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It's a Tough Job,
But Somebody's Got to Do It:
Where to Start

The Social Diary Wealth Management Columnist Martin S. "Duke" Johnson
Duke Johnson JD MBT CLU, - Column #2, April 2nd, 2006

Call of Duty

Ok, you are the dutiful son or savvy daughter, and when Dad asks you to be executrix and trustee for their estate, you say "sure, no problem!" Wow, had you only known. In most cases executors and trustees have different responsibilities so being in both roles is most efficient. Most estates are straightforward, and as following figure indicates, about 71% of IRS estate tax returns are valued at less than $2.5 million. With the current estate tax exclusion level at $2 million, most estates will be tax-free. IRS statistics indicate the number of taxable estate tax returns amounted to 1.2% to 2.3% of total adult deaths in recent years.

So what's the big deal? Well, even in modest estates, the executor is charged with finding and taking inventory of all estate assets. Bank, investment accounts, deeds to property, insurance, retirement benefits, et al. If real estate, private corporate stock, partnerships, and other ventures are involved, you just got a full time job. All assets must be re-titled, some sold, some appraised, some used to settle debts; and then you must file income and estate tax returns.

The trustee's role, if all estate assets are in a trust, is similar to that of the executor with additional "Fiduciary Standards." Investment of assets is critical, along with the distributions to beneficiaries. This is where the fun begins.

Squabbling Siblings

I dislike the word "dysfunctional," especially when applied to families, as "psych types" love to label all behavior. Trustees may face tough investment decisions and friction among family members --"sell the home; I want cash now," or "don't you dare sell the dining room furniture; I want it shipped to Boston now."

Health conditions, substance abuse problems, kids of divorced parents, and on and on. This is not a responsibility to take on lightly, yet we don't want to deal with a stranger from a bank trust department. Having served in these roles on more than one occasion, and having helped numerous clients with estate administration, let me share with you some inside tips to implement before a death:

1. Family Meeting

You cannot really be effective as an executor or trustee unless you have a meeting with your parents regarding their finances and what they want to achieve with their estate. Survey says:

" 71% of seniors said they would be very comfortable if their kids asked about wills and trusts.
" Only 49% of adult children report knowing a great deal about their parents' estate.
" 50% of parents say it's important to leave a legacy, and 86% say they have a will or estate plan.

Open this critical family discussion with a comment about your parents' "legacy" or your experience in setting up your own estate plan, or a meeting with Duke. Blame me!

2. Request GPS Form

You know, Global Positioning System, or "where to find anything"--a special document which catalogs all assets, benefits, people, property, contacts, etc.

Start with our own "Life Crisis File," then move up to our special "Inheritance Letter" that outlines "all you need to know when I'm gone." Call me so we can decide which tools will help you the most.

3. Outsource (Not to Bangladesh)

Draw on the resources available--check with your parents as to which professionals they currently work with, as they will probably be your best resources and will likely have current files. CPAs can be most valuable, as tax returns, valuations, and known tax traps are within their purview. We can be of special assistance in determining investment choices, cost basis of old stocks, merger/acquisition information, and solid investment counsel on the critical task of determining assets for distribution.

4. Deal With Problem Beneficiaries Now

Ask parents or grandparents to hand write a letter of direction to all beneficiaries, spelling out exactly who gets what in no uncertain terms. Don't leave it up to me to decide who gets the antique auto, Cropsey's paintings, or the Wedgewood china. All the rest consign to eBay!

5. Set Hard Deadlines --Keep Meticulous Records!

This is a JOB. Even if there is no bond required or you receive no compensation, treat it as if the IRS will audit the estate.

Keep track of hours spent on estate matters, travel/mileage, and expenses. Prepare accounting for all beneficiaries.

Estate tax returns are typically due within nine months of the date of death. Keep the estate accounts open for six to eight months for any surprise creditor bills, taxes, etc. Hold cash to meet expenses, taxes, and immediate payments to charities or family beneficiaries.

All you can do is your best! And most beneficiaries won't realize or appreciate all you've done. But that's why you were asked to serve! Cheers for you!

* Martin S. "Duke" Johnson is the President & Chief Investment Officer of La Jolla Institute for Wealth Management. Johnson's credentials include: JD, University of Connecticut School of Law; MBA (Tax) Golden Gate University, San Francisco; BA, Baldwin-Wallace College, Berea, Ohio; CLU, American College, Bryn Mawr, Pennsylvania; American, Connecticut & Colorado Bar Associations

Mr. Johnson has over 30 years of diversified experience in the fields of investment counseling, taxation, insurance, estate planning, and law. Previously, Mr. Johnson was Vice President of E.F. Hutton's Personal Financial Management division and served in various investment and management positions for Aetna Life & Casualty and INA Corporation.


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