Mon, 19 January 2009
Very often, when I prepare wills, powers of attorney and health care directives (living wills) for clients they react with surprise when they see the length of my documents. “Why”, they say, “is the will you are preparing 20+ pages when my previous one was only 2?” “The document is designed to cover as many scenarios as possible”, I explain, “not knowing which scenario may in fact occur”. It is not good enough to simply address the most likely ones, especially if yours turns out to be one of the uncommon ones.
Narrowly or poorly drafted wills can cause unpleasant and expensive results. Let’s take the simple task of designating an executor, the person who is appointed the official representative of the estate and is charged with gathering the assets, paying the debts and taxes, if any, and following the instructions set forth in the will and making final distributions to the heirs. It is a good idea to have one or more backup or alternate executors, in case someone can’t or won’t serve, when the time comes.
Now, most people would think in terms of the executor dying as the reason a back up is necessary, but that is just one possible scenario. Yet, I not infrequently see a will drawn up that states “if my executor dies then I appoint my alternate to serve”. Let’s say Child A is the executor and Child B is the alternate. Mom dies and A doesn’t want to serve. No problem. A will step aside in favor of B, right?. Except that A is alive and the will only provides that B can serve if A has died. So, what now?
B can serve as administrator. Same role and responsibilities but some very important differences. An executor can serve without a bond if the will so provides but an administrator cannot. And that can be an expensive difference. The bond acts similar to an insurance policy in that the company issuing the bond will pay out the inheritance if the assets are lost or misappropriated. The bigger the estate the higher the cost, sometimes tens of thousands of dollars. While a bond can be very important, many close knit families see it as unnecessary. Unfortunately, in our case there is no choice. Had the will stated that the alternate can step in if the executor dies or otherwise can’t or won’t serve, then the bond could have been avoided. A very expensive mistake and a reason you want to be sure that the attorney drafting your will is experienced in estate planning or elder law.
Category:Estate Plan -- posted at: 6:00am EST