The Estate Plan Poll

The Common Executor would like to know how many visitors have actually completed an estate plan.

Many people hit road blocks on how to set up their estate. As a result, people decide to put off the process for a later date. Procrastination can produce undesirable results if a person dies without, at least, a basic estate plan. So, don’t procrastinate. While you are here, participate in the poll.

Have you Completed your Estate Plan?
© Kama

 

One Last Gripe from the Belligerent Beneficiary

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one last gripeThree days after mailing the distribution checks, the belligerent beneficiary made one last gripe. Unfortunately, the belligerent beneficiary made the mistake of contacting my attorney to complain. Since the attorney was under instructions to refuse direct contact from the beneficiaries, the attorney referred the gripe to me. As a result, the effort by the belligerent beneficiary to avoid contact with me failed. Anyway, the attorney informed me by email that the belligerent beneficiary had the following complaints about the distribution:

  • The beneficiary didn’t understand why the distribution happened early: that distributing early was against probate rules.
  • The beneficiary wanted to know why a final inventory and a final accounting wasn’t provided along with the distribution.
  • Since the beneficiary didn’t know about the distribution, the beneficiary felt slighted.

After reading the email, it was obvious to me that the belligerent beneficiary didn’t read the email sent to all beneficiaries about the distribution as mentioned in the article Estate Income Tax Returns: Execute the Plan. At first, I thought it was just an oversight that led to a misunderstanding. However, after further thought, it felt like one last gripe. After claiming the estate broke probate rules and not sending reports, this wasn’t a misunderstanding. To me, it was typical behavior from the belligerent beneficiary displayed throughout the entire administration. So, in reply to the attorney, I assured the attorney that I would handle the complaints appropriately.

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Plan a Simple Distribution in Your Will

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simple distributionIf you have a common estate and plan to distribute property through your will, plan a simple distribution. There is no need to force your executor to flow chart the beneficiaries and solve a complex algorithm to distribute property as depicted in the article Why is Calculating a Distribution from a Will Necessary?. In addition, complex distribution instructions increase expenses of the estate by forcing the executor to use outside help. So, to avoid giving your executor needless headaches and inflating expenses of the estate, plan a simple distribution.

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Why is Calculating a Distribution from a Will Necessary?

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calculating a distributionTypically, calculating a distribution from a will, in a common estate, is a result of poor estate planning. If an executor needs an analysis pad to figure out a distribution involving many beneficiaries, the estate plan has the following flaws:

  • There are too many beneficiaries in the estate plan.
  • The estate plan has a complicated distribution formula.

In the article The Estate Income Tax Returns: Execute the Plan, calculating the distribution written in the will forced me, as executor, to use an analysis pad, then an excel spreadsheet. The distribution formula consisted of twenty beneficiaries receiving different amounts of property calculated in percentages and shares. In fact, the complicated distribution formula took me a few drafts to get to a final draft. After completing the final draft on an excel spreadsheet, to make sure the distribution calculation was accurate, I emailed the spreadsheet to my attorney and the tax professional. The professionals reviewed the final draft and approved the distribution. Finally, after the review, I was able to distribute the property to the beneficiaries. In addition, the spreadsheet of the final draft became the template for the next distribution.

Although the distribution worked out well, an executor of a common estate should never have to calculate a complicated distribution. Therefore, calculating a distribution from a will should rarely be necessary.

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The Estate Income Tax Returns: Execute the Plan

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execute the planSoon after receiving the plan to complete the estate income tax returns, I began to execute the plan. As described in the article The Estate Income Tax Returns: The Plan to Complete the Returns, the plan, in part, involved distributing the proceeds of the rental property sale and paying out tax deductible expenses. However, before I could begin to execute the plan, I had to complete the following tasks:

  • Mail W-9 forms to beneficiaries refusing to give their social security number through email or by phone.
  • Contact the two charities for their tax-id numbers.
  • Contact the attorney and the tax professional for invoices.

So, after requesting the information, there was nothing left to do but to wait for the information to arrive.

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The Estate Income Tax Returns: The Plan to Complete the Returns

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plan to complete the returnsOn July 8, 2013, the plan to complete the returns came into focus. On this day, the tax professional asked for a copy of the will to complete the planning. At the time, the tax professional was looking into charitable deductions and if the will provided for them. So, I sent a copy of the will through email as a PDF file. In addition, in the same email, I outlined why I wanted the estate to pay the estate income tax. After sending the email, I knew the plan to complete the returns was near completion.

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The Cleanup of the Decedent’s Home Office and the Final Task

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decedent's home officeWhile the tax professional was planning the estate income tax returns, I decided to clean up the decedent’s home office. Early in the administration I set up my home office to administer the estate. However, I moved only the documents and property needed to properly administer the estate. Consequently, I left the rest of the documents and property in the decedent’s home office. So, while in limbo, I thought it was a good time to finally clean up the decedent’s home office.

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The Estate Income Tax Returns: Prepare the Tax Documentation

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tax documentationIn May 2013, soon after meeting with the belligerent beneficiary, my focus turned to the estate income tax returns (returns). After reviewing the tax documentation used for the final returns, I became uncertain about the tax documentation needed to prepare the estate income tax returns. That uncertainty gave me reason to pause. This is when I realized that this chaotic estate was going to close on time. After months of worrying about the run-down rental property, the tenants, and associated expenses, the estate would actually settle on time. So, with the returns not due until December 15th, there was no need to rush. Furthermore, instead of wallowing in uncertainty, I called the tax professional for some guidance on the tax documentation.

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