skilled and impartial.  They usually take control of the financial assets of an estate and hold those assets in-house where they can easily track all income and disbursements.  They charge a fee for their services, usually a percentage of the assets.  A corporate Executor can be well worth the cost, particularly if the estate is complex or where difficult family relationships make the estate administration particularly challenging.

Sometimes the best solution is to name two or more Co-Executors, with one being a family member or friend and the other being a professional advisor or corporate entity.  This can give you the best of both worlds, with the friend or family member providing the personal knowledge of the family, and the professional advisor or corporate Executor providing the needed expertise.  Whatever you decide, don’t underestimate the responsibilities that you are giving to the person you name as Executor.