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executor

Q&A: Filing a tax return after a parent dies

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Dear Liz: My mother’s only income was Social Security. Her accountant told her many years prior to her passing that she didn’t need to file a tax return. I was the executor of her trust and told the attorney I hired to help settle the estate that I would file her final tax return. I never did. That was 10 years ago. Now I feel that I should have filed it back then and am wondering if I should do it now or forget about it.

Answer: If you still have access to her paperwork, you can review her bank statements to see if there is any indication her income climbed enough in her last years to require filing an income tax return. If so, you can consult a tax pro about next steps.

But you’re probably fine, says estate planning attorney Jennifer Sawday in Long Beach.

If your mother was under the threshold for filing an income tax return, there would have been no reason to file a final return after she died, Sawday says.

Q&A: Choosing the right health care agent

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Dear Liz: There is a lot of dysfunction and drama in my family so in my will, I’ve named a friend to be my executor. But I don’t think she’s the best person for my advance healthcare directive. She’s too nice and I think she would cave under pressure from my family. Can I choose someone else?

Answer: Absolutely, and often that’s the best choice.

Your executor is the person who will settle your estate after you die. You should pick someone you know to be trustworthy and diligent. The executor (or successor trustee, if you have a living trust) doesn’t need to be a financial expert, since they can use estate funds to pay for legal and tax help.

The person who makes healthcare decisions for you may need another set of skills. They may face considerable pressure from others, including family, friends or the medical establishment, so you’ll want someone who not only understands your wishes for end-of-life care but who will fight to carry them out.

Your advance care directive or living will is the document where you articulate your wishes for the care you do and don’t want at the end of your life. You’ll also need to create a medical power of attorney, which is where you name the person you want to speak for you if you become incapacitated. Even a detailed advance care directive can’t cover every circumstance, and the power of attorney will help ensure that your chosen person can advocate for you no matter what happens.

You’ll need one more document, which is a financial power of attorney. This names someone who can pay your bills and otherwise handle your finances if you become incapacitated. You can name your executor, the person you named for healthcare decisions or some other person to serve this role. Check with your financial institutions, since they may have their own documents they’ll want you to use.

If possible, you should name at least one backup for each position, since people may not be able to serve when the time comes. Also, your wishes or circumstances could change over time, so all these documents should be reviewed at least annually and updated as necessary.

Q&A: When money disappears from a mother’s estate

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Dear Liz: My mother recently passed and my sister is handling all the legalities. At one point, my sister mentioned our mother had a sizable savings account plus two retirement accounts valued at $400,000, and that I would receive something. Now she is simply saying, “I don’t know where the money has gone.” She handled all my mother’s finances for years before her death. How is this possible? I can’t hire an attorney, nor do I want to alienate my sister or seem greedy. What should I do?

Answer: If your sister handled your mother’s finances for years and she’s settling the estate, then she almost certainly knows where the money went. Why she won’t tell you is the mystery.

Your mother’s money may have been eaten up by long-term care expenses, which can be breathtakingly expensive. That’s especially true if there was a long gap between your sister’s disclosure about the accounts and your mother’s death.

If that were the case, though, your sister could just say so.

There are many other possibilities. Your mother could have been scammed, or gambled away the money, or been the victim of financial elder abuse. Abusers are often people the elders know, including relatives and caregivers.

Perhaps your sister didn’t help herself during your mother’s lifetime, but arranged to be the beneficiary of all the accounts, either with or without your mother’s consent.

You don’t have many options if you aren’t willing or able to consult an attorney, but you wouldn’t be greedy to ask for some clarity from your sister.

Q&A: Successor trustee can use estate funds to hire help

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Dear Liz: I have named my daughter as executor of my revocable living trust. I am concerned that she may not have the ability to carry out all of the functions required of an executor. Are there entities she can hire using trust funds to fulfill her duties?

Answer: Technically, an executor is a person who settles an estate through probate court. Because you have a living trust, your estate should avoid probate court, and your daughter’s role is known as a “successor trustee.”

The jobs of executor and successor trustee are much the same after a death. They’re required to inventory assets, pay your final bills, file your last tax returns and distribute your assets according to your estate documents. Both executors and successor trustees are allowed to use estate funds to hire any help needed, including an attorney and a tax pro. If you’re already working with professionals you trust, make sure she has their contact information.

Q&A: Bowing out of trustee duty

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Dear Liz: My husband agreed to serve as successor trustee for his brother’s living trust several years ago. My brother-in-law also added me as a backup. My brother-in-law’s financial situation has gotten very complicated and we would like to be removed as trustees. How do we go about this removal? My husband has asked his brother to see the lawyer who drafted the trust so they can both discuss the change, but his brother has ignored this request for several months.

Answer: A successor trustee’s role is similar to that of an executor. Both are charged with settling someone’s estate. Being asked to serve is an honor, since the person choosing you is saying they expect you will act with honor, integrity and prudence. But you can’t be forced to serve, even if you initially said yes.

Your brother-in-law may have already named other alternatives. If not, a court can appoint someone. This would undermine one of the benefits of a living trust, which is to avoid a court’s involvement in settling an estate. But that’s ultimately your brother-in-law’s problem to solve, not yours.

Before you bail, though, understand that as successor trustee or executor, you don’t have to be a legal or tax expert. You can use the estate’s resources to hire people to help you — and in all but the simplest estates, you probably should.

Of course, financial complications can lead to other complications — family fights, disgruntled heirs and so on. You may no longer have the energy or willingness to face such difficulties. If that’s the case, you’ve given your brother-in-law the heads-up he needs to make other arrangements.

Thursday’s need-to-know money news

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Today’s top story: Why you may not want to be an executor. Also in the news: 5 ways to foil catalytic converter thieves, 3 money habits to carry forward from the pandemic era, and how to avoid fees when paying your taxes.

Why You May Not Want to Be an Executor
Settling someone’s estate can be time-consuming and difficult, plus you could be sued.

5 Ways to Foil Catalytic Converter Thieves
Catalytic converter thefts have soared during the pandemic.

3 Money Habits to Carry Forward From the Pandemic Era
According to a new survey, 78% of Americans report that the pandemic spurred them to take financial action.

How to Avoid Fees When Paying Your Taxes
Some options are better and cheaper than others.