Anyone who has lost a close friend or family member knows that what a difficult, painful, and overwhelming time it can be. We are often asked to help our clients through probate process when a loved one dies, but probate isn’t the only thing you’ll have to think about; in fact, it may not even be the first thing you should think about. We know that nothing can make this process easy, but we hope this brief guide can help make the process of dealing with the death of a loved one somewhat less overwhelming.

1. The first thing you’ll want to do is call close friends and family. They will share in your grief, and they can also share the responsibility of notifying others.

2. Contact a funeral director. This person can help walk you through the process of planning a memorial, making burial arrangements, and even writing an obituary. This can often be the most overwhelming task, not because it is particularly difficult, but because it has to be done so quickly; sometimes before the reality of death has had a chance to sink in with the survivors.

3. Find out if your loved one had a will. Contact their attorney (if they had one) and make sure you have the original for the probate court. If you aren’t sure how to file with will with the probate court you can contact an attorney, or check the website of the local probate office for the deceased.

4. Order multiple copies of the death certificate. You will need these for the insurance company, as well as for some of the steps below.

5. Collect the mail and contact all utility companies, credit card companies, debt collectors, etc.; call to notify them of the death and stop services.

6. Go through the deceased’s files and paperwork. This can be tedious, time-consuming, and confusing, depending on how organized your loved one was. This is important information you (or the executor or trustee) will need to file final tax returns and pass on to the probate court, so don’t be afraid to ask for help when you need it.

Dealing with the death of a loved one is one of the most difficult and overwhelming things you may ever have to do. If you are having a particularly hard time with the grieving process don’t be afraid to ask others to help with the more difficult items, or to hand the list over entirely to someone else if you feel unable to cope. This is when your own probate or estate planning attorney (or the deceased’s attorney, if they had one) can be especially helpful.

Although it sometimes feels as if time should stand still when someone we love passes away, life does go on, for better or worse. But the world is full of caring and knowledgeable people to help you through the process… if you only know where to look.

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Ilene L. McCauley and Frederick H. Goldinov are licensed to practice law in the State of Arizona. The law firm of Goldinov & McCauley, PLC provides legal services for clients in the State of Arizona. The information provided on this website and our blog is general and educational in nature and should not be construed as legal or tax advice, nor does the use of the website create an attorney/client relationship. Laws of specific states or laws relevant to a particular situation may affect the applicability, accuracy or completeness of this information which cannot take the place of one-on-one personal legal consultation and advice. Federal and state laws and regulations are complex and subject to change. No legal representation is created, and we make no warranties with regard to the information or results obtained by its use. Neither the authors nor anyone forwarding or reproducing this work shall have any liability or responsibility to any person or entity with respect to any loss or damage caused, or alleged to be caused, directly or indirectly, by the information contained in this website or blog.

Naming someone as trustee of your living trust is quite possibly one of the most difficult decisions you’ll ever make. The trustee is involved in just about every aspect of the administration of a trust; and although it is considered a great honor, it can also be a great responsibility.

Most people choose someone close to them to serve as trustee: a best friend, son or daughter, brother or sister. Choosing someone who knows you and your family to serve in this role can be beneficial in many ways, but if that person doesn’t have a financial or legal background the responsibilities can be overwhelming! It is important that the person you nominate as trustee knows not only what is expected of trustees in general, but also knows what you expect of them as a trustee. For this reason, you may want to consider giving your nominated trustee these 5 Basic Tips for Trustees—and don’t forget to add your own personal requests as grantor.

1. Make sure you read and understand the entire trust document. If you don’t have a legal background it is okay (preferable, in fact) to ask for help from an attorney.

2. Always remember that the beneficiaries of the trust are your first priority and responsibility. Once you are trustee you have what is called a “fiduciary duty” to always act in the best interests of the beneficiaries.

3. Make sure that the trust has its own separate checking account. If the trust is a living trust you as trustee will likely be the person who creates that separate account after the death of the grantor. Under no circumstances should a trustee mingle personal finances with trust finances.

4. Maintain regular contact with the beneficiaries; not just to provide them with regular accountings of trust activity or investments, but also so you yourself can remain aware of the lifestyle, needs, and feelings of all the beneficiaries.

5. Be sure you have a support team that will benefit the trust and the beneficiaries. Get investment advice from a financial professional; have a trusted attorney help with any legal questions you might have; hire a mediator to help if there are irreconcilable differences amongst the beneficiaries. The goal here is not to spend the trust funds frivolously, but to protect and preserve trust assets as the grantors would have wished for their beneficiaries.

Ilene has assisted many a trustee in maneuvering through their duties. She also offers training for current and future trustees several times each year.   Ilene’s next Trustee Workshop is scheduled for September 14, 2012.    If you would like to attend, or want to send your trustee to the training, please call Kathie at 480-296-2036, or you may register online by following the directions on the side bar.

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Ilene L. McCauley and Frederick H. Goldinov are licensed to practice law in the State of Arizona. The law firm of Goldinov & McCauley, PLC provides legal services for clients in the State of Arizona. The information provided on this website and our blog is general and educational in nature and should not be construed as legal or tax advice, nor does the use of the website create an attorney/client relationship. Laws of specific states or laws relevant to a particular situation may affect the applicability, accuracy or completeness of this information which cannot take the place of one-on-one personal legal consultation and advice. Federal and state laws and regulations are complex and subject to change. No legal representation is created, and we make no warranties with regard to the information or results obtained by its use. Neither the authors nor anyone forwarding or reproducing this work shall have any liability or responsibility to any person or entity with respect to any loss or damage caused, or alleged to be caused, directly or indirectly, by the information contained in this website or blog.

The public has been curious about the estate of Steve Jobs ever since he passed away in early October, but with his assets wisely protected with a trust, his family’s privacy regarding the distribution of inheritance has remained intact. (Privacy is only one of the many benefits of using a trust as part of your estate plan.) However, what is not a secret is that Mr. Jobs’ significant investments in both Disney and Apple stock will pose some interesting questions for his advisors and heirs. Whatever the family chooses to do, it’s clear that estate tax and capital gains tax laws will have to be taken into consideration.

This article in Investment News discusses what Jobs’ trustees or heirs might choose to do with his valuable investments. According to the article Jobs had billions of dollars invested in Apple and Disney stock. Now, “under the U.S. Tax Code, his heirs may sell shares of Apple and Disney, and avoid $867 million in capital gains taxes. If Apple’s late co-founder left his estate to his wife, Laurene Powell Jobs, the family won’t be liable for the 35% estate tax until she dies or gives money to others, according to estate planners.”

An executor or trustee has a responsibility not only to follow the wishes of the grantor of the trust, but also to look out for the best interests of the beneficiaries; which in this case may include selling or diversifying investments Jobs had chosen to hold onto for sentimental reasons.

Additionally, any executor or trustee will have tax laws to consider–not only the laws in place right now, but any changes to the estate or capital gains tax laws being considered by Congress for 2013. “The capital gains tax is set to rise to 20% in 2013, from 15%, and high-income Americans also will be subject to a 3.8% levy on unearned gains.” This means that advisors and heirs won’t want to wait too long before making any decisions.

The estate of Steve Jobs may be larger than most, but the same issues and questions will face the executors, trustees, and heirs of estates of all sizes. Whether you are a grantor, executor, heir or trustee, our office can help you through any questions or concerns you may be facing. Don’t be afraid to contact us.

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Losing a spouse may be one of the most difficult life events that any of us have to deal with. A spouse is a parenting partner, a co-CFO, a best friend and a beloved soul mate. Losing the person who supports you in so many ways can create an emptiness which can be almost paralyzing.

This is why it’s so important after the death of a loved one to have the support you need to get through the detail-oriented and often emotionally draining probate process, which includes tasks such as sorting through a financial history, submitting legal documents to the probate court, contacting creditors and family members, and more. Some people have family or friends to help with these time-consuming tasks, others enlist the help of an estate planning or probate attorney, but one thing is clear: no one should do it alone.

Every family or couple will have a different experience with the probate process, but our firm would like to offer a basic list of universal “to-do” items to remember after the death of a spouse. We hope this will help give our readers a little bit of security during a very emotional and stressful time.

* Obtain multiple copies of the death certificate
* Gather any and all estate planning documents
* Contact an estate planning attorney. Even if you don’t plan to retain an attorney, a brief initial consultation can help you understand the task ahead and prevent you from skipping important steps
* Notify the person named as executor or trustee
* Notify the necessary institutions or agencies (the deceased’s employer, social security administration, insurance company, creditors, post office, etc.)
* Remove spouse’s name from all joint accounts or ventures, such as bank accounts, utility companies, credit card accounts, etc.
* Pay final bills
* Cancel accounts, subscriptions, etc.

Depending on your situation and location, there may be many more tasks to be done. Additionally, if you are serving as executor or trustee (as many spouse’s do) there will be a great number of administrative tasks to be performed in addition to the ones on this list. Under these circumstances even the strongest and most capable people can feel overwhelmed. Remember that you don’t have to go through the process alone.

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If you are looking for a reliable way to leave financial gifts to family members you may find that a Crummey trust is the right estate planning strategy for your family. A recent article in the Wall Street Journal explains that “Crummey trusts are used in many circumstances, but are best suited for making gifts to minors—especially when a parent is giving money to a young child who isn’t ready to handle a large sum.”

While it’s true that Crummey trusts can be a very convenient and reliable estate planning tool, they do require a certain amount of annual attention and maintenance, and may not be the right strategy for everyone.

Crummey trusts can be used for many different kinds of assets, but they are most commonly used to protect life insurance policies from estate taxes. Your estate planner can help you set up the Crummey trust and use it to purchase a life insurance policy. Then you “fund the premiums with annual gifts… That gets money out of the estate while skirting the gift tax. Since the trust owns the policy, the death benefit ultimately goes to the trust, shielding it from federal estate taxes.”

Once the initial work of setting up the trust and buying the insurance policy is done, “The trustee must send out ‘Crummey letters’ each year, informing beneficiaries that they can withdraw the gifted amount during a window of time, say 30 days. Usually, the beneficiary leaves the money in the trust. But the IRS considers it a tax-free gift only if the person has the right to take it in the short term, and the Crummey letter proves that he has that right.”

Sending letters once a year isn’t a difficult task, but forgetting even once can lead to consequences with the IRS. Our advice is to be very careful to select a trustee you can count on to be timely and detail-oriented with the Crummey letters. Alternatively, the estate planner who set up your trust will often be willing to take over the administrative task of sending annual Crummey letters as well. Contact our office for more information.

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When someone creates a will or a trust of course they want to choose a dependable and trustworthy person as executor or trustee. For most people this means someone close to them—a family member or friend, or often the most responsible of their adult children. However, this often means that the person they’ve chosen as executor or trustee is also a beneficiary. The question that occurs is this: Is it a conflict of interest to be both executor/trustee and beneficiary?

As executor or trustee a person has a legal duty to manage the property in the decedent’s estate for the benefit of the trust or estate beneficiaries. This means that while the executor/trustee should be compassionate, he or she must act in an equal and unemotional manner toward ALL the beneficiaries.

A beneficiary, on the other hand, is often by definition emotional. Even those beneficiaries who are not concerned with the monetary aspect of their inheritance (and let’s be honest, many heirs are more concerned with the dollar amount than they might let on) will likely be emotionally invested in the heirlooms of the estate. Many family feuds are sparked when siblings can’t agree on who gets the family silver or great grandma’s engagement ring. And the potential for conflict only increases when real estate is involved.

If you are creating your will or trust, the best way to avoid this conflict is to be as specific as possible in your instructions to your executor and beneficiaries. Spelling out in no uncertain terms who gets the family silver will decrease the chances that the executor will be tempted to take advantage of his or her position. You may also want to consider naming a disinterested party as a trust advisor or co-executor to provide checks and balances throughout the administration process.

If you are a beneficiary who is also serving as executor/trustee there are a few things you can do to ensure you keep your executor and beneficiary roles separate:

* You may want to consider contacting a probate or estate planning attorney to mediate or oversee the process.

* Rely on random but fair methods (such as flipping a coin, drawing straws, or organizing a round robin) to distribute unassigned personal property with emotional value.

* Be sure to involve an impartial appraiser if real property is involved.

* If all else fails, an executor or trustee is always permitted to step down and hand the role over to a qualified and disinterested party.

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You’ll often read news articles or blog posts about saving for retirement—when to start, how much to save, what savings or investment plan is best—but there’s an important retirement topic which often goes underreported: How these retirement accounts impact your heirs.

As noted by this article in the Wall Street Journal, “The new, higher threshold for the federal estate tax has many heirs happily thinking they won’t have to surrender a big piece of their inheritance.” But these heirs “may need to think again if they’re in line to receive a lot of money from tax-protected retirement accounts like 401(k)s and IRAs.”

Many (if not most) retirement assets these days are IRD assets, this is “income in respect of a decedent,” and it means that the assets are income earned by a person, but not taxed or received before that person passed away. These IRD assets can be wonderfully beneficial to the investor… but they can be an unpleasant surprise for heirs, who will end up paying the taxes on these assets.

“Heirs who receive retirement accounts often pay far more tax on IRD than they have to, collecting payments from the plan but failing to take an annual deduction that is available to beneficiaries. Sometimes that’s because the tax attorney who planned the estate knew about the deduction, but the accountant who prepares the heir’s taxes doesn’t.”

Some of the solutions suggested in the article are to take advantage of a recent rule change which allows many IRD savings accounts to be converted to Roth 401(k)s. Taking advantage of this and converting the money to a Roth allows the owner to pay any applicable taxes now, so that heirs won’t be liable. Another option is to move money from the IRD retirement account into an irrevocable life insurance trust, thus removing it from the taxable estate.

“People need to refocus their thinking on what heirs are truly inheriting.” Our office can help you do just that. A little bit of thought and action now can save your heirs a lot of taxes and confusion down the line, and this is especially true if you are lucky enough to have a significant amount of savings that you anticipate passing on to your children or grandchildren.

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What is probate?

Probate is defined as “the legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person’s property under the valid will. A probate interprets the instructions of the deceased, decides the executor as the personal representative of the estate, and adjudicates the interests of heirs and other parties who may have claims against the estate.”

The definition doesn’t sound too bad, but probate can be a very trying process. Even in the best of circumstances there are procedures that must be followed to the letter, and the actual process (depending on the size of the estate and the laws of the state in which the property is being probated) can take anywhere from 6 months to a few years.

Do I need a lawyer to help probate an estate?

As a rule it is not necessary to have a lawyer help you probate an estate. However, if you have been named as executor, probate can often become an overwhelming maze of deadlines, notifications and potential liabilities. This is why many executors do choose to hire a probate lawyer to help them through the process.

You may want to think about hiring an attorney if you are serving as an executor under any of the following circumstances:

• There are a number of beneficiaries who are not on friendly terms, or are receiving varying sizes of inheritance.
• The decedent had large estate with many different assets, especially if the assets are not commonly held.
• The decedent was a resident in a different state than your own home state.
• A large number of creditors are making claims on the estate.
• There is a disagreement about the will, or if more than one will was found.
• The will is challenged or contested.

Do Life Insurance or Retirement Benefits Have to Go Through Probate?

The answer to the question above is generally “no”; life insurance and retirement benefits do not have to go through probate if the account has a named beneficiary. Benefits from life insurance accounts can be paid directly to the named beneficiary, and money from IRAs, Keoghs, and 401(k) accounts transfer automatically to the named beneficiaries of those accounts as well. The persons named as beneficiary, however, will most likely want to consult with a financial advisor to determine what needs to be done with the proceeds from these accounts. Another type of account that may not be subject to probate is a pay on death (or POD) account, the money from which can pass directly to the named beneficiary upon the death of the owner.

Probate is a subject most people don’t want to spend much time considering, not only because the rules and requirements can be convoluted and confusing, but also because of the close association between probate and death. If you have any questions at all about the probate process please don’t hesitate to contact our office—or your own local attorney who specializes in probate—for more information.

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Some assets—such as real property, stocks and savings—are fairly straightforward when it comes to bequeathal to heirs; other assets—such as valuable artwork or antiques—are not so easy. How do you will an asset to a loved one when there is no deed of ownership? And just as importantly, how do these paperless assets figure into the size and administration of your “taxable estate”?

According to this article by Bonnie Kraham, how you dispose of these assets can be extremely important to the administration and taxation of your estate. One particularly dangerous method is referred to as “the empty hook” method, wherein “When the collector dies, the beneficiaries simply remove the artwork (from the hooks) in accordance with name tags on the items for the intended recipients. Thus, the estate is left with “empty hooks” of what may be part of a sizable taxable estate for estate tax purposes.”

The problem that arises with the “empty hook” method is that wealthy families who collect artwork or antiques as investments often have records of their purchases and sales, as well as a list of valuable items for insurance purposes. Any of these documents and records would be reviewed during probate or administration of the estate. “If you don’t fully disclose the value of your art collection, or don’t properly plan to gift art in compliance with estate tax rules and regulations, you can pass on tax fraud, instead of art, to your beneficiaries.”

Perhaps the best way to hold and legally dispose of your art or antiques collection upon your death is to transfer ownership of these valuable assets into a trust. “Transferring your art collection to a trust may be the most effective, efficient and transparent way to administer your estate after death . . . Trusts are private documents and, although the tax reporting remains the same for trust assets, trusts protect the privacy of an art collector or artist, which can be an emotional protection for the beneficiaries.” Additionally, keeping valuable artwork in trust provides an extra layer of protection from divorce or frivolous lawsuits during your lifetime.

Contact our office, or your own local estate planning attorney, for more information.

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Being named as the executor of the estate of a deceased loved one comes with many challenges, including dealing with the probate system, and refereeing unhappy family members; but one of the most difficult (and least discussed) challenges is sorting through the plethora of paper and information that people collect over the course of a lifetime.

You can save your executor (and your family) time and money later by organizing your important documents and finances right now. If you’re not sure where to begin, or what information an executor would need to know, we’ve assembled a list of information and documents an executor might need quick and easy access to if anything were to happen to you:

• Instructions and letter to trustee: Contact information for your EP attorney and trustees, instructions on how to begin the process.
• Minor children: Information about your minor children, nearby guardians or relatives, medical and health insurance information.
• Personal Information: Birth and marriage certificates, passports, family, friends and contact people.
• Estate Planning Documents: Trust, wills, any amendments, personal property memorandum.
• Employment/Business Information: Contact information for supervisors, client information if you are a small business owner.
• Health Care: Advanced Health Care Directive, HIPAA, emergency contact information, phone numbers for doctors, health insurance particulars.
• Financial Powers of Attorney
• Real Estate and Tangible Property: Deed to your home, mortgage information, homeowners and fire insurance, vehicle records, artwork and antiques.
• Bank Accounts and Investments: Account numbers and locations, contact information.
• Monthly Expenses and Bills: A copy of one monthly statement for each.
• Information about recent Taxes
• Retirement Accounts/Government Benefits: Account numbers, beneficiary information.
• Life Insurance: Account numbers, beneficiary information
• Memorial and Burial/Cremation: Preferences, pre-paid arrangements, phone numbers.
• Memberships/Secured Accounts/Passwords

Once you are organized, keep your information in an accessible place and make your executor aware of the location. This simple act of organization will not only benefit you right now, it will save your family and your executor much time, money and frustration later on.

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