February 25, 2019 By

Q&A: Mom’s 94; one son handles her money, another wants more access to it

Dear Liz: I have two younger brothers, and the youngest was chosen as the executor of our widowed mother’s estate. The problem is that he doesn’t understand financials. Mom is 94. Her entire estate is invested in blue-chip stocks. The portfolio was carefully planned by our uncle and closely tracks the Dow Jones industrial average. With her present holdings, she has enough to live indefinitely in her nursing home.

Her portfolio is up 40% in the last two years, but my brother is worried that the stock market is going to crash. She could give me up to $15,000 a year, but he’s telling her $500 a month for each brother is good. I’m a retired electrical engineer and have managed contracts for the military worth many millions of dollars. Can I challenge my brother’s ability to manage our mother’s finances?

Answer: Sure, if you want to open up an all-out family war at this stage of your life. A better approach might be a collaborative one, in which the three brothers seek outside, expert advice to handle Mom’s affairs.

You might have been terrific at managing military contracts, but that doesn’t give you the background in taxes, estate planning and investment management that’s required in this situation. You may be overestimating how much her portfolio has grown — the Dow is up about 25% in the last two years, not 40% — while underestimating both the risk of a downturn and the effect of larger withdrawals.

Your brother, meanwhile, is understandably concerned about a portfolio that’s 100% invested in stocks. That would be a lot of risk, even if your mom had decades to ride out any downturn (which, obviously, she doesn’t). Remember that the stock market lost roughly half its value a decade ago and lost about 90% during the Great Depression.

If your mom’s portfolio could take such a hit and still produce enough for her to live on, then larger distributions might make sense. Maximizing the annual gift tax exclusion, which allows her to give away $15,000 a person without filing gift tax returns, may be desirable if her estate is worth more than $11 million and could be subject to estate taxes. If she’s not wealthy, though, distributing $45,000 each year to three of you could increase her risk of running out of money.

A fee-only financial planner could analyze that risk and recommend a prudent course of action. The planner also could help arrange the necessary documents that would allow your brother to manage your mom’s financial affairs. Right now, it’s not clear whether those are in place.

Your brother is not yet the executor, because your mother is still alive and executors are in charge of distributing an estate after someone dies. If she wants him to make decisions for her should she become incapacitated, she should give him her power of attorney or name him as the successor trustee of her living trust. Otherwise, he probably would need to go to court to be named conservator.

It may rankle that your mom put him in charge of her estate, rather than you. If he’s trustworthy, though, you should put aside the idea of challenging him for control, especially if your main motivation is to get your inheritance early. Instead, offer to assist him in finding the professional advice he needs to help your mother and work together to make sure her remaining years are as free of family drama as possible.

Filed Under: Elder Care, Estate planning, Q&A Tagged With: , ,
January 28, 2019 By

Q&A: There can be legal pitfalls in DIY estate planning

Dear Liz: You answered a letter from a reader who was asked to be the executor of a friend’s estate. The reader was worried about being pulled into a lawsuit because the friend planned to disinherit a brother. You mentioned that the friend’s estate will pay the legal fees and other expenses if the brother contests the will and that executors can be compensated for their time. You also should have mentioned the importance of hiring an experienced attorney when disinheriting someone because there are a lot of ways this can go wrong.

Answer: Even Nolo, the self-help legal publisher, warns people that they need to hire an attorney if their estate plans are likely to be contested. A do-it-yourself estate plan can wind up costing far more than it saves if the parties wind up in court.

Filed Under: Estate planning, Q&A Tagged With: ,
December 17, 2018 By

Q&A: The gift of organization

Dear Liz: You recently responded to a widow whose pension income stopped on her husband’s death. She was told the company had no record that he had chosen a “joint and survivor” option that would have continued the pension for her lifetime. This is outright fraud and elder abuse. My mother was given the same answer by an insurance company when my father died after collecting his pension for 25 years. If someone signs up for a “single life” pension that ends at death, the company will always have a record.

If you select the surviving spouse option, their standard operating procedure is to say they have no record. They prey on the elderly hoping the surviving spouse has dementia or lost their contract. Before my father died, other surviving spouses told my parents and me about this practice, so my parents kept all their retirement papers in a safe place. When I told the insurance company representative that I had the contract in front of me, her attitude changed from combative to helpful. She said, “I will mail you the paperwork to sign, and include a copy of the contract when you mail it back.”

Answer: Having a copy of the contract seems to be key in getting such conflicts resolved. Let’s hope the original letter writer still has this essential document that can prove her case.

Many people hang on to way too much paperwork because most of it will never be needed or can be retrieved or re-created. Documents relating to pension choices are among the exceptions. To be useful, though, important documents must be not only kept but also accessible. A contract buried in a pile of utility bills may never be found. Having an organized filing system and keeping it maintained can be a gift to yourself and your family.

This year’s natural disasters, including hurricanes and fires, remind us that just having paper versions of documents isn’t enough. It’s a good idea to scan important documents and store copies at another site, on a secure internet site or (preferably) both.

Filed Under: Elder Care, Estate planning, Q&A Tagged With: , ,
December 10, 2018 By

Q&A: What to consider before becoming an estate executor

Dear Liz: A lifelong friend has made me executor of his will. He has one brother who is named in the will only to be told that he is not included. My friend’s estate is left to two other lifelong friends. If his brother protests the will, what are my duties or liabilities? Can I be pulled into court at my own expense and time? Should I tell my friend that I don’t want the role?

Answer: Being an executor can be a huge hassle, but it’s also an honor and a way to offer a final, loving gesture to your friend. Learn as much as you can about the situation before deciding whether to refuse.

If the brother does contest the will, typically your friend’s estate will pay the legal fees and other expenses. Executors also can be compensated, with the amount determined by the will. If there’s no mention of a fee in the will, state law determines how much the executor can be paid. The fee would be taxable income to the executor. It’s certainly worth discussing the potential costs and fees with your friend before you decide whether to take on this role.

Family members and friends often waive the executor’s fee as a gesture of goodwill, but there’s no requirement to do so. The job typically requires considerable time and effort, even when unhappy relatives aren’t threatening lawsuits. Also, executors can be held legally and financially liable for mistakes. If you do take on this role, consider hiring an attorney to guide you through the process. The attorney’s fees also can be paid by the estate.

Filed Under: Estate planning, Q&A Tagged With: , ,
November 12, 2018 By

Q&A: Can an executor withhold a copy of a will?

Dear Liz: What rights does a sibling survivor have to get a copy of a mother’s will, if the sibling is not the executor?

Answer: From the way you phrased your question, it sounds as if your sibling is serving as executor of your late mother’s estate and refusing to let you see her will. That’s unfortunate. In many states, the executor is required to give you notice of the probate proceedings, and some states also require that you receive a copy of the will if you’re named in it or the guardian of a minor child who’s a named beneficiary, said Jennifer Sawday, an estate planning attorney in Long Beach.

If you’re not a beneficiary, you could still get a copy if the estate is probated. Probate is the court-supervised process of distributing someone’s estate. Rules vary by state, but small estates may bypass probate or qualify for a streamlined version. If formal probate is required, the case is typically opened in the county where the person died and the will becomes public record. Some county courthouses make records available online, while others require you to show up in person to request a copy of the public record.

If the executor fails to file the will or open a probate case when one is required, you can go to court to force the issue. You’ll want to discuss this option with an attorney.

The rules are different if your mother created a living trust rather than a will. Beneficiaries typically receive copies after the creator’s death, but living trusts are designed to avoid probate and don’t become public documents.

If she didn’t actually have a will or living trust, the laws of your state determine who gets what. Surviving spouses and children are usually first in line.

Filed Under: Estate planning, Inheritance, Q&A Tagged With: , ,
November 5, 2018 By

Q&A: The value of a special needs trust

Dear Liz: You recently answered an inquiry from a lady who was furious about the lack of estate planning provided by her brother-in-law for his disabled daughter. As the father of a special needs child, I read the synopsis hoping that a special needs trust was created and maybe was just not known by the sister-in-law. This would explain why the father had, in essence, disowned his own daughter. I hope you will make an addendum to your answer highlighting this very important tool for others like us to ensure our loved ones are cared for after our passing.

Answer: A special needs trust is an estate planning tool that can help disabled people continue to qualify for government benefits such as Supplemental Security Income and Medicaid. The money can’t be given directly to the disabled person but can be spent on her behalf in a variety of ways such as paying out-of-pocket medical expenses or providing vacations. Anyone thinking of leaving a bequest to a disabled person should be aware that the money could disqualify the recipient from essential resources and consider a special needs trust instead.

If the attorneys were aware of the father’s disabled daughter, as the writer suggested, they most likely would have mentioned the possibility of creating such a trust. The sister-in-law said everything had been left to the surviving spouse, so presumably she had seen a copy of the will or trust. If not, she could ask the attorneys for the document on behalf of the daughter.

Remember, though, that the 29-year-old daughter hadn’t been signed up for disability or medical benefits until the sister-in-law intervened. The young woman had not seen a doctor since her mother died more than a decade earlier. She also was kicked out of her childhood home by the man’s surviving spouse. This does not paint a picture of a caring father who wanted to provide for his daughter.

Filed Under: Estate planning, Q&A Tagged With: , , ,
November 5, 2018 By

Q&A: Providing for a disabled child

Dear Liz: The letter about the disabled daughter was horrifying, but the father isn’t the only villain here. Surely the mother knew what kind of man she married. Shouldn’t she have made provisions for her daughter in her own estate plans?

Answer: Ideally, yes. No parent should assume a spouse will “do the right thing” for their kids. Even if the surviving spouse doesn’t marry the proverbial wicked stepparent who walks off with the whole estate, the survivor could be defrauded or compromised by dementia or other cognitive problems. Estate planning attorneys phrase it this way: You may trust your spouse, but do you trust your spouse’s next spouse?

Parents who have disabled children, or who hope to preserve a portion of their estate for their kids, should discuss their situation with a qualified estate planning attorney and make the appropriate provisions in their wills or living trusts.

Filed Under: Estate planning, Q&A Tagged With: , ,
October 29, 2018 By

Q&A: Disabled daughter left out of will

Dear Liz: When my husband’s brother passed away last year, he left a sizable estate to his second wife of five years (the mother of his children died 10 years ago). He left nothing to his two adult sons or young grandchildren. But the most troubling part was that he left no provision for his 29-year-old daughter who has disabilities and was still living in her childhood home.

Within months, the wife demanded that this young woman leave the property. The stepmother’s comment was, “Not my child, not my problem.”

We helped our niece move to our home and apply for Social Security disability and Medicare. She now is able to see doctors about her condition. She couldn’t remember the last time she had seen a doctor, which was probably in her teens when her mother was still alive.

A wheelchair has been ordered that will enable her to go out. She has a bank account and had to be taught how to use a credit card at the store and ATM. She started classes in early September to get her high school diploma. Her brothers are stunned that she is able to do all of these things.

I am thrilled for her and the progress she’s making, but I am furious with my late brother-in-law and the attorneys who completed his will. The attorneys were aware of this young woman and her needs, yet did not counsel her father to make provisions for her.

Answer: Your fury is understandable, but it’s not a given your brother-in-law got bad advice. It could well be that the attorneys counseled him about his options for caring for his special-needs daughter, and he simply ignored them. Given his long history of ignoring his daughter and her needs, that wouldn’t be surprising.

Filed Under: Estate planning, Q&A Tagged With: ,
October 4, 2018 By

Thursday’s need-to-know money news

Today’s top story: How not to inherit Mom’s timeshare. Also in the news: Why bundling insurance doesn’t automatically mean savings, why your financial advisor has a financial advisor, and 12 documents to prepare now for your heirs.

How Not to Inherit Mom’s Timeshare
Limiting liability.

Will You Save Money Bundling Insurance? Not Always
When bundling isn’t saving.

Why Your Financial Advisor Has a Financial Advisor
Even experts need experts.

12 Documents to Prepare Now for Your Heirs
Making a difficult time easier.

Filed Under: Liz's Blog Tagged With: , , , ,
October 2, 2018 By

How not to inherit mom’s timeshare

Timeshare owners James and Barbara Ruh enjoy their annual vacations in Hawaii, but they don’t want their daughters to be obligated to take over the contracts when they die. So the Ruhs, who are attorneys with offices in Santa Barbara, California, and Edwards, Colorado, created a trust to hold their timeshare interests.

The daughters, who are co-trustees with their parents, can keep the timeshares, sell them or abandon them after the parents’ deaths, Barbara Ruh says. The trust is designed to prevent the timeshare resort developer from going after their daughters for any unpaid or ongoing costs.

“If our daughters do not want the timeshares, they will not be liable individually for any fees,” Ruh says.

In my latest for the Associated Press, a variety of options to assure nobody’s getting an obligation they don’t want.

Filed Under: Liz's Blog Tagged With: ,