Ep # 75: How To Make Your Estate Settlement Easier For Your Executor

Benjamin Haas | May 25, 2022

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Benjamin Haas 00:03

Hi everyone and welcome to A/B Conversations where we will help you CFP your way out of it. A podcast where you get into the minds of a couple of certified financial planners on how we think and feel about everyday financial planning questions and what should really matter most to you. A healthier financial life starts...now! Hey Adam. Welcome back to the podcast. It's Friday! Whoop!

Adam Werner 00:32

It sure is. Whoop, whoop?

Benjamin Haas 00:37

I don't always whoop, but when I do, there it is.

Adam Werner 00:43

Oh man, I was waiting to see if there was going to be a dad joke involved in this.

Benjamin Haas 00:47

And it kind of was.

Adam Werner 00:48

I wasn't sure that you were going to be able to pull that one out. You did. You got there.

Benjamin Haas 00:54

We did it. So great topic today because I think it's one thing that we probably don't talk enough about. And it just so happens, I mean, those that listen to our podcasts know this by now, oftentimes we'll be driven to share a topic because of some recent experiences that we've had. And we've had two or three clients, unfortunately, lose a parent in the last couple months and it really drives home the importance of organization. In all these cases, the child was the executor and crap, things get complicated quickly.

Adam Werner 01:31

Yeah, I feel like we've talked about this in another podcast or to where we just talked about kind of the role of the executor. What are they kind of responsible to actually help?

Benjamin Haas 01:44

Yeah.

Adam Werner 01:47

Or execute as part of the process. That was often a misconception that the executor has to make a whole bunch of decisions and they have to kind of work through this and think through the lens of what would my mom or dad or whoever. What would they want? And really, as long as things are documented clearly, it is more of just about execution and follow through and that organizational side of things.

Benjamin Haas 02:16

I'm just, I get this vision in my head. So when we l say, okay, yeah, just execute. It really is made more complicated by the fact that over our life, we just accumulate and we accumulate and accumulate. I don't, liken it to your house, if you had to literally pack everything up after 90 years of accumulating things. It's not always easy and the volume of things can be what makes it complicated. So even just this, hey, just follow this stuff. One, that implies that things are written down. Two, that it was written down effectively. Three, that it's few things and not potentially lots of accounts. Lots of properties. Lots of people involved.

Adam Werner 02:59

Yeah, and that's where we see, I think, in these particular circumstances, where we may be working with the child who may be around retirement age, they could already be retired or we are seeing that.

Benjamin Haas 03:14

50 - 60 years old.

Adam Werner 03:16

Yeah, fall to them. And that original, I don't know, if it's the original generation, right, but the generation that is passing was more, I think of the mindset of, I'm going to have an account here, I'm going to have an account there, I'm going to have this investment account with this institution. And the diversification was through statement and institution, not necessarily on the investment side of things. The different individual security holdings and that does add more complexity because it's just more work. It's another institution you have to communicate to, it's more paperwork, it's yada, yada, yada. There's just a lot that goes into it. So, when we talk about potentially a more complicated estate or a complicated inheritance, that's definitely one of them, right? If there's just a quantity of work involved, can definitely make things a little bit more complicated. We've seen recently, sometimes it's properties, if there's multiple properties or maybe properties that aren't even in the same state. We've seen vacation homes and properties just adds another layer of complexity that needs to kind of be factored in.

Benjamin Haas 04:27

Right, because your job as the executor really is now to start to dispose of these things. In our experience, when we're involved in that, when we are holding the account for a client that has passed away. Sure, it can be as simple as we had a beneficiary designation. There's a death certificate, we're going to open the account for the heir and boom, things are ready to go. That's simple, when you have a property, maybe it is a complicated property. Now there needs to be upkeep while you're getting ready to sell it and maybe there are certain things that need to be prepared to get it ready to sell. By the way, the home probably has expenses while you're getting ready to sell it. Then you're going to need some sort of an appraisal because, by the way, that's what the estate tax return needs. The value of these things, right? Gosh, it just starts to feel overwhelming. So, before you and I go any further, I think, let's frame this in a way of what are the things that you and I would recognize that we would want to kind of tell the executor ahead of time and that can then maybe take two different forms in my mind. If you know you're the executor, these are things that you want to kind of not be just prepared for but maybe it sparks a conversation with your parents. On the other end, if you are in that phase of life, where you say, look, I recognize all these things could be problems. Maybe I had my own experience with my parents. It's also going to sound like a list of, here are the things that are going to prepare your executor and your heirs for, so I just kind of want to frame that up now that we've scared the crap out of anybody that could potentially be an executor.

Adam Werner 06:07

Yeah. Are people even still listening at this point? Now that we told them how awful things can go.

Benjamin Haas 06:13

Put the pillow over your head it kind of feels like the market right now. Let's start with liquidity.

Adam Werner 06:27

That's a huge one that is often, I guess, not necessarily thought through and we say that from our standpoint of we often preach as much as you can name a beneficiary on a financial account for instance, or potentially bank accounts. But that's where it may get a little tricky because then that supersedes the will. If you have somebody named as a beneficiary on an IRA, for example. That's the process right there. You deal directly with that institution, whoever the beneficiaries are, that all happens outside of the process of the will, it's a pretty straightforward process. The issue sometimes is when you list beneficiaries on every single account or potentially even piece of property, there's nothing left that actually filters through to the estate, cash-wise. It's that liquidity side that you mentioned earlier, if there's upkeep on properties, expenses still need to get paid. The bills still exist, utility bills, whatever things like that, that are still going to last for a few months. And if there's not cash in a bank account tied to the estate, that makes it incredibly well, it makes it impossible to be able to continue to pay those bills. It just adds another layer of now for the executor to try to figure out, these bills still need to get paid. How are we going to go about doing that?

Benjamin Haas 07:54

So well said, the checklist of things that need to happen, there's going to be those things that need to happen now versus sooner or later. In the now it is hope that if we're having this podcast, everyone needs to have the will so that can start the process. But early in that process is literally going to the bank and establishing an estate account where things can start to flow through. Bills can be paid. So you said that well because the whole point of having liquidity is we need to get money into that thing. The expenses need to be paid like you said and we don't want to put somebody in a spot where, look, there isn't money liquidity to go into that account. Are you going to start to pay some of those bills? I mean, we've seen that happen.

Adam Werner 08:43

Right.

Benjamin Haas 08:44

You should get reimbursed, of course but talk about putting yourself in a tough spot.

Adam Werner 08:52

We often look through the lens of anything that you can name a beneficiary on any account on again, doesn't then flow through to the will, doesn't have to go through the probate process. It saves a little bit on fees and all of that, but it does take some level of planning on the front end to make sure that you do have the right kind of structure for what's going to go directly to beneficiaries, what's going to actually flow through to the estate, and then with how you have things documented in the will. That's what will then flow through to those heirs that are listed anything that goes through the estate, if you have accounts that have beneficiaries listed on them, that's not going to go to how you have things listed in the will.

Benjamin Haas 09:36

Yeah, so then, I think the takeaway for me is, to say, yes, I have a will and yes, I named beneficiaries is probably not the end of the conversation. There is a degree I think of like annual maintenance of going, I made these specific requests in my will that I want $50,000 going to the church. I want $100,000 going to this person. $100,000 going to that person. Let's put on top of that the fact that we know to manage your home may take a year or the beach property, actually do the calculation to go if I pass away tomorrow, how much money needs to be in that estate account? It sounds very simple but how many people actually do that?

Adam Werner 10:15

Yeah, I don't, I couldn't tell you.

Benjamin Haas 10:19

It's not a trick question. I don't know either.

Adam Werner 10:21

Is this a number, should I guess?

Benjamin Haas 10:23

You and I both can make a reasonable assumption that not a lot of people do that.

Adam Werner 10:28

And it's made more complicated by the potential if there are just more things, right, if there's just more accounts, more properties, just more assets, you talked about it earlier, we are looking often through the lens for us through the investment side, the financial account side and people can certainly accumulate many different accounts over their lifetime. But you are spot on, it's the physical stuff that we hear from a lot of clients trying to help settle their parent's estates that it's the quantity of physical items that becomes somewhat of a daunting task to try to clean up, clean out and just dispose of through that process. So, the more you can streamline that on the front end, the better.

Benjamin Haas 11:22

I think that ties very well into the second point that I think we wanted to make around transparency and openness. I think best case scenario is often where, I'm still just going to keep on going with the scenario of mom and dad. Mom and dad are getting up there and age and they want to really put their child or children in a good spot. It's starting to liquidate some of your own things. If you've had the conversation and know that certain people may not want them. Is that a good thing at the end of life? It is because you're taking the onus to liquidate it in the way that you would see fit, then it does flow through the way that you would want it to go and you're not really leaving that to the executor to try to figure out. So, I'll say just first tying off to your point. Transparency, to me kind of means having these conversations, even if they're a little uncomfortable as you prepare these documents.

Adam Werner 12:17

Yeah, and that's the key word you said there is uncomfortable because it often is not a topic that anybody wants to talk about in any real detail with their loved ones that. Here's what I would like to see happen when I'm not here. It's just not a conversation I think people look forward to having but we know and we've seen, and I think a lot of people do understand that just getting on the same page. Getting a little bit more perspective and context through conversation outside of the legal document can go a really long way to helping in that potential situation where something is just not clearly laid out in the will, for instance, but you've had the conversation, you kind of know what mom or dad's wishes really are, the big picture. That at any point if there is a decision that needs to be made, that you're not just executing on the will itself, that you have that to kind of lean on to be able to help you make a decision where you're not just completely out on an island. I'm thinking of somebody in particular that kind of shared with us just the emotional conflict of, I'm not sure what to do with this. I'm not sure how mom or dad would want me to dispose of XYZ asset and that just puts another added level of stress on somebody who's already dealing with that emotional impact at that point, too.

Benjamin Haas 13:51

Yes, so what is more uncomfortable, being in that spot or before mom and dad pass going to them and saying, hey, mom, dad? Is this written down somewhere? Am I the executor? Like, ask the question. I know how uncomfortable that is but I promise that's not as uncomfortable as being in this situation after they pass and not knowing what to do or not being comfortable maybe with some of those things. So yeah, you know, when we say be organized, the first step of that is having the conversation and putting yourself in a situation where you're going, it's going to be awkward but you have to ask, is this documented? Have you thought about this? Am I the executor? Who is? Because if you don't know whose job is what before mom and dad passed away, that's just going to create even more strife and anxiety.

Adam Werner 14:44

Yeah, so let's stick there for a second because you said it. It's finding out who is even listed as the executor and we've seen when there are multiple children involved. Sometimes the default is what we'll just name the oldest because that's just for whatever reason that's been the default. They may or may not be the most qualified of your children to execute the process but we've also been seeing more and more where, rather than pick any one child

Benjamin Haas 15:16

I don't want to hurt anybody's feelings.

Adam Werner 15:17

Yep. So, I'm going to name more than one or I'm going to name everybody with the ability to make these decisions and again, that can work in certain circumstances. But, it just adds another layer of potential complication, where now if you have multiple executors, then you need decisions to be unanimous which may not happen if there is conflict or disagreement. And for anything that does need to be executed, it's paperwork, titles,

Benjamin Haas 15:49

Tax returns, everything. Which is why we bring this all up. And I'll go back to, I think the way that that can be best resolved on the front end is just through open communications. If that means an attorney needs to be involved in the front end or a trusted adviser like us on the front end, if we need to kind of step in and generate this conversation so it's not awkward between people, we'll do that. Because, when you think about knowing what the jobs are and who's going to be the executor, and knowing what the plan is, what are we really trying to do? It is avoid disputes and try to be efficient with the money. We've heard certain situations to where, okay, mom and dad that they named the person that they should and I'll give my opinion. There're three types of people in the world. There're problem finders, there's problem creators, and there's problem solvers and those problem solvers are the doers. Do you want to find a doer for this job. There's my piece. But if you named one person and there are other siblings, how many times have you heard that? Well, younger sibling, older sibling kind of got ticked off, they ransacked the house. I don't care what the will says. I wanted mom's ring. Yeah, I wanted dad's coin collection, whatever it is. You don't want, the communication on the front end can help set expectations not only on who is going to do what job and what mom and dad want but here's the process that is going to need to be followed by law. That's something that I think can be a part of the conversation on the front end, too.

Adam Werner 15:51

That all needs to be coordinated and then every single person listed as executor needs to sign off on that. And God forbid, you're not all local and now you're dealing across state lines. You're just trying to communicate different times. Name this scenario, it just adds another layer of potential complication that slows down the process and again, just invites potential disagreements among siblings at an already difficult time. Yeah, and it is that process. It's like many other things there. There is a

Benjamin Haas 18:09

Yes, speak to it.

Adam Werner 18:10

There's a clear process when you go through an Estate Settlement and I'm just trying to think here, we've kind of talked about this in other iterations, too. For the executor, I think it certainly feels like there's a lot of weight on their shoulders to deal with all of these different moving pieces and try to get that done in an efficient and timely manner. If you're not the executor but you know, now that you are an heir of those proceeds, we've often seen that it's, I don't have to do any work. But I know I have this XYZ, I have this dollar amount coming to me and it's already spent before it ever hits their hand, like it's burning a hole in their pocket before it even gets there. And just those potentially improper expectations on timeline, I think a lot of people do understand that settling an estate is not a fast process. It's not something that happens overnight. But the more complicated situations arise that process can get drawn out to, I mean, certainly months and potentially beyond a year is not ideal, but it's not unheard of either.

Benjamin Haas 19:26

Yeah, you're dealing with other financial institutions. You're needing to shut off every bill, every piece of income. Even by the time you're ready to kind of like close the estate. Now you're having to file certain things and you need to get clearance that was accepted and kind of the taxes were paid and everything is done at the state level. I mean, all of this is supposed to happen. You said it before, maybe the executor, I don't know what the average age is. That would have been cool to look up. Let's guess between 50 and 60. They probably still have a full-time job so this is not something that just turns around very quickly and I think you hit the nail on the head. What are we talking about? Disputes that come because an heir might be saying, why isn't this moving faster? I need to get to this money; we need to take care of this. I was the one that was going to buy out my siblings on the beach property, what's happening? It takes good communication but it takes time. It really does.

Adam Werner 20:21

And so the other side of that maybe taking that next step of the time and you kind of talked about, you know that 50 to 60, or whatever the age frame is, potentially prime working years, to be able to now deal with, you know, settling an estate can be difficult navigating on your own. That's where we would say, certainly, when appropriate, lean on the professionals that can really give expertise and try to smooth out some of those potential hiccups. Obviously, I don't know how many people actually go through the process of settling an estate without an attorney. I'm guessing that's a huge, huge minority but involving somebody like us, a financial planner or financial advisor that can at least speak to some of the investment side of things and then also, potentially involving a tax preparer or a CPA, somebody like that that can help work through the tax return or through any of the tax impacts. Clearly, we're dangerous enough in a lot of those circumstances. But when it comes to the formality of filing the documents, the tax returns, and any of the estate processing side of things, it helps to have a team behind you that you can lean on for that expertise and experience that you may or may not have.

Benjamin Haas 21:51

Yes, and I just think about the role that we can or really should play when we know the full financial picture of somebody's life and we know how to communicate with other institutions. We've prepared checklists for how these things maybe should be handled and in what order. It's there to provide guidance and help. I know, like any professional situation, you have the attorney of the taxpayer, you have financial guidance, you may be paying for that help. But why do you do that? It may be to avoid errors. Errors and the heirs.

Adam Werner 22:26

Errors.

Benjamin Haas 22:27

Don't make errors and avoid having to discuss things with the heirs. At the same time, again, it's just it’s money, it’s time, it’s potential liability. So, the whole moral of the story here, it really is about kind of preparing on the front end with organization, being clear about expectations, and making sure that everybody's kind of on the same page. It just makes things go so much smoother when these things can happen on the front end, especially if you're one of those families that has a lot going on. Right? Circling all the way back to our first comments. This gets more complicated the more stuff there is involved.

Adam Werner 23:04

Yep, yep. So yeah, if we can certainly, you touched on it earlier, we can certainly play that role on the front end, if it's just helping steer that conversation and make sure everything is kind of thrown out there and the important bits are kind of covered. For those that are put in the shoes of executing after someone's passing, executing the will after somebody's passing, certainly lean on us, lean on other professionals to help them guide you through that process.

Benjamin Haas 23:39

Yeah, I think my last piece of advice would be if you think you may be in that situation where you're going to be the executor, ask the question. Just put it out there. Hey, is this something you've thought about? Is this something you've taken care of? Is there something I can help with? Because better to help on the front end than be put in that spot on the back end and not have things prepped.

Adam Werner 24:02

Yep. Well said.

Benjamin Haas 24:05

All right. Thank you for your guidance as always good, sir.

Adam Werner 24:09

Thank you.

Benjamin Haas 24:10

We'll see you next time around.

Adam Werner 24:12

Sounds great.

Benjamin Haas 24:13

Here's the weekend whoop whoop. See ya.

Adam Werner 24:16

Bye.

Benjamin Haas 24:23

Hey everyone, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you, consult with your attorney, your accountant and financial advisor or tax advisor prior to making any decisions or investing. Thanks for listening! Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor.

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Ep # 75: How To Make Your Estate Settlement Easier For Your Executor