Yes, a current inventory of all assets that is regularly updated is a cornerstone, certainly.
@momsquad
From a practical standpoint, the executor has a great deal of authority and discretion so long as he/she is acting within the terms of the will. In fact, most wills have broad language granting all manner of power and authority to the executor. If any of the beneficiaries disagree, that’s where legal action can occur, be it a challenge to the executor or the will.
The trustee also has broad powers typically in most trust agreements to manage the trust while carrying out its terms. Again, the beneficiaries would have to bring legal challenge if they disagree.
The IRS is only interested in taxation issues, not the “legality” of the distribution of estate assets. That’s the probate court’s jurisdiction and most states have extensive probate codes that govern.
Obviously, all of us hope our wishes will be clear and carried out without rancor among our heirs. But, human nature is human nature. And probably as many emotions bubble to the surface in estate matters as do in divorce negotiations and settlements.
We are lucky in that the ILs’ estates were fairly “simple” and their wishes were clear. No one fought over the jewelry or any of the other tangible personal property.
If anyone has complex assets or a large or blended family, then good and advanced planning is truly necessary.
A good read and food for thought:
One recent thread about a parent’s collection of books made me take another hard look at things that matter a great deal to me about which my D might not care a wit. I had a huge collection of books also, but those have been wittled down over the course of house moves and annual purges. Her childhood books that I lovingly selected have been culled and most of them passed on friend’s babies and children. I have given in to the idea that her taste and interests are her own and that she should decide for herself what is most important to her as I got to do.
I have also stopped “collecting” most things and focused instead on spending time and making memories. I already have the things my mother has deposited in our house from when my parents downsized to a smaller home.
Collections: “most of the time the children don’t care” – although the estate tax information is outdated, this article is helpful.
http://www.nytimes.com/2012/02/25/your-money/in-estate-planning-dont-forget-the-collectibles.html
I read a book a few months ago, one that was likely mentioned on the parents caring for parents thread, it was written by an estate planing attorney, reflecting back on the advice he gave early in his career, how that did not always work out in practice as well as it would have been hoped and how he advises differently now. I was very surprised how many examples he gave of executors and trustees not following the will/trust instructions and all other manner of poorly planned wills and trusts, it was really rather sad.
I think it helps to use an estates attorney who has helped some clients wind down their estates and has experienced the good, bad and ugly, to hopefully help his client have better outcomes for heirs and survivors. The ones who have just graduated may not have had the life experiences of some of the more seasoned attorneys.
Based on recent consultations (again) with counsel, I’m adding these points as a cautionary notes about IRA beneficiary designations:
(1) IRS regulations state that one cannot go beyond the beneficiary designation in your IRA or your plan’s document to determine the beneficiary
– this means that if your 401(k) plan or IRA does not have beneficiaries that are identifiable, your account will go to your ESTATE
– you can designate “children” or “grandchildren” as a group, but you cannot designate “people to be named in my will” or “my heirs” because those designations require interpretation of outside sources
(2) your employer or IRA company will not go beyond the language of the company plan or IRA agreement that governs your account and will make your default beneficiary your ESTATE
(3) if your ESTATE is deemed the beneficiary (or if you actually selected your estate as your beneficiary), the account will generally pay out as follows:
(a) owner dies before 70-1/2: five years
(b) owner dies after 70-1/2: over the remaining life expectancy of original owner at time of death minus 1 year (according to IRS single-life expectancy table)
The IRS has taken this position in its regulations and in several private letter rulings.
Lesson: if you want to allow your IRA to stretch out to the single life expectancy(ies) of your beneficiary(ies), you must have identified beneficiaries for your IRA. Once the account is deemed to go your estate, as might happen if your beneficiaries predecease you, etc., the “stretch IRA” option is essentially gone except as set forth in (a) and (b) above.
Lesson: the telephone representatives of problem mutual fund company (not Vanguard or Fidelity but a very large mutual company headquartered in Boston) did not understand this during the first two rounds of conversations and gave wrong and conflicting advice. We sought our own counsel but not before we already took one incorrect step with disclaimers on their advice which the company will now NOT reverse.
Lesson: IRA inheritance is very complex and I’ve only learned any of this because of the back-end administration of the ILs estates. But, the original account owner can keep it simple through clear beneficiary designations and regular housekeeping of such designations.
Thanks for starting this thread. I’m glad you started with the value of stepped up basis.
I’ve often been hard on lawyers. I tend to be very exacting and meticulous. I need to find a good estate planning attorney in the Boston area who can keep up with me and discuss the complex issues without treating me like a fool. I can really understand the complexity. In many of my real estate dealings my lawyer has often let me down. I don’t really know how to go about finding a great estate planning attorney.
Back in the mid 90s DW and I made a DIY estate plan from a bunch of NOLO books by Dennis Clifford. Those books gave me a pretty solid understanding of the issues. Our mid-90s estate plan included a simple living trust. Aside from a small mutual fund and a notarized transfer of all of our personal household property into the trust, the only other purpose of the trust was to be the beneficiary of our life insurance policies so that the trustee who would also be the guardian and custodian of any UMTA accounts would have immediate liquidity without the need for court oversight.
By 2010, we had acquired a substantial sum, our kids were older, and we reread the latest version of the book, and revised and restated our trust to be an “AB DIsclaimer Trust”, which allows the surviving spouse to create a bypass trust if it makes sense at the time of the first spouses death. We did this ourselves too.
In 2013, we purchased a vacation home out of state and we had the lawyer look over the trust to assess whether it was safe to hold property in the trust. The thinking was that avoiding probate out of state was a pretty good idea. He concluded that our LT was enforceable. He recommended some changes if he were to redo the trust to clarify our intentions with respect to grandchildren. This was the furthest thing from our mind when our kids were 1 and 3. Of course he messed up the calculation of the property closing and lost my confidence, so we still looking for “The” estate planning attorney.
I know some would say that it’s been foolish of us to do all of this without an attorney, but I think the chances of it being a problem are minute and we are really only keeping the life insurance in force because if we did screw up then this money can help deal with that. Nonetheless we’re ready to bite the bullet and get professional help. Also, Massachusetts revised their laws recently and enacted a Uniform Probate Code which I think greatly simplifies
At some point in the next few years, it will become apparent which of our two daughters, currently 20 and 22 will have sufficient financial maturity for us to name them successor trustee. At that point, we want to revise and restate the trust for real using an attorney. The older D is academically brilliant, but gets easily flustered about money. The younger D seems to have a natural instinct for dealing with money so I think it’s going to be her, but 20 is too young. Unless one of them becomes pregnant, there really isn’t a huge rush.
Last year, DW and I did a drill to determine whether we would create the bypass trust under the current circumstances to avoid the Massachusetts Estate tax which kicks in at 1M (We are under the Federal 10M level). We concluded that given the surviving spouses life expectency (we’re in our early 50’s), the value of the second stepped up basis exceeds the value of avoiding the Mass Estate tax.
I was thinking of using a discussion of this issue to help vet potential estate planning attorney’s since I think it’s not an easy question.
Any ideas on how to find a great estate planning attorney in Boston and what else to ask to separate the good from the great.
Thanks in advance.
The way we found an estate attorney in SF where my relatives live was by asking my relative who is a prominent attorney there. He had one recommendation and she was excellent.
The way we found our excellent estate attorney in HI (where we live) was by asking around for recommendations and interviewing several attorneys (at no charge). The bank had two recommendations that were OK but nothing amazing (tho their prices were low @ $1000 for a simple estate plan). Also asked a friend who does financial management for seniors as a nonprofit. Also asked a relative who is bank’s counsel who he recommended. I ended up hiring his recommendation and we have been very pleased with him. I knew his dad, who was the probate judge in HI for many years. He is very personable and was good at getting title cleared on several properties that H owns, as well as helping make good recommendations about estate issues that he has encountered with other clients.
If you know any attorneys, you could start by asking whom they recommend. Banks and brokerages also often are willing to make recommendations. If you have friends who have worked on their estate plans, you can ask them for recommendations. You can interview them and see whom you are most comfortable with. I am an attorney, so am pretty comfortable with most of the concepts myself, but don’t know the nuances that I expect an estate attorney to know.
I have no insight into estate planning lawyers in Boston, but do with regard to attorneys in general.
(1) Attorneys have to make a living - you get what you pay for. You can get “basic” wills and trusts for a flat fee. For more specialized problem-solving, your best bet is to find someone who is board certified in wills and trust or estate planning (check with MA bar certifications). Board certification in estate planning generally requires expertise in taxation, marital law and matters that all factor into estate planning. Board certified attorneys charge more, but you ought to be more confident in their abilities and advice. You can get referrals from your business colleagues for a start, then go from there.
(2) It will help your vetting that you know the issues. By all means bring them up when you interview your options. But keep in mind again that attorneys’ time is their livelihood. You might go with a list of assets and issues you want addressed specifically and see what trust structure they propose. As I understand it, if the trust agreement is the driving document, the will itself is generally very simple and is intended to catch the residuary estate and “goes off” from the terms of the trust(s).
(3) Lawyers have to work with your facts but are typically also constrained by documents that address current state and federal tax law to the best of their ability. For example, you care about your kids, but a good lawyer ought to worry about things you might not have considered like grandchildren. No every client is diligent enough to go back for estate planning every few years. Good lawyers do try to take into account of all contingencies even if it’s just a matter of bringing them up for consideration. If not, all you get is a 50-page document that few clients actually read or completely understand. It’s up to the client to mention what is most important in setting up your plan.
The problem often arises where clients do not know what their options are, and just ask for the “standard” thing. There is no “standard” thing insofar as everyone’s facts and families are different. But it sounds like you are better informed than most.
(4) There is no problem in using self-help DIY documents. If your circumstances are simple and you understand the issues, they are a great resource. The problem arises when the user of those DIY documents doesn’t understand that there are many other issues and risks that a good lawyer can uncover and address. It all depends on your comfort level and expertise.
I will share my example in brief: 2/3 of the ILs’ estates were in IRAs (hence my recent posting). No one knew much about inherited IRAs before this time. Depending on who gave the right/wrong advice, there was the risk that the entire balances might have been distributed into their living trust because that’s what the wills and living trust said – all assets and proceeds from estates into living trust. That action would have resulted in a huge income tax bill in 2014 (when no one needed the money), then a distribution from the trust. After some reading by me and consultation with counsel regarding options, we learned about advantages of stretch IRAs, etc. The real estate was a simple matter for us because in that case the living trust was helpful. It may not be for everyone.
It really does depend on your assets, the age and sophistication of your heirs. A good plan takes into account all these factors.
Also @ClassicRockerDad, if you want to compare the hit on estate taxes vs. cap gains tax, that discussion is often more efficient and cheaper to have with a CPA or FP simply because their primary job is to run numbers for different scenarios. But often times, they don’t have access to the latest legal rulings, etc. in as timely a manner and must themselves consult with an attorney for complex issues or because they cannot be deemed to be giving legal advice.
Thanks Attorney Mother.
I think my problem is that it’s always been hard for me to trust anybody with money because I’ve seen the way some financial professionals have taken advantage of people.
My dying mother moved her money market funds to annuities in the last 18 months in her life because the very nice salesman told her that her money was “doing nothing”. It was doing something. It was staying liquid for when she needed assisted living. It probably paid for braces for the salesman’s children. She never went to assisted living. She remained in her co-op until she fell and broke her arm. Then she went downhill and died within 3 weeks.
Another relative is a banker and he’s often talked about the incentives the sales force has to produce. He showed me a website for training for annuity salesman and how they offer seminars with free food for seniors to drum up business. Then they are taught that if there isn’t a problem, they must create a problem - your money is doing nothing. It ought to be illegal but it isn’t. Why a woman with advanced cancer needs an annuity is beyond me.
My widowed mother-in-law got her very nice friendly neighbor to help do her taxes. It was $600 for a 1040 on an income in the $30K range. He was so nice. I’ll bet. He called last year “offering” to do it again for her but I bought her HRBlock Tax Cut and we just did it together on the computer.
I do my own financial planning and my own taxes. I’m even doing my own gift tax form this year and plagiarizing the Obama’s because we made 529 contributions in exactly the same way as they did for their daughters, with the gift splitting and the 5 year election. Do you know what some CPAs charge for a Form 709. It takes less than 20 minutes.
We did the math on long-term care and decided to self-insure. No nursing home for me anyway - home care all the way. That’s another thing I need an estate planning attorney to craft - a medical living will.
I suppose if I had my own business or owned rental real estate, I might pay someone to do my taxes. But since I just get W2s, 1099s and 1098s, plugging the numbers into a cheap software package is easy enough.
I don’t expect the estate plan to be cheap. What I want is for someone to be a true fiduciary - to act in my interests - even when it comes to their costs. That’s really hard to find.
I have had true fiduciaries as exclusive buyer agents on real estate transactions and I know it when I see it. It can be really wonderful. I have a friend who performs handyman services on my house and we just pay what he asks. I trust him. I have a similar relationship with my auto mechanic. He’s not cheap, but he understands that I don’t want him to save me money on repairs, I want him to fix the car properly so it never leaves me stranded. I’m saving money by not needing a new car.
That’s what I need in an attorney.
I’m sorry to hear about what happened with your elderly mother. That was an unscrupulous salesman, plain and simple. It’s unfortunate that she was persuaded to act before she had a chance to discuss with you, because you clearly sound financially savvy.
Frankly, that brings up one salient point of estate planning no one wants to think about – the erosion of mental judgment and capacity with age. Most of us know that we need a durable medical POA and living will/advanced directive for health care. But few of us want to acknowledge that diminished judgment and capacity can sneak up on us long before we are willing to acknowledge it. I do not mean this in an unkind way, but you might consider why your mother felt the need to change her finances without consulting anyone. At that time, she probably believed that she was making a good decision with her funds and, because she still had autonomy to act, she exercised her judgment. Of course, had she asked you or your BIL, you could have persuaded her otherwise. But, the point is that she did not have to consult with anyone before acting and what she did could not be undone. If I recall, there is a time limit for contract rescission for some insurance products to prevent fraud, but if no one knew, that’s not a protection.
I think the lesson for us is that we have to recognize when it’s time to ask for help, be it from a family member or a professional advisor who isn’t also a salesman.
I cannot address the tactics of salesman because those are found in every marketing sphere. They abound in the financial and estate planning areas also.
The best solution I have for that (for myself) is to educate myself (despite being an attorney, I am not an expert in wills, trusts or estates – it’s all self-learned through experience) about the issues so that I can ask tough questions of our lawyers. That makes me a difficult client as well and, if most attorneys charge by time spent, I have to be prepared to pay for their time. But, presumably I’d get what I want and I’d understand what I’m getting – I consider that money well spent, especially as it is expertise I carry with me as I make plans for myself and H.
Your buyer’s agent in real estate is your exclusive representative, in that he has no conflict of interest in representing both sides. He is, however, still earning a commission and hopes to do well enough with you to earn your future business and referrals.
Lawyers ARE fiduciaries and they are supposed to be looking out for your best interests. That’s not to say that they aren’t trying to sell you something also. They have to make a living.
My suggestions for you, for what they’re worth:
(1) know exactly what assets you have, know exactly what you want to do with them
(2) be familiar with the issues your family members and assets pose in the context of an inheritance – there are many books on the subject as you already know
(3) go with a list and interview 3 lawyers and ask what structure they propose for you – the first consultation is typically free but don’t expect that anyone is going to give you a free sample because that’s unrealistic.
(4) get a quote for the work you want done
(5) you are probably better off going to a largish firm that specializes in estate planning for the simple reason that there are economies of scale and expertise to be found. It’s their bread and butter.
I look at it this way (and this is just a hypothetical, not at all reflective of any real facts): if I have $5,000,000 in assets to worry about regarding state estate taxes, a legal bill of $10,000 is 0.2%; $20,000 is 0.4%. Assuming you make sure that you understand the documents you paid for, and they are “good for a few years” barring life and tax law changes, then it’s not a huge hit.
And, speaking as a lawyer, when you consult with someone you have to be prepared to hear “It depends” and not think that is bs. Because things do depend and it takes time and money to chase down the “final” answer.
Regarding Mom & the annuity & all of us dealing with their parents, there is really a spectrum of failure. A person is 100% themselves, we can all tell; a person is really demented/disabled, anyone can tell; but in between, as the person declines, maybe we can suspect, but we cannot usually prove it. It is a very risky place to be (said the DIL of a 95 year old who is bound and determined to make all his own choices, who should not be driving, and who really should not be making decisions without oversight.)
It is difficult to get overlook authority on someone who has not fully failed yet, people can and do cover up that weakness pretty well and people in that situation are also often a bit paranoid and prone to not trust their family; they prefer to trust the hired help and annuity salesmen 
Uh no, that’s where there is a conflict of interest. If you’re trying to sell me something that I may not really need, you are putting your interest over mine. I don’t consider that a fiduciary. If you’re making a living by taking advantage of your clients, you’re not my kind of lawyer or any professional. For example, I won’t need an annual meeting to review my estate plan. I would only need a meeting if I needed to make a change. Some of the lawyers that have been recommended insist on an annual meeting. They need me to become a revenue stream. Others insist that DW and I each have separate living trusts. When I ask why, it’s because that’s the way they do it. Perhaps there is a good reason if one is starting from scratch, but it seems like just a way for us to spend a lot of money when what we really need is for someone to understand our needs, suggest stuff, and revise and restate our existing trust.
My exclusive buyer’s agent would play devil’s advocate with every house we looked at and got us our keep house for less money than I would have bid given the cirsumstances. She put us ahead of her own interest. My Japanese car mechanic told me to get rid of an aging Camry wagon which he knew we couldn’t replace with another Japanese station wagon (we prefer wagons to SUVs or minivans). He put our own interest first. I never question the price these people charge. The money I’m saving comes from other places.
There is always a conflict of interest if there is money to be made. It’s a matter of coming to peace with someone who will be professional about it. Wanting an annual meeting is not a bad idea–you may not know if you need to make a change. It allows the attorney and you to go over any new developments that may affect your situation. If you don’t want that, you can opt ou. But in many cases you get what you pay for, not always, and one should look for the deals, but also understand your own limitations and possible needs. I say this as someone who insists working very closely with an attorney or most such professionals and I do try to gather as much info on my own and understand what they are saying and doing. I do take all suggestions and advice in to consideration.
I think you should look for an attorney who does primarily, if not exclusively, trusts and estates work, and who has done numerous estates in the general value range of yours. It should be somebody located and admitted to practice in your state (not an issue for most people). In the interview, I think the primary thing to look for is that the attorney listens carefully to your situation and responds to what is unusual about it. What you don’t want is somebody who simply sets up the same structure for everybody.
I have an opinion about this formed by working with an attorney from a large firm in a major city, whom I was directed to when I asked some transactional attorneys from the same firm about getting a will drafted years ago. Originally, I received a “professional courtesy” rate, but in the several revisions we’ve done I’ve paid for the work.
I think Hunt’s advice is basically correct. I would add that I don’t think the attorneys at large firms are more expensive than small firms. My experience is that they are better staffed, and more deeply experienced. The big firms in Boston will all have someone, and you could probably call them up and get an unvarnished quote from them on what they would charge and how. Then it would be take it or leave it, which is what you want.
I’m really not sure why you felt the need to defend your position to the extent you have. I’m glad that you have such wonderful people whom you trust.
If you have a fundamental distrust of attorneys, then by all means do your legal work yourself. Good luck.