Executor Anxiety: What if the Estate Doesn’t Sell?

There is often confusion about the role of the Executor/Successor Trustee who manages the family’s estate after the death of a parent. An article in The New York Times underscores the uncertainty and anxiety that an Executor may be experiencing. An “Executor” carries out a person’s Will (common in New York because Probate is more workable there), whereas most California people will have a Trust, so the person doing all these tasks is the “Successor Trustee”. Anxiety is not uncommon—none of us has trained for this role, and we don’t normally bring any experience to the job.

 

In the article, one person is the Executor of her mother’s estate. The sale of her house and its belongings will be divided equally among the surviving children. The Executor had the home’s furnishings appraised and is preparing them for sale. She’s concerned that if the furnishings don’t sell, as Executor, she will be responsible for the shortfalls.

Fiduciary duties: Acting in the best interest of the beneficiaries

An Executor is legally responsible for sorting out the finances of the person who died, generally making sure debts and taxes are paid. What’s left is distributed among the heirs. As an Executor, you can’t act against the interests of any of the beneficiaries—these are your fiduciary commitments.

According to these fiduciary duties, you can’t sell assets for less than fair market value without agreement of the beneficiaries. Your job is to settle the financial affairs and divide the assets in accordance with the Will. It’s not your job to pay your siblings if the estate is ultimately not as valuable as everyone seems to think. You are expected to make prudent decisions about how you liquidate it.

 

What’s “prudent” can be a matter of supply and demand

“What’s prudent is going to depend on the nature of the assets,” said Douglas F. Allen, Jr., a trusts and estates attorney in the Manhattan office of the law firm Seyfarth Shaw. If the estate has a valuable 19th-century armoire and you sell it at a yard sale, your siblings could hold you responsible for being careless with their inheritance. Your job is to figure out how to appraise it and find the best venue to sell it, whether that’s at an auction or through an antiques dealer. If the piece appraises for a modest sum, you may decide to sell it at an estate sale. If it sells for far less than the appraised value, then it was only worth that much—it’s a matter of supply and demand. If it’s perceived as just a hulking piece of furniture in the marketplace, then the estate is responsible for the cost of disposing of it. 

A reality check: No one seems to want old bulky furniture

I recently helped a friend downsize. They sold the estate where they had lived for 30 years. They had a home full of beautiful things, including dishes, silver and antique furniture. All of these items were expensive and in excellent condition. We tried all of the online sales sites and didn’t get as much as a nibble. No one wants this stuff, including her own children. So while they may have paid a lot of money for these items, they were virtually worthless in today’s marketplace. They only have value when someone wants them.

When it comes to real estate, partner with a broker you can trust

Decide whether to list property as-is or spend money from the estate on upgrades, repairs and staging. If the broker suggests listing it for $750,000, but it sells for $700,000, then that’s all the money you have to split up, minus whatever expenses you incurred for staging, repairs and broker fees, according to Robert D. Steele, a partner at the Manhattan law firm Schwartz Sladkus Reich Greenberg Atlas, where he is head of the firm’s trusts and estates department.

Have these conversations now

To avoid a conflict among your siblings, start the conversation now, before any heirlooms are sold or divided up. Do some research to understand the local market value. Explain the process and whatever guidelines have been laid out in the Will. For heirlooms that have sentimental but limited monetary value, split these up now to avoid turmoil at what will undoubtedly be a difficult time.

Schedule an appointment to create your Living Trust: Zoom or in-person!

You now have a choice–via Zoom or an in-person meeting. Our Trust package includes a Power of Attorney, an Advance Healthcare Directive and a Pour Over Will. Best of all, we guide you through it and we prepare the legal documents.

We service the entire East Bay and North Bay areas

Berkeley, El Cerrito, Richmond, Pinole, Alameda, San Leandro, Castro Valley Newark, San Lorenzo, Concord, Alamo, Danville, Lafayette, Orinda, Moraga, Pleasant Hill, Martinez, Pittsburg, Antioch, Brentwood, Oakley, Discovery Bay, Pleasanton, San Ramon, Livermore, Tracy and Fremont. Our clients also live in the Napa Valley, Benicia, Vallejo, Martinez, Fairfield.

This article is based on an article in The New York Times by Ronda Kaysen.

 

 

Aging in Place: Growing Older at Home

Living Trusts are an important service for us, and creating a Trust often inspires people to get serious about life planning. Many of those who are retired or who are nearing retirement begin to make plans for what they hope will be the next twenty or more years. Health and economics influence every decision, but having a plan—and acting on it–provide peace of mind for many seniors and their families.

Aging in place is a concept that has gained popularity for some very good reasons

Many retirees move to where they can be close to their kids and grandchildren. Remaining in the home where you’ve raised your family and celebrated important milestones may be the most logical place to live out your life. But not every home is suitable for aging seniors. Isolated access, stairs, loose floorboards, porches, electronic gates and winding driveways can seem insignificant now, but what if you have a stroke? You’re suddenly completely isolated, unable to get into or out of your own home.

Ben and Sara have decided to age in place

Ben and Sara have been trying to sell their 40-acre property in the Napa Valley for the last five years. It’s accessible from a steep, winding road that finally ends at their driveway. Visitors hit the buzzer and an enormous, yawning wood and iron gate slowly swings open. Their lovely home is on a single level, but the property traverses the hillsides. Sara and Ben are in their late 70s, still busy and active. Over the years they have spent a lot of money remodeling their home. They have tried to sell, but have not found a buyer who will meet their price. They’ve decided to stay right where they are and age in place.

Really bad idea. This is not the kind of home in which to be aging in place

Ben and Sara are isolated in their home. When the power goes out, that huge gate won’t open and there is no other ingress/egress. When they’re no longer able to drive, they will be completely isolated. Their nearest neighbors live another half mile away, up more winding roads. Their three grown children all live on the east coast.

Maintenance on their 40 acres is becoming a burden

They have a gardener, but Ben does a lot of the work himself. He enjoys the physical effort, including fussing over his tomatoes, olives and grapes. He knows, however, that he is doing less and aching more. While Ben and Sara are financially secure, maintaining their property is a constant drain.

Ben and Sara would be better off taking a financial loss, selling their estate and buying a smaller home or cottage in Napa where they can safely grow old within walking distance of the library, cafes and activities.

Choosing to stay in your own home can be an expensive proposition

Despite the costs, the United States Aging Survey shows that many Americans age 65 and older say they want to stay right where they are, in the homes where it’s comfortable and familiar. But to age in place successfully, it’s often necessary to remodel your home to make it safer.

How will you age?

Consider how you might age before remodeling your house to accommodate life after retirement. Although medical advances and improved diets are keeping seniors healthy and active longer, the years inevitably take their toll. Eyesight and hearing may worsen; it may be difficult to navigate stairs, step over a threshold or climb into a bathtub. It’s not unlikely that at some point you will require a walker or a wheelchair. If arthritis is in your gene pool, you could have difficulty grasping and turning doorknobs.

Falling is a concern as we become less steady on our feet

Seniors dread falling, as old bones heal slowly. Replacing a hip or knee requires a long recovery period. Removing potential hazards is critical to home safety for aging seniors.

What remodeling do you need to age in place?

In the same way that you baby-proof a home, you need to age-proof it for seniors. You might not need as big of a house as you think. If you live in a two-story home, you may want to move to a smaller home on a single level. You may think about remodeling that second floor to make room for a family member or friend to live with you as a caretaker.

Some common remodeling projects for those considering aging in place 

• Install non-slip flooring. Falls are a leading cause of death and injury for older Americans. Replace the floor with a nonslip surface or install nonslip rugs.
• Walk-in tub or shower installations. Making a bathroom safer may require a walk-in tub or shower.
• Wider doorways for wheelchairs. According to the ADA, doorways should be at least 32 inches to make room for a wheelchair or walker.
• Installing a ramp. A ramp will make entering your home in a wheelchair more manageable.
• Install stair lifts or handrails. A stair lift for someone who can no longer access upper levels of a house is an important consideration.
• Change faucets to levers. A small thing, but a big difference maker to someone with crippling arthritis.
• Bathroom remodeling. Remodeling a bathroom quickly gets expensive. Making room for a wheelchair can mean new plumbing and electrical.
• Lower the kitchen countertops. Those in wheelchairs will need to have cabinets and counters lowered.

Creating a Living Trust is an important part of financial planning

Our Living Trust portfolio includes an Advance Healthcare Directive and a Power of Attorney. In this legal document, you can detail your preferences for your retirement years. You can state your wishes to remain in your own home or move to a retirement community. When the time comes, you can identify your preferences for moving to assisted care or a nursing facility or staying in your home.

California Document Preparers assists our clients in the preparation of Living Trusts. Our dedicated team guides you through every step. Schedule an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

Naming a Successor Trustee: A Lesson from Doris Duke and Her Butler

When our Living Trust clients get to the part about naming a Successor Trustee, it means they’re nearly finished. They’ll quickly write down the name of their brilliant scientist daughter who lives in Boston whom they rarely see or their dreamy artist son who lives right here in the Bay Area. The reality is that neither of these people is likely to be a good choice.

Successor Trustee can be a demanding, time-consuming job

A successor Trustee is the person who will assume control of your Living Trust after your death or when you’re unable to continue with your responsibilities. It’s up to the Successor Trustee to distribute the estate according to the terms of the Trust. This is a big responsibility, and depending on the complexity and size of the estate, it can be demanding and time consuming. There are always financial reports to review, so the person you appoint should be adept at dealing with numbers. He/she must be able to interact with not only all of the family members, but bankers, CPAs and insurance agents. The Successor Trustee should be someone who has the time and patience to deal with the often-unexpected details that will surface as your estate is closed.

A classic example of naming a really bad Successor Trustee: Doris Duke and her butler

Let’s take a look a Doris Duke. Born on November 22, 1912, Doris Duke was the only child of James Buchanan Duke, a founder of the American Tobacco Company and Duke Energy Company and a benefactor of Duke University. Duke was dubbed “the richest girl in the world” by the media. When she died in her Beverly Hills home at the age of 80 in 1993, with a net worth of nearly $1 billion, she left the majority of her estate to the Doris Duke Charitable Foundation.

Semiliterate butler responsible for managing a $1B estate

Duke apparently led a lonely life and had disinherited her only child, a daughter, several years before her death, yet she had befriended her butler, Bernard Lafferty. When she died, she left the Irish-born Lafferty $5 million and made him a co-executor of her estate, which included administering her Foundation. Lafferty had little formal education and was semiliterate, but quickly developed an appetite for nice things and spent lavishly. He also abused alcohol and drugs.

Not unexpectedly, the daughter contested the will, and after more than two years of legal battles, they reached a $65 million settlement with Lafferty and the estate. Importantly, a seven-member board was appointed to oversee the Foundation, which supports the arts, environmental efforts, education and other causes.

There is some irony here. Duke had left her semiliterate butler to make decisions about how nearly $1B of her money was to be spent on charitable causes. There are now seven experienced people making these decisions for the Foundation. While most of us don’t have huge estates that we’ll be leaving to our heirs, there is nonetheless a fair amount of complexity. Think about this as you name your Successor Trustee.

California Document Preparers assists our clients with the preparation of their Living Trusts. We’re available by phone and email to answer questions and walk you through every step of the process. Call one of our three Bay Area offices today to make an appointment.