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Estate Planning Questions: Can an Estate Administrator be a Beneficiary?

Estate Planning Questions: Can an Estate Administrator be a Beneficiary?

by | May 24, 2022 | Asset Protection, Estate Planning

According to the Alabama probate code, an estate administrator serves the same function as a personal representative, which is the legal term used to describe an individual appointed by the court to carry out the terms of a will, or a matter of intestacy. There is no prohibition insofar as a beneficiary being appointed the role of estate administrator, but it is important to note the fiduciary duties that this legal role entails.

Difference Between Executor and Estate Administrator

The difference between an estate executor and an estate administrator is simply by the way in which these roles are appointed. When someone drafts a will, they name someone to act as the executor of the estate. Once the estate goes to probate, the court will appoint someone to act as estate administrator per that state’s intestacy laws. Unless the court deems the named executor unfit for the role of estate administrator, this person is generally one and the same.

That being said, there is no reason why a beneficiary cannot also be the estate executor or estate administrator, at least legally speaking. There are, however, reasons why you may want to choose an objective, third-party to administer your estate.

Let’s say you own a modest home, a car, and a 401(k) account worth $200K. After consulting with an estate planning attorney, you decide that drafting a will and naming your only daughter as the executor of your estate is the right move. You also choose to name your daughter as beneficiary. Since the combined value of your home, vehicle, and retirement account is greater than $25K, your daughter will have to enter the will in Alabama probate court.

In this example, your daughter has what it takes to be both a beneficiary and an estate executor, as well as the estate administrator. This is what the Alabama probate court will expect from your daughter:

  • Carry out your last wishes as outlined in the will
  • Use letters testamentary as needed in order to settle debts, distribute assets, transfer property titles, and manage the estate
  • Provide administrative reports to the probate court judge

As the executor, your daughter will have the right to start the probate court process, but this does not automatically entitle her to act as estate administrator (executrix)—she will have to follow procedure, submit an application to the court, and become officially appointed as the executrix by the courts. As long as the judge determines that your daughter has the means and abilities to serve as the administrator of your estate, she can be executrix, beneficiary, and administrator all at once.

Should a Beneficiary Act as an Estate Administrator?

Not all situations will be as the one we have described above. In some cases, it may be better to designate executors who are not beneficiaries, which is particularly the case with larger and more complex estates. When you have survivors whom you think may bicker over their respective inheritances, an estate planning attorney will probably recommend naming an executor who is not a beneficiary.

Close friends who have long-standing relationships with your family could be good candidates for executors. It is not uncommon to see people choose in-laws, or people with whom they served in the military, as their executors. When executors or personal representatives are not beneficiaries, they are entitled to reasonable compensation that can be paid from the estate, though this will need to be approved in probate court.

Naming an estate planning law firm as executor of your will is also a great idea. In this case, the attorney’s fees can be paid from estate proceeds, and there is a good chance that the probate court will have no objection to the appointment of a law firm to serve as estate executor. Your chosen law firm will know exactly how to navigate the probate process, quickly and seamlessly, keeping time and cost to a minimum, and working hard to get your estate settled, so your family can reap the benefits of your hard-earned assets.

Contact Miller Estate & Elder Law

Miller Estate & Elder Law is here to help will all of your estate planning, probate, estate and trust administration, and elder law needs. If you have been named executor of a loved one’s estate, we urge you to download our free guide, 7 Steps to Handling Your Loved One’s Estate.

If you’re in need of a power of attorney or have other estate planning needs, feel free to contact our office with questions. You can also download a free copy of The Basics of Estate Planning in Alabama, or attend one of our upcoming free workshops.

If you need more guidance, we are happy to help. Contact us using the brief form below.



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What Happens if I Don’t Have a Power of Attorney?

What Happens if I Don’t Have a Power of Attorney?

by | May 17, 2022 | Estate Planning

In January 2022, American Academy of Neurology issued a statement related to the treatment of stroke victims. In essence, the statement was a reminder about the importance of reviewing power of attorney and advanced medical directive documents as part of estate planning. Let’s review the two objectives of this directive, which any estate planning lawyer will tell you is great advice:

1. In some cases, the irreversible effects of a massive stroke, which can be as unpredictable as they can be devastating, can be mitigated through endovascular therapy, but such treatments can also result in patients entering a state of medical coma. This is the kind of treatment that often requires consent, which is why it is a good idea to update medical directives. In 2013, a statistical review of endovascular treatments in stroke victims indicated a success rate lower than 40%; most patients ended up facing quality of life decisions.

2. Strokes range from the fatal to the mild; the most problematic tend to be those that fall somewhere in the middle, which means that patients are more likely to be left with onset dementia, paralysis, disability, and dangerous hypertension. This should serve as a reminder for all of us to think about drafting and executing a power of attorney (POA) in case of emergencies.

We tend to think about estate planning as something we should do in anticipation of the inevitable, but we should also think of it as planning for the unpredictable. Not everyone who suffers a massive stroke will have a history of hypertension; quite a few people are completely blindsided by sudden cerebrovascular events that leave them incapacitated or with slim chances of recovery. With all the above in mind, you certainly will not want your loved ones to deal with a stroke in the family and a lack of a proper POA to handle various affairs.

What Happens in the Absence of a Power of Attorney?

If you are able to make it through a stroke with just hemiplegia (partially paralyzed), chances are that you will have a nice shot at recovery. With the right medications plus many sessions of physical, speech, and cognitive therapy, you could recover to a state in which you can read and sign documents such as POAs, wills, trusts, advanced directives, vesting of property, title transfers, and others.

Let’s say your stroke was the serious kind that constricts blood flow to the brain. This is when your chances of recovering are sharply reduced, and you may also be left with onset dementia caused by neurological damage, which means that you would not be able to understand any aspect of estate planning at all. You will not be personally affected by the lack of a POA because of your reduced cognitive capacity; your loved ones and caretakers, however, will certainly be affected.

Without a POA, your loved ones will not have the means to access your accounts, pay your debts, or even come near your assets. If they need to pay for medical expenses, or if they are going out of pocket while taking care of you, the absence of a POA will make their lives extremely difficult and stressful.

A POA executed for emergency situations can make life less chaotic for those you really care about. With the help of an estate planning lawyer, you can avoid all those unpleasant situations that often happen when you least expect them.

If you’re in need of a power of attorney or have other estate planning needs, feel free to contact our office with questions. You can also download a free copy of The Basics of Estate Planning in Alabama, or attend one of our upcoming free workshops.



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Four Reasons to Revise Your Estate Plan

Four Reasons to Revise Your Estate Plan

by | Apr 18, 2022 | Asset Protection, Estate Planning

The need for an estate plan is something that many Americans only recognized as important during the worst months of the Coronavirus pandemic. We generally dislike thinking about our eventual demise, but the mortality rates of COVID-19 prompted us to see matters in a different light. In April 2020, professors David Horton and Reid Weisbord, respectively of the University of California Davis and Rutgers Law School, published the results of a survey showing that 68% of Americans did not have a will or any kind of estate planning strategy in place at a time when COVID-19 contagion was at a very high level.

 

Passing away without a will or an estate plan throws you into what is known as intestacy, which essentially means that your assets and property will be distributed according to state law. The probate code in many states calls for an estate distribution among tax agencies, creditors, surviving spouses, and descendants. This is not an ideal situation for many families; moreover, the interests of couples who never married, and of people who live in non-traditional family structures, are seldom taken into account by intestacy laws.

 

Seasoned estate planning attorneys can tell you that intestacy is only one of two major problems related to probate matters in the U.S. Failing to review, update, and revise an estate plan can complicate matters at a time when you won’t be around to fix the problem. If you already have an estate plan, great…but there is also a chance that you need to revise it due to legislative changes related to taxation, probate, or trusts. Even if changing legislation hasn’t impacted your estate plan, the natural evolution of your life probably has. Please take a moment to think about the major life events you have experienced since your estate plan was created. If any of them match the situations below, this is your cue to revise your plan.

 

Family Matters

Let’s consider the joy of getting married or welcoming a baby. Think about the letdown of getting divorced, or the sorrow of losing a loved one. These are major life events that call for an immediate revision of your estate plan, particularly when they involve weddings or marriage dissolution.

Moving Across State Lines

If you moved to Alabama from another state, the only way to tell if your estate planning strategy will continue to be effective is to review it. Keep in mind that some states have specific provisions with regard to the number of witnesses who must sign legal documents, such as trusts, living wills, medical directives, and others. Likewise, if you purchase a vacation home or investment property in a state other than the one you reside in, your plan will need to be updated accordingly.

Changes in Trustee or Estate Executor Designation

Your estate plan likely names an executor, personal representative, or trustee who is responsible for carrying out your wishes, distributing your assets, and otherwise administering your estate. If something happens to your named executor or trustee—or your relationship takes a turn for the worse—you should revise your estate plan immediately.

Changes to Assets and Liabilities

Filing for bankruptcy, paying off debts, selling a home, winning the lottery, or purchasing a collectible car are all examples of financial events that can significantly change the value of your estate, thus calling for an adequate revision.

Want to learn more about estate planning and the important role it can play in your future? Feel free to contact our office with questions. You can also download a free copy of The Basics of Estate Planning in Alabama, or attend one of our upcoming free workshops.



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What is a Trust…and Do I Need One?

What is a Trust…and Do I Need One?

by | Apr 13, 2022 | Avoiding Probate, Elder Law, Estate Planning, trust

Most people know that a will is an important piece of the estate planning puzzle, but there are many misconceptions about trusts. Most people believe that trusts are reserved for the very wealthy. While it’s true that not everyone needs a trust, it is hardly limited to those with multi-million dollar estates. Depending on your estate planning goals, assets, and wishes, a trust may be a very viable option for you—even if your estate is modest.

But, what is a trust…and how do you know if you need one?

What is a trust?

A trust is a legal contract that ensures the proper distribution of assets to the trustor’s beneficiaries. Assets can be distributed in the exact manner you wish them to be. The individual creating the trust—called a ‘trustor’ or ‘grantor’—places title to his or her assets into the ownership of the trust. The process of transferring assets to the trust is called ‘trust funding,’ and is an essential part of successful trust creation. The trustor will also name a person to manage and administer the assets held in the trust, called a ‘trustee.’ A well-organized and regularly maintained trust has the potential to save your loved ones from certain headaches, like probate court, and can offer tax benefits for inheritances, as well as more privacy and control over your assets.

General Guidelines

Generally speaking, trusts may be a viable option for you if you have a net worth of $100,000 or more, a considerable portfolio of real estate and other tangible assets, or detailed instructions for how you’d like your assets to be distributed to your beneficiaries when you pass away. It’s important to note that these recommendations are not set in stone, as each circumstance is highly unique, and even those who don’t meet these guidelines may still benefit from drafting a trust.

Types of Trusts

To further answer the question “what is a trust,” and determine whether a trust will fit your unique needs, it’s important to understand the different types of trusts that exist, and what makes them different. The most common types of trusts include:

  • Revocable (aka ‘Living’) Trust: This flexible trust allows you to cancel, maintain, and make amendments to the trust while you’re still alive. A revocable trust isn’t subject to probate, but doesn’t always protect assets from creditors, as the trustor still legally owns the assets that have been transferred to the trust.
  • Irrevocable Trust: Contrary to a revocable trust, irrevocable trusts are not able to be revoked or amended without the consent of all beneficiaries named in the trust. While this certainly limits the flexibility of the trust, it better protects the trustor from creditors and lawsuits. Additionally, an irrevocable trust can help minimize estate tax liabilities.
  • Testamentary Trust: Also referred to as a ‘will trust’ this type of trust is generated from a last will and testament, becoming effective (and irrevocable) after the trustor passes away. Testamentary trusts ensure that assets are distributed to beneficiaries at a designated time—known as the ‘trust expiration,’—which is prompted by a triggering event, such as the beneficiary turning a certain age. Because this trust is part of a will, it must go through probate before the trust can be created.
  • Charitable Trust: This type of irrevocable trust allows you to leave behind a legacy of giving. Charitable trusts are often established to reduce estate and gift tax liabilities. A charitable remainder trust (CRT) carries the added benefit of providing a source of income to you or your beneficiaries during the trust term. At the time of your passing, all remaining assets will then be distributed to the designated charity.
  • Special Needs Trust: Parents and guardians of children and adults with a disability can use this type of trust to protect a beneficiary’s eligibility for needs-based government programs, like SSI and Medicaid. This allows trustors the ability to provide financially for these beneficiaries when they are no longer around to physically care for them.

While creating a trust isn’t for everyone, it is a valuable part of an estate plan for many, providing an additional layer of protection for your legacy, and the future security of your loved ones. The flexibility, problem-solving, and variety that a trust provides makes it an attractive option for those seeking a well-rounded estate plan.

Educating yourself on trusts is only the first step. When it is time to create your trust, working with an experienced estate planning attorney will ensure that your trust is established and funded properly. Contact usvia the brief form below to get started today, or learn more about protecting your assets by signing up for Miller Estate and Elder Law’s FREE estate planning workshop.



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The Difference Between Wills and Trusts

The Difference Between Wills and Trusts

by | Apr 5, 2022 | Avoiding Probate, Estate Planning, trust

Establishing an estate plan that clearly lays out your instructions for asset distribution is one of the greatest gifts you can give to the people you care about. Two of the most important ingredients to ensure your assets and loved ones are protected are wills and trusts. These legal instruments are often confused with one another, making it difficult to discern which option is right for you. What are wills and trusts? How are they different? When should you use wills vs trusts? 

What follows is answers to these questions (and more), to help you make the best decisions for your family, and your legacy.

What are Wills and Trusts?

Wills and trusts both outline instructions for how you want your assets distributed, so you’ll see some overlap in what each is capable of doing, and the advantages and disadvantages of each. One of the major differences is when and how each becomes effective.

Wills

A will is considered a “simple” document, providing instructions for how you’d like your assets to be distributed. In your will, you’ll name an executor who will be responsible for distributing your assets per your wishes. Additionally, a will allows you to name a guardian for minor children and pets, forgive debts owed to you, and provide any additional instructions for such matters as funeral arrangements, and how taxes should be paid.

Trusts

A trust is a bit more complicated than a will, establishing a separate legal entity that holds legal title to your assets, and naming a trustee to manage and distribute those assets on your behalf, should you become incapacitated or pass away.

While there are many different types of trusts, they can all be classified in one of two ways:

  • Revocable (Living) Trust: This document allows the trustor to create the trust, retitle assets to the trust, assign a trustee, and make alterations, amendments, or terminations while they are living. This type of trust allows you to make an impact while you’re still alive, while giving you the flexibility to easily make amendments as life circumstances change.

  • Irrevocable Trust: This type of trust also assumes asset ownership, but cannot be altered, amended, or terminated by a trustor without the permission of his or her beneficiaries. While more restrictive than revocable trusts, this type of trust offers tax benefits that a revocable trust does not. 

Will vs Trust: What’s the Difference?

Both wills and trusts will help you handle your estate planning affairs, but there are some key differences that may help you decide whether your unique situation requires one or the other—or even both—options.

  • Effective Date

As aforementioned, one of the key differentiators of wills and trusts is when they go into effect: a will goes into effect upon death, while a trust becomes effective immediately upon funding and signing it. 

  • Privacy and Probate

All wills must undergo an often-arduous, time-consuming, and expensive probate process, which becomes public record and is accessible to anyone. Trusts, on the other hand, are not subject to probate and remain private. This can make trusts an attractive option for those seeking a faster and more private estate administration process for their beneficiaries…and one that is protected from the challenges often presented in probate court.

  • Property Coverage

A will covers any property solely owned by the grantor at the time of death, but does not cover property held by a trust, or any jointly owned property. A trust will only protect the property that has been transferred to it. Anything outside the trust may be subjected to probate.

  • Cost, Complexity and Maintenance

Wills created by an estate planning attorney often contain more complex terminologies, but a will can be extremely simple, with some states even allowing handwritten wills. This simplicity keeps the cost of creating a will at a minimum and, since wills are typically only revised for major life events, maintenance costs are also low.

Since trusts require you to fund them by transferring title to your assets, they can be more complex, and it is highly recommended you work with a trust attorney to ensure your trust is fully funded, supported by proper documentation, and kept up-to-date as you acquire new assets, and as life changes. This continuous maintenance can add additional costs, but ensures you’ve got 100% of your bases covered.

Will vs Trust: Which one is right for me?

The first step in answering this question is to assess your situation, needs, and goals. Things like your age, wealth, marital status, minor children, special needs, and unique requests play a pivotal role in making this decision. Most people need a will, but a trust is not vital for everyone. Enlisting the help of an estate planning and trust attorney is always the best option to find the estate planning solutions that best suit your needs. Contact Miller Estate and Elder Law to begin your custom-tailored estate plan, or register for our next FREE estate planning workshop today to learn more about estate planning and asset protection.

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