Get smart with your money
By Liz Weston
Dear Liz: Your recent column about advanced directives said that people could get a free version at PrepareForYourCare.org. I found there is a charge. Is this for all online directives?
Answer: Prepare is a free site supported by donations, grants and licensing agreements. If you were asked to pay, you either clicked the donate button or weren’t on the correct site.
By Liz Weston
Dear Liz: I have less than $5,000 in my savings account, a 12-year-old car and a mortgage with a $200,000 balance. I am 67 and can’t decide whether to make a will. I live alone and have no children. I have three siblings, but am only close to one. I hate to spend money on an attorney when I can use that money to cover funeral expenses. I’m leery of using an online will service. Can you recommend an inexpensive way to get my affairs in order?
Answer: Anyone who can afford to pay for estate planning help probably should. This is a complicated area, and it’s easy to make mistakes that can make settling your estate unnecessarily costly or difficult.
If you can’t afford to pay for help, though, there are low-cost and free options you can explore.
Start by creating an advanced directive, which details what kind of care you want should you become incapacitated and can’t speak for yourself. You can create one for free at PrepareForYourCare.org. Every adult should have an advance directive, also known as a health care power of attorney.
Another document every adult should have is a financial power of attorney, which allows another person to manage your finances if you’re incapacitated. You can create one at FreeWill.com, a site supported by nonprofit organizations. The site will also help you create a simple will for free.
LegalZoom, Rocket Lawyer and Quicken Willmaker are other options that can help you create estate documents, typically for less than $100.
By Liz Weston
Dear Liz: My mother recently died at the age of 93. My sisters and I are her beneficiaries, and all of us are in our 60s. Unbeknownst to us, one of her assets is a “dynasty trust,” established in 1964, that can only be used for “care” and “education.” The lawyer never told us this and we could have used the trust to pay for her assisted-living care, all of our college education costs, and the college education costs of our children.
According to the trust, the restrictions don’t end until 21 years after our deaths. Two of us have two children each, and one sister has no children. None of the grandchildren plan to have children of their own. With these terms, and assuming we live into our early 90s, the grandkids will be in their late 70s before they can access these funds. Is it possible to “break” this trust so that we can make use of these funds while we are all alive and able to use the funds effectively?
Answer: Dynasty trusts are designed to pass wealth down through multiple generations. They’re irrevocable, which means the person who created the trust gives up control of the assets.
That doesn’t mean the trust can’t be changed, says Los Angeles estate planning attorney Burton Mitchell. He recommends getting a complete copy of the trust and asking an experienced trust and estate attorney to read it. The trust may include language allowing an early termination. If this is truly a dynasty trust, “back doors” to allow changes are usually built in, Mitchell says.
If not, there may be a way to terminate or modify the trust by agreement of the beneficiaries.
If all else fails, you may be able to go to court to modify the trust provisions based on changed circumstances, provided all beneficiaries agree, Mitchell says.
By Liz Weston
Dear Liz: My older brother and his wife recently told me they made me the executor of their living trust. I have no experience with this. They live in Maryland and I’m in California. Can you please let me know what I can do now to make the process simpler when the time comes?
Answer: Your brother and his wife should have asked you if you would be willing to take this role, which is called “successor trustee” rather than executor when a living trust is involved. Just because they put your name in their document doesn’t mean you are required to serve. Their trust should name other people who can serve. If not, the court can step in to name someone.
Being either a successor trustee or an executor is often a big commitment that may last for years. You’ll be required to manage the trust assets, pay final bills and creditors and communicate with beneficiaries. Successor trustees may have added responsibilities, since they typically have to step in if the trust creators become incapacitated.
If you’re willing, though, agreeing to this role can be a way to honor the people you love by making sure their wishes are followed. Being asked to be a successor trustee or executor is an honor, since the trust creators believe you are honest, trustworthy and diligent enough to handle this enormous responsibility.
You’re allowed to, and probably should, hire legal and tax help using estate funds. The estate should also pay for your travel to fulfill your duties.
You can do some research before deciding. Ask for a copy of the trust so you can start to familiarize yourself with the trust assets and what will be involved in settling the estate.
By Liz Weston
Dear Liz: My goal is to avoid probate and allow simplified access for my heir, who is also my executor. I have no family. I have chosen payable-on-death and transfer-on-death accounts instead of putting all financial assets in my trust, against the wishes of the attorney who drew up the trust for my condo. I am 79, with about a million in financial assets, with no debt or mortgage, and I am self-insured for long-term healthcare. Is the decision to use these accounts appropriate for me?
Answer: Please take the advice you paid for. The trust you have is probably a living trust, a flexible estate-planning device that avoids probate. Living trusts generally allow a smoother, more organized settlement of the estate than other probate-avoidance options.
The person who settles your estate is called your successor trustee and will perform much the same duties as an executor. But typically your successor trustee also can handle financial and other matters should you become incapacitated.
As covered in previous columns, payable-on-death and transfer-on-death accounts can be appropriate solutions for people with few assets who can’t afford to pay for a living trust. For more complex estates like yours, however, a living trust is the more appropriate option.
By Liz Weston
Dear Liz: My husband’s parents, who are 88 and 93, respectively, have decided to leave their house, worth $800,000, equally, to their three children, who are all in their sixties. The children get along well and all decisions will be made as a group. None of the adult children can afford to buy out the other two, and the three adults and their families cannot all live in the house at once. Everyone would like to keep the home, which is paid for, in the family. What solutions exist for this situation? Where do we begin, and what questions do we need to ask, thinking into the next generation?
Answer: Owning real estate with other people can be difficult, even when the individuals get along. Perhaps your generation can pull it off, but there’s no guarantee the next one will.
Let’s say the time has come to replace the roof. How will the group decide how much to spend, and will everyone be equally willing to split that considerable cost? How might the dynamics change if one family is living in the home, but the others are expected to pay for repairs and maintenance? What happens if one inheritor later wants to sell, and the others still can’t buy out that share?
Keeping the family home can feel like an important legacy to offer to your children, but not if ownership creates strife that imperils family relationships. An experienced estate planning attorney can meet with you as a group and discuss the scenarios and legal documents you may need going forward.