How Estate Size Will Influence Your Estate Plan

15 Friday Sep 2017

Posted by Robert Dowling in Planning Tips

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Abatement, Abatement Process, Asset Management, Beneficiary, Bequests, Debts, Earned Income After Death, estate, Estate Income Taxes, Estate Obligations, Estate Plan. Common Estate, Estate Planning, Estate Size, Estate Taxes, Expenses, Large Beneficiary Pool, Net Worth, Order of Payment, probate, Probate Avoidance Strategy, Probate Court, Retirement Accounts, Simplified Probate Process, Small Estate, Tax Planning, Tax Professional, Unintended Consequences, Well-Funded Estate, Will

To properly plan your estate, it’s important to understand how your estate size will influence your estate plan. As explained in the article The First Step to Estate Planning: Estimate Your Net Worth, your net worth will determine your estate size. By calculating your net worth, some important questions will come into focus regarding your estate plan:

Are there enough assets to cover your debts and other estate obligations?

If there are enough assets to cover the estate obligations, are the remaining assets enough to cover bequests?

Do I need to plan for estate taxes or estate income taxes?

Do I need to plan for abatement?

Obviously, these are just a few basic questions as life circumstances can make estate planning much more complicated. However, the answers to these questions will influence how you begin to properly plan for your estate.

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Two Reasons Why a Beneficiary May Become Belligerent

11 Monday Sep 2017

Posted by Robert Dowling in Beneficiaries

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Abatement, Abatement Process, Ademption, Ademption by Extinction, Belligerent Beneficiary, Beneficiary, bequest, Claims, Common Estates, Contest The Will, Doctrine of Ademption, estate, Estate Assets, Executor, Expenses, Identity Theory, Probate Avoidance Strategy, Taxes, Threaten Lawsuit, Will

There are many reasons a beneficiary may become belligerent. However, according to the article How to Handle a Belligerent Beneficiary, one way a beneficiary acts out towards an estate is to exercise their right to contest the will or threaten a lawsuit. Moreover, there are two legitimate reasons why a beneficiary may exercise such a right: abatement or ademption.

Unfortunately, the executor must inform each beneficiary named in the will that they are part of the estate. If the beneficiary understands the bequest they may receive, the beneficiary will expect that bequest at some point. So, if abatement or ademption affected a bequest, the intended beneficiary may become belligerent. As a result, the belligerent beneficiary may contest the will or sue the estate.

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How to Avoid Abatement and Ademption

04 Monday Sep 2017

Posted by Robert Dowling in Planning Tips

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Abatement, Ademption, Ademption by Extinction, Beneficiaries, Bequests, Common Estates, Contest The Will, Estate Planning, General Bequests, Heirlooms, probate, Probate Avoidance Strategy, Probate Court, Residuary Beneficiaries, Specific Bequests, testator, Will

Typically, careful estate planning will avoid abatement and ademption. However, people with common estates know little about abatement and ademption and fail to plan properly. As a result, the probate court ends up deciding the distribution of bequests through abatement or ademption.

To avoid abatement and ademption, the testator must prepare a coherent estate plan and keep it updated. If the testator uses the process described in the article The First Step to Estate Planning: Estimate Your Net Worth, then avoiding abatement and ademption is possible.

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Determining Bequest Distributions Using the Doctrine of Ademption

28 Monday Aug 2017

Posted by Robert Dowling in Probate

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Ademption, Ademption by Extinction, Ademption by Satisfaction, Advancements, Beneficiaries, Beneficiary, Bequests, Doctrine of Ademption, General Bequest, Identity Theory, Intent Theory, probate, Probate Court, Specific Bequest, testator, Will

The doctrine of ademption applies to specific bequests no longer owned by the testator at death. In general, when bequeathed property is no longer part of the estate at death, the bequest fails. As a result, the intended beneficiary receives nothing and doesn’t retain any rights to the property.

In short, all states apply the doctrine of ademption in some form. Additionally, the following two forms of ademption make up the doctrine:

Ademption by extinction – This form of ademption applies when the bequeathed property is not part of the estate at the testator’s death.
Ademption by satisfaction – Concerns property given to a beneficiary during the life of the testator.

Although all states use the doctrine of ademption, not all states apply ademption the same way. The rest of this article will touch on the two forms of ademption.

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Paying Debts and Honoring Bequests through the Abatement Process

21 Monday Aug 2017

Posted by Robert Dowling in Probate

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Abatement, Abatement Process, Administration Expenses, Administration Plan, Attorney, Beneficiaries, Bequests, Claims, Common Executor, Creditors, decedent, Estate Assets, Estate Expenses, Estate Planner, Executor, Expenses, Funeral Expenses, Intestacy, Personal Property, Real Property, Will

When an executor realizes the estate lacks the assets to meet estate obligations, including bequests, an abatement process occurs. The abatement process allows for the proportional payment of obligations using limited assets that result in reducing or eliminating bequests to beneficiaries.

Initially, to determine the need for abatement, the executor will build an administration plan as described in the article The Administration Plan: A Necessity for the Executor. If the plan reveals that the estate lacks the assets to meet estate obligations, then abatement will result. Additionally, if the will excludes abatement instructions, estate law will handle the abatement process. This article will provide an overview of how estate law in Massachusetts handles abatement.

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Close the Temporary Home Office

14 Monday Aug 2017

Posted by Robert Dowling in Record Keeping

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Acting Executor, Amended Returns, Beneficiaries, Death Certificate, Distributions, estate, Estate Administration, Estate Tax Returns, Executor, Executor Approval Letter, Expenses, Filing System, Formal Probate Process, Former Executor, probate, Storage Boxes, Temporary Home Office

After closing an estate, the most gratifying task for an acting executor is to close the temporary home office. Typically, after satisfying all the rules of probate in a formal probate process, the executor will close the estate. As a result, the executor becomes an acting executor responsible for closing tasks as described in the article Estate Income Tax Returns: Review and File the Returns. In the end, the one closing task an acting executor likes is the final task: the task to close the temporary home office.

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Estate Income Tax Returns: Review and File the Returns

07 Monday Aug 2017

Posted by Robert Dowling in Estate

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Attorney, Beneficiaries, Distribution Checks, Distributions, estate, Estate Closing, Estate Income Tax Returns, Estate Reserve, Executor, Fiscal Year Returns, Massachusetts Schedule 2K-1, Record Keeping System, Schedule K-1(Form 1041), Short Year Returns, Tax Professional

The time to review and file the estate income tax returns occurred simultaneously with closing the estate. According to the article Closing the Estate: Final Tasks to Close the Estate, on October 29, 2013, I was dealing with the professionals to send a final invoice. On that same day, the fiscal year returns, both federal and state, arrived in the mail for my review. Since the tasks of closing the estate and reviewing the fiscal year returns weren’t burdensome, the timing was fortunate. The arrival of the fiscal year returns would allow me to review and file the returns while closing the estate. So, the only task remaining after closing the estate would be dealing with the short year returns.

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Closing the Estate: Final Tasks to Close the Estate

31 Monday Jul 2017

Posted by Robert Dowling in Estate

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Acting Executor, Attorney, Belligerent Beneficiary, Beneficiaries, Close the Estate, estate, estate account, Estate Income Tax Returns, Estate Reserve, Executor, Final Distribution, Fiscal Year Return, Massachusetts DOR, Massachusetts Schedule 2K-1, Schedule K-1, Short Year Return, Tax Professional

After making the final distribution to the beneficiaries, final tasks remained to close the estate. As mentioned in the article Closing the Estate: Send Assent Forms to Close the Estate, distributing all the funds in the estate account was necessary to close the estate. Unfortunately, after the final distribution, the $5000.00 estate reserve was still part of the estate account. As a result, the final tasks to close the estate were as follows:

Make the final payments to the professionals.

Distribute the remaining funds in the estate reserve to each beneficiary.

Close the estate account.

Although eager to complete the tasks, making another tedious distribution dimmed the mood.

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Closing the Estate: Send Assent Forms to Close the Estate

24 Monday Jul 2017

Posted by Robert Dowling in Estate

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Assent Forms, Attorney, Attorney General, Belligerent Beneficiary, Beneficiary, Close the Estate, Distribution, estate, estate account, Estate Resesrve, Executor, Final Account, Final Accounting, Final Distribution, Inventory of Assets, Massachusetts Probate Court

On October 1, 2013, after completing the final accounting, it was time to get approval to close the estate. As mentioned in the article Closing the Estate: Complete the Final Accounting, the attorney would send assent forms along with the final Inventory of Assets and the Final Account to each beneficiary. If the beneficiaries approved of both documents, they would sign and return the assent form. Moreover, if all assent forms returned signed, this would allow me to start the closing process. Otherwise, any beneficiary wanting to contest the Final Account would notify the attorney of their intentions. So, sending the assent forms for approval from the beneficiaries was really a referendum on the estate administration. As a result, this was an anxious time for me as an executor.

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Setting up the Estate Reserve and the Final Distribution

17 Monday Jul 2017

Posted by Robert Dowling in Probate

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Attorney, Beneficiaries, estate account, Estate Administration, Estate Closing, Estate Reserve, Executor, Final Account, Final Accounting, Final Distribution, Formal Probate Process, Miscellaneous Expenses, probate, Schedule B, Tax Professional, Unexpected Expenses, Will

When completing Schedule B in the final accounting, setting up an estate reserve and the final distribution becomes necessary. As mentioned in the article Closing the Estate: Complete the Final Accounting, Schedule B takes more time to complete than Schedule A. The reason is that the executor has to step out of the final account to complete the following tasks:

Set up an estate reserve that will pay expenses beyond the closing of the estate.
Calculate a final distribution using the remaining funds in the estate account.

Since the estate reserve and the final distribution represent future expenses of the estate, they become part of Schedule B. Also, because the two items are future expenses, planning and estimating future expenses becomes necessary. As a result, the executor may have to delay completing Schedule B for at least a couple of days.

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The Common Executor

~ A Journey into Estate Administration

How Estate Size Will Influence Your Estate Plan

Two Reasons Why a Beneficiary May Become Belligerent

How to Avoid Abatement and Ademption

Determining Bequest Distributions Using the Doctrine of Ademption

Paying Debts and Honoring Bequests through the Abatement Process

Close the Temporary Home Office

Estate Income Tax Returns: Review and File the Returns

Closing the Estate: Final Tasks to Close the Estate

Closing the Estate: Send Assent Forms to Close the Estate

Setting up the Estate Reserve and the Final Distribution