Estate Administration I:  Stepping Up – Preparing Your Estate

When constructing an estate plan, most people think primarily about who is going to get what.  Fewer people thoroughly consider who is going to make sure that those wishes for distribution are efficiently carried out in a way that does not impose unnecessary costs on the estate.  In Part I of our conversation on estate administration, Chaya R. Biskin-Sitko, Esq., head of Holm & O’Hara LLP’s Trusts and Estates Practice, answered some core questions about estate administration for those creating or revising their estate plans.

What should a person do to make sure their estate is prepared for efficient administration?

Beyond having all the essential estate planning documents in place, there are three things everyone should do to help the estate administrator wrap things up as efficiently as possible:

  1. Make a comprehensive list of everything that makes your life run.
    Most people consider their major assets – real estate, investment accounts, bank accounts, life insurance policies – but often forget about other things that are part of their lives and will need to be wrapped up after they die.  This includes things like loans you have made, debts, bills you pay regularly (e.g., phone, utilities) and digital accounts (e.g., Facebook, Instagram, LinkedIn, Skype).  When you are making this list, it is important to note how you pay each bill or debt and to document passwords for all online accounts.  You don’t want anything getting paid twice and you don’t want your estate to be eaten up with needless late fees and other penalties.  And you certainly don’t want someone else to gain control of your digital life.

  2. Get your documents in order.
    One of the great things about life is that it is always changing.  But we do not always remember to alter key documents along the way.  In many instances, we have seen people inadvertently leaving assets to former spouses or making minor children the direct heirs to liquid assets.  In the first case, while your intended heirs could litigate, they may not prevail and, even if they do, the action will impose an unnecessary cost on the estate.  In the second instance, while the courts will probably figure out a way to straighten things out, your legacy will be reduced by the cost of the action.

  3. Consider consolidating assets.
    This follows on my previous point.  People will often open accounts with different financial institutions during the course of their lifetimes.  Or they will have an opportunity to make a side investment.  It is incredibly easy to forget where you have stashed money, which is why millions of dollars go unclaimed every year.  Rather than leave it to chance that your estate administrator or heirs can ferret everything out and funnel it to your intended heirs, it is much better to identify and consolidate everything yourself.  It will also be less time-consuming – and potentially less expensive – if your administrator can deal with a smaller number of institutions.

ESTATE ADMINISTRATION BASICS

What, exactly, is estate administration?
Simply put, it is the handling of the affairs of someone who has died.  This includes marshalling and wrapping up assets and paying off legitimate debts and outstanding bills – and accounting to the court for all of those actions. 

Who administers an estate?

Estates are administered by agents recognized by the designated court where the deceased person was legally resident.  These agents can be either executors appointed in the last will and testament or personal representatives appointed by the court when a person has died without a will (intestate).  Sometimes the agents are individuals, sometimes institutions (like banks or law firms), and sometimes a combination of the two.

Is estate administration complicated?
Depending on the assets and the structures in place, the process can be either fairly straightforward or complicated (as well as time-consuming and expensive).  It may make sense to put some property – such as investment real estate – into a trust structure to bypass some of the complications.  But there will always be the need for some administration and you will want to make sure it is handled well so that your heirs can receive your legacy with as little fuss as possible.  Keep in mind that the first stage – for the courts to authorize an administrator to act – typically takes at least three months in large jurisdictions.  Because of the backlog created by COVID-19, this may now take as long as a full year.  It is absolutely essential to be as prepared as possible.

How do I choose my administrator?

This is a fraught question for many individuals.  The advice I give clients is this:  take a pulse read of your life and try to figure out who is capable of taking care of your financial and legal affairs.  If you wouldn’t give someone charge of your bank account now, you probably don’t want them to have charge of it, along with the rest of your assets, after you have died.  Second, you probably want to select someone who lives where your estate will go through probate; it can be extremely difficult to stage-manage the process from another state or country.  Another key consideration is whether a particular individual is up to meeting the burden.  No matter how many times an individual may have served as an executor, each estate presents its own nuances and issues that will have to be worked through. And there is no getting around the fact that estate administration is a lot of work.

Does it really make a difference who I choose as executor?

Absolutely.  We recently worked on a matter where a man’s heirs – an aunt and cousins with whom he was close – lived abroad and he decided to name a neighbor as executor.  The decedent was a bit of a spendthrift and also a bit of a pack rat, so he had accumulated a lot of stuff, including pricey video equipment and clothing, much of which had not even been removed from the package.  Plus, he was disabled, and had an extremely expensive, cutting-edge prosthetic.  The designated executor felt no connection – or obligation – to the heirs and treated everything as junk and disposed of it with no accounting whatsoever.  The courts are trying to reconstruct what happened and see if something can be salvaged for the designated heirs.  Clearly, the executor was not the right person for the job.

What can I do to protect myself and my heirs?

The exact answer will depend on the particulars of your estate.  There are two big picture strategies you might consider.  

  1. Consider appointing an attorney or a law firm as executor or co-executor.  I admit that this is a plug, but it isn’t shameless, and it is based on both experience and sound reasoning.  When you appoint an attorney or a law firm – like myself or Holm & O’Hara LLP – as your executor or co-executor, we will get to know you during your lifetime, get to know your family and other heirs, come to understand your wishes and be prepared to see that they are carried out as quickly and efficiently as possible.  Unlike individuals named as executors, this is not a burden for us; we do a lot of this kind of work every day and understand what has to be done, and when.  We also assume a legal obligation as fiduciaries and risk losing our licenses to practice law if we do not meet it.  Many banks also serve as co-executors, but typically cannot provide the level of personal service – or attentive legal direction – that a boutique law firm like ours can offer.  Having an accountable institution responsible for estate administration can reduce or eliminate family conflicts.  While there is some cost to the estate, it is always lower than the cost of court proceedings for litigation or to clean up improper actions.  Additionally, because our approach centers on relationships, rather than transactions, in very specific instances, we have been able to provide a range of concierge services – helping clients oversee their business affairs, home health care, etc. – during their final years. 
  2. Look at using a trust strategy.  A second consideration is whether it makes sense to put certain assets in trust.  As I mentioned before, if you own investment real estate, this might well be a good idea, especially if you own property in multiple states.  The same is true if you own significant parts of an s-corp or a c-corp.  These are all assets that cannot – and frequently should not – be rapidly liquidated.  If the property is in multiple states and is not held in trust, you would need to have a representative in each state recognized by the designated state court.  A trust supersedes the multistate conflict and the office of trustee cannot die. This means that successor trustees will take over automatically after your death and continue to oversee its assets until it fulfills its purpose. There is no lag between the death of a grantor (person who creates the trust) or original trustee and the appointment of a successor trustee.  A trust can also be extremely helpful in overseeing the sale or wind-down of a corporation.  Under a standard estate administration process, it can be months before the courts authorize someone to act.  Your heirs can lose money and rights during that time.  Because a trust is an ongoing entity, the trustee can move to prevent that and ensure that things continue to operate as smoothly as possible.  Common misconceptions about trusts are that you have to give up control of your assets (you do not), and that they will save taxes (they will not, unless you give up control of your assets).  Your estate planning attorney can review your objectives and help you implement the right trust structure to help you meet them.

The estate planning attorneys at Holm & O’Hara LLP stand ready to assist you in reviewing and modifying your current estate plan and in developing a flexible structure that works for you and your family.


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