Estate Planning

Hello friends!

We are well into 2023 and our monthly planning topics.

This month’s topic builds on our planning theme. It is the guide for what will happen when you are no longer able to make decisions in the moment. That’s right, I am referring to one of two things, you’re either incapacitated and unable to speak for yourself or you’ve been called Home.

I am ready to meet my Maker. Whether my Maker is prepared for the great ordeal of meeting me is another matter.

WINSTON CHURCHILL

This can be a hard topic to think about, much less talk about. What if you don’t have kids or never married, don’t have family or friends you trust or want to burden with handling your affairs? Don’t know who would you want making a decision to keep you on (or off) life support? These are questions that keep many people from taking this important step.

Here’s one reason why you’re going to want to make time for this conversation.

A cautionary tale -

I provide trustee services for a number of 1301 Management Trusts. These are cases where a typically single parent has passed away and has minor children. In most every state, a Minor (child under the age of 18) cannot directly inherit an asset (money, real estate, jewelry, etc.). The statue says there must be a guardian of the Minor child and of the assets. No big deal right? Our code has some things in place to take care of this situation. Good hearted people to take care of what we didn’t take care of when we had the chance… all those tomorrows.

Here's the fact pattern:

• Mom and Dad divorced, 2 kiddos ages 10 and 7. - Late 2019

• Mom got the house in the divorce so the kids could have some grounding.

• This is a middle-class family. They lived well, but not extravagantly.

• Mom passes unexpectantly in early 2021, no will or documents indicating any wishes. She had the house, household contents, jewelry and about $250k in cash.

• Dad moved back into the house to stabilize the kids and, fortunately there’s no question on guardianship.

• Because Mom passed without a will, the legal process begins. Her bank account is frozen, and no one knows her passwords to get in and pay bills, etc.

• Dad had his hands full getting things transferred into his name. To keep the kids in the house, he had to buy it from her estate.

Here’s a very abbreviated description of the timeline. Remember, she passed in early 2021.

Summer 2021 - Attorneys are assigned by the court for probate to begin. Because there are minors, there is an attorney for the estate as well as for the minor children. - Count 2 attorneys. The estate is turned over to the probate attorney and he begins finding and claiming everything that belongs in the estate property. The attorneys are required to file numerous court documents and be in hearings several times - all costs being paid by the estate.

October 2022 - I received a call asking if I would take on the trustee role for the children’s inheritance (1301 Management Trusts). I go before one of the probate judges in Travis County. He asks me a bunch of questions to determine if I’m a decent human being and asks why there’s not a corporate trustee being assigned.

Judge, there’s not enough for a corporate trustee to make enough in fees to take the case, so while many were called, none were willing to serve. I’m your gal, like me or not.

February 2023 - We convene again in front of the same Judge for him to approve assets moving into the trust. At this hearing, the Judge asks the probate attorney why the house and furnishings have not been sold - yeah - you read that right. The attorney gently reminds the Judge that the children and father are living there, and yes, they are in fact using the dining room table, couches, and beds. The attorney didn’t feel it was right to sell what ultimately would have brought little cash into the estate. The Judge took a few minutes to consider this action - was that the right thing to do for the estate? In the end, he agreed that the household effects in use should not be sold. This was my first big - ‘wow, that’s terrible. He could have ordered it all be sold’.

The second ‘that’s terrible’ was when the probate attorney handed me a shoe box of “things of value” that he found in the house. A few clutch purses, some Kendra Scott jewelry, her wedding rings and a Tiffany bracelet; all of which I have been instructed by the judge to hold until the youngest of the children is 18. At that time I am to work with the kids to determine who will receive their mothers’ things, and exchange cash between their trusts for these objects to make the other whole, or sell it and give them cash – after it is all approved by the court. I have no doubt this is exactly the interchange that will allow these kids to reflect fondly on their mother when the time comes (strong sarcasm here).

As of April 4th, we are still waiting for the last attorney request be approved through the court before the trusts are turned over to begin support to the children.

That was a long setup. Here’s what I want you to take away:

• 2 years after this mother passed, her estate is still locked up in the court system.

• Attorneys who are performing what most would consider pro-bono work are responsible for shepherding this process. Their fees are small, but still are fees paid for by the estate. Most only do this a few times because of the work involved and very little payment in return.

• Every time a document is filed (often) or a hearing held (many), a fee is paid by the estate.

• A Judge ultimately decided what happened with all the mother’s property. Had there been large debts for the estate, it would have all been sold to cover them.

• I am a STRANGER to these kids and to this woman. Our paths have never crossed, I just happen to be the one who said yes when a whole bunch of others said no. This woman’s belongings from the shoebox were laid out on my dining room table so I could take pictures and catalog it all. Then I wrapped it all back up to try and keep it from tarnishing. I now have her jewelry and other things she held precious in a safe deposit box and will hold it for the next 9 years.

• While I am not paid much to do this work, it is still money coming from the children’s trusts to pay trustee fees, ongoing court costs, document filings (quarterly), etc. For the next 9 years.

This case just happened to have children involved. That doesn’t mean that grown children and family don’t go through just as much hell trying to close out an estate when there is no will. The time, money and emotional toll it takes for a person to go through this is beyond what anyone should ever be called upon to do after losing someone they love.

Working through your estate planning documents does not have to be a big traumatic process. Even if you can only get some basics in place, it’s better than nothing. Believe me, spending the money now will not only save your heirs time in the future, but it will also save your estate (and them) potentially a much larger sum of money. Not making decisions is expensive. A key point here is that the system is agnostic to how much money you have – it’s a level playing field for anyone going through it and it really doesn’t matter which state you are in. Some are just a little less bad than others.

You’ll notice there is not a ‘here’s who you call list’ attached. That’s because getting the right legal professional to draft your documents is important. You don’t need a high-cost attorney to draft a simple will. You don’t need a basic will if you have complex assets. Do you have to have an attorney? No, you don’t. Should you? Recommended. The statues change as the years go by. There’s “magic language” that a document needs to have to get through probate quickly and not be contested. Documents can be drafted in a way that allow you to update where things go over time. They should also be reviewed every 7-8 years. Like your financial plan, this isn’t something to be done and put on a shelf.

I know this month’s post is a heavy one. The importance of having your estate planning done can’t be overstated. For your piece of mind, and as a kindness to those whom you will leave behind one day - Please take the time to do this work. Do you have wills, powers of attorney, directive to physicians, guardianship for the kids, etc.? When was the last time you saw them? Does someone know where the originals are?

Want help getting started? Reach out and I will send you a PDF of things to think about and what to gather before you meet with someone. It will help the process move along more quickly and save you money by being prepared going into the process. We want to be your thinking partner.