Get smart with your money
A will allows you to distribute your worldly goods, select a guardian for minor children and name an executor to carry out your wishes.
But you should be aware of what a will can’t or shouldn’t do. This is particularly true if you’re drafting your own document without an attorney’s help, since you could unknowingly make a mistake that upends your whole estate plan.
In my latest for the Associated Press, learn what a will can, cannot, and shouldn’t do.
Dear Liz: We are trying to leave our affairs in order for our executors. (Pity them. We have accounts and substantial assets in England and Canada as well as the U.S.!) Thinking of some immediate expenses they will have, I’ve documented details of how to access our accounts online (passwords coded in a way that only a family member will understand). But am I inviting them to do something illegal?
Answer: If a site has a password, then it probably also has a “terms of service” agreement that prohibits you from sharing that password with someone else. You may be able to add someone else’s name to a financial account, but that’s often not desirable, either because you don’t want to give them access in advance of your death or incapacity, or because doing so could have gift tax implications.
The most practical solution is to create a list of the accounts with your login credentials and make sure your executor knows where to find it. (You probably should have only one executor, by the way, with a couple of backups. This is a big job that grows infinitely more complicated when two or more people have to agree on decisions and sign every document.) You’ll also need to keep the list updated, which can be a big task. A password manager could be a good solution, since your executor would only need to know the master password to access your accounts.
Also make sure your executor has the passwords to your email addresses as well as your computers, tablets and cellphones. Otherwise, the executor might not be able to receive identity-verifying codes and links that allow access to your accounts.
Death and taxes may be the only certainties in life, but death taxes are only a remote possibility for most people. The vast majority of Americans won’t ever have or give away enough to owe estate or gift taxes.
Far more people could be affected if a tax break that benefits heirs is eliminated. While campaigning for president, Joe Biden proposed doing away with something called the “step-up in basis” that allows people to minimize or avoid capital gains taxes on inherited assets. But no legislation has been proposed yet, and such a change could have a tough time getting approved by a divided Congress.
In my latest for the Associated Press, why it’s time to think about the hard stuff and plan ahead.
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.
Being asked to be an executor is an honor you might want to pass up.
Settling an estate typically involves tracking down and appraising assets, paying bills and creditors, filing final tax returns and distributing whatever’s left to the heirs. At best, the process is time-consuming. At worst, it takes hundreds of hours, exposes you to lawsuits and thrusts you into the middle of family fights.
Robert Braglia of New York, a certified financial planner, was executor of an estate where the woman disowned three of her four children and left most of her money to just one of her many grandchildren. That could have caused an uproar even if the family got along, which it didn’t: Two of the woman’s children were fighting over the woman’s ashes before she actually died.
“Even without conflicts — which there always are — it is an enormous job,” Braglia says.
In my latest for the Associated Press, why it’s important be clear on what’s involved before you agree to take on this role.
Dear Liz: My wife and I have a revocable living trust and we would like to change our primary successor trustee to someone who lives in the United Kingdom. The new trustee is not related to us nor is he a U.S. citizen. Can this be done and would our trust then become a foreign trust subject to a lot of U.S. taxes? How can we avoid this becoming a foreign trust?
Answer: Please rethink your plan, and not just for the reason you suggest.
Naming a foreign trustee very well may change the trust to a foreign trust for federal or state tax purposes when you die, said Jennifer Sawday, an estate planning attorney in Long Beach.
But settling an estate is difficult enough when the successor trustee lives nearby. Trying to manage the process from another country could qualify as cruel and unusual punishment.
If you really don’t have someone in the U.S. whom you trust, consider hiring a professional trustee. Some banks offer trust administration or settlement services as well as other fiduciary services, Sawday said. A licensed professional fiduciary could handle this role as well. Your estate planning attorney should be able to give you some referrals.
Hiring someone could cost more than naming a friend or family member, but often the money is well spent, Sawday said, because the professional is familiar with the work and is efficient compared to a layperson who may serve as a trustee once in a lifetime.