Some estates have problems
They have a range from incompetent executors, poorly worded wills, bequests of specific assets that deceased did not own at death, income and other taxes, takes too long to settle, and sale of assets at sharp discounts. There are far more if there is no will at all.
The problems come in two categories.
The will and its planning
The will didn’t work or the people tending to it did a poor job. Sometimes on purpose. The will maker has complete control over those problems and should attend to them.
Executorship is a massive undertaking and the majority, even vast majority of people, have not clue number one. If they had only clue one, many would refuse the job. Pay careful attention to your selection. Try to match the executor’s skills to the complexity of your estate. If there is likely to be conflict among the heirs, you may want an institutional executor.
The will should be updated fairly frequently. Each time you do it notice that eventually your last effort will be the final will and testament of you. If you have the slightest hint that the one you have and are reviewing might be weak, amend it. Be sure, too, you have workable powers of attorney for health and property. It is possible that you could lose the ability to change because of lost capacity.
Be very conscious of specific bequests of property. I leave my white house at Rural Route 4 to my friend John is wonderful if you own that house at death. Worse still if you sold it and built a much larger white house, also at Rural Route 4. I have seen that one and it could have been disastrous.
Too little cash
Too little cash is the cause of the other causes of estate break downs.
No one has an estate tax problem. Taxes are just a fact. The problem is making the deposit that will allow the bank to clear the check the executor writes to the government. There is a great difference between a tax problem and a deposit problem. If you don’t take care to deal with the deposit other things happen. You control two of the ways to make the deposit.
You could hold liquid assets or you could own appropriate life insurance.
If you don’t make the cash available, the executor borrows for the estate costs and the estate winds up some day far in the future when the loan is repaid. Not many heirs like that one.
The alternative is to sell some assets. The rule while living is “Keep the best, sell the rest.” After death though, executors don’t sell what they want, they sell what they can. There are tax factors that make selling in the 12 months after death crucial. Thus the big discounts.
How many of you think “Estate Sale” means you should expect a bargain? Probably most of you.
When you analyze the four methods to get cash, own cash, own life insurance, sell, or borrow, life insurance wins.
Lynn Townsend’s Lesson 62 says, “If you have a problem you can solve by writing a check, you don’t have a problem, you have an expense.” Smart people pay necessary expenses in the cheapest possible way.
Planning the distribution of your estate is easy to put off.
I am alive today so I am pleased I didn’t waste yesterday working on that torturous subject. Common sense says it is like growing cabbage. Plan ahead.
A well organized and thoughtful estate is a blessing to all concerned. Act soon.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.
In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772