Did you know that nearly 60% of Americans lack a will or have done any estate planning?
In this episode of The Agent of Wealth Podcast, Marc Bautis talks with Anthony Park about the importance of estate planning. They discuss why naming an executor is significant for not just a person’s assets but also their personal well being. Anthony shares what the average estate process may look like when a person dies and how an executor’s role comes into play.
In this episode, you will learn:
- What happens to your estate when you die
- Tips on who to name as the Executor of your estate and why naming your child may not be the best decision.
- Why estate planning for “Solo Agers” is critical
- What happens during probate if you own property in multiple states
- And more!
Tune in now to learn strategies that will help you create your estate plan!
Tune in now to learn strategies that will help you create your estate plan!
On today’s show, I brought on a special guest, Anthony Park. Anthony is a New York based attorney who represents his clients as a professional executor, trustee, or probate lawyer. Anthony is also a best-selling author on Amazon and the host of the podcast Simple Money Wins.
You can break down financial planning over one’s life into three periods.
- The accumulation phase where they’re working and building up assets
- The decumulation phase. When someone retires, and is now drawing on those assets.
- The distribution phase. What happens to those assets when someone dies.
In the financial planning world, not nearly as much time is focused on that third period as the other two. I’m excited to talk about how someone can better prepare for the distribution of those assets and make the probate and estate process go a lot smoother.
What happens when someone dies?
That’s a great question. I think all planning should really start from a viewpoint of what actually happens when someone dies. A lot of plans are very academic and ivory tower, but the real world of probate is actually really quite messy. You have to know that in advance to understand what is a good in theory planning technique versus what are planning techniques that are actually going to make the lives of your heirs easier or are worth it. And who wants to spend their life planning for their death, right? You want to do the bare minimum amount, I would imagine.
The first overarching thing I’d like to point out is that probate is pretty much, let’s call it 15 years in the past, in terms of technology. If you’re used to banking through an app or through Twitter or through a live chat, those options don’t exist for your executor. Your executor is going to have to deal with a live person. They are going to have to walk into a physical branch and show their face. There’s no very little scanning and sending of documents. You have to send original documents or you have to hand in original documents. This is the chore that you’re leaving for whoever you name as your executor or whoever’s in charge after you pass.
It sounds not only complex, but also time consuming for the executor.
Oh, brutally so. There are things that I didn’t imagine doing again, like standing in line at government offices. People are often surprised if they’re doing it for the first time as an amateur executor. But unfortunately, for those of us who do this on a regular basis, it’s like stepping into a time warp when we clock in for work and then going back to the real world with smartphones and such when we’re off the clock.
Is the Will where someone names their Executor?
Yes. Traditionally you name your executive in your will. That’s just a nomination. The fact that you’ve named somebody as an executor in your will doesn’t make that person your executor. That happens upon your passing and when the court decides.
The reason for that is usually quite a bit of time passes between when you’ve made your will and when you actually pass away. Things may have changed. That person may not be in the country. That person may not be alive. That person may be a felon now. Or who knows? There’s a lot of reasons why they would no longer be allowed to be an executor or don’t want to be.
You want to name at least two Executors. You want to have a depth chart, ideally. But don’t worry about it too much. If the people you named just don’t work out for whatever reasons, there are mechanisms for your heirs to circumvent the will and put somebody appropriate in place, if that’s what the circumstances dictate.
Do you see a theme with people naming executors? Do they name a family member?
The rough analogy I like to use is wedding planning. For executors, you would traditionally name your surviving spouse or your favorite child or your eldest child. I guess nobody’s supposed to have a favorite child.
And similarly, with weddings, you would name your best friend as your best man or maid of honor. I don’t know how it is in your circle of friends. But lately, being the maid of honor or best man is actually a big job. You have to plan a bachelor party. You have to write your speech. There’s a lot of things you’re asking that person to do, right?
But that evolved into hiring wedding planners, right? And in the past, 10, 15 years, the whole wedding planning industry has become a real legit industry where you’re outsourcing the headaches and just leaving the fun parts for your best man and your maid of honor.
So for estates, you don’t want to burden your eldest son with all the headache of being an executor. You want to give them the opportunity to mourn and be in charge of family gatherings and such like that. But in terms of the real nitty gritty grunt work, that is something more and more people are beginning to outsource, just because it’s such a chore.
That makes sense. Where do you begin an engagement with someone as a professional executor? Is it prior to someone dying? Or do you only get involved after they die?
Lately, it’s been falling into two buckets. Folks who are naming me in their will or trust as they’re doing their planning. That gives them a lot of peace of mind that they found somebody who’s younger and is going to be around for my older clients. Because all of their peers and siblings are of the same age and will probably be passing around the same time. It’s really useful for them to know that they have a younger, experienced person to step in and fill that role for them.
The other bucket, like I mentioned, is where somebody has passed away and the surviving heir is like, “Nobody wants to do it.”
They have young kids, they have jobs, they have careers, they’re locked down, or whatever the case may be. They just can’t do it and they’re relieved to know that there’s an outsourced solution available. I can come in after somebody has passed as well.
And like you mentioned, a lot of people will name their eldest child or an eldest son. I’m sure doing that could create problems with relationships with other siblings if one feels like the other one is controlling or doing something that they shouldn’t be doing.
Absolutely. There’s an element of asymmetry of control where, even if it’s not actually happening, the non-executor siblings feel like they’re in the dark or they feel like they don’t have quite as much information or control as the executor sibling. And even if it’s at a subconscious level, that does create some friction.
That’s usually not what parents want to leave behind. And one other point on that is that naming the most “responsible” child as the executor is a funny little catch 22, because the most responsible adult child is usually the one who has the most stuff going on in their life.
They already have a job, a successful career, PTA, all that good stuff, whereas the … I’m just using an avatar, but the slacker child who has all the free time and who probably could be an executor, you don’t want them to be. It’s a weird kind of a counterintuitive situation.
I could see how parents don’t want their death to cause damage to the relationships between their kids. Unknowingly, they could do that by not naming the wrong person, but by taking that approach of singling out. Is there such a thing as co-executors? Do people do that?
That is possible here in New York and New Jersey. I don’t recommend it. It’s just classic too many cooks in the kitchen spoil the stew. That means you need each of those individuals to sign off on everything and to show up in person for everything. You’re just doubling the headaches, basically.
What Does an Executor Do?
Can you walk us through at a high level what goes into settling an estate or what an executor will do?
In New York, you go to the county court for where the person passed away, or you can go to where they had some real estate. You can do a little bit of court choosing, forum shopping, as the lawyers like to say.
The whole process really falls into three phases or three buckets. The first is getting somebody legally appointed as the executor. Then you have the big middle chunk, which is what we call estate administration. But I think most folks would recognize it as settling the final affairs. And then the third bucket is closing the estate and just making sure everything is wrapped up and everyone’s gotten their money.
And there’s a clean finish to this so that the executor won’t have any lingering liabilities.
In that first bucket, you’re going to court. Iif there’s a will, you’re submitting that, proving to the judge that it’s legit, and it followed all the technical formalities. That the person was of sound mind and not senile or not under any medications when they signed the thing. And then the judge will grant Letters of Testamentary. That’s a certificate you get from the court that says, yes, you are an official court-appointed executor. I have no idea why they call it letters testamentary though.
That certificate is what you hold up and you show to the banker, to the title company, to the DMV, to anybody who needs to deal with you and needs to have confidence that they’re dealing with the right person and that they’re allowed to share information with you. It could be hospitals, if you need medical records. It’s everything.
The whole second phase of settling the final affairs is at least seven months, but it’s usually more than a year. This big middle chunk is where you’re running around and doing all those things you can imagine; closing down accounts, finding accounts. You might have to dig through old tax returns, maybe even hire a private investigator to look through the credit reports. There’s a lot of things you need to do to sort out and figure out what is there to collect.
A lot of people ask, “Oh, isn’t there a central database where you can find out where this person had life insurance or where this person had brokerage accounts?” Oh man, if that existed, advertisers would be having a ball.
Is it as simple as taking what’s in the will and following the instructions? If the Will said, “Leave this account to John Smith,” you actually execute whatever’s involved in making that transfer to John Smith.
That’s correct. But the one caveat is you don’t do that until the end. The reason for that is you need to make sure there’s enough money to cover the debts. You want to avoid having an insolvent estate for whatever reason, which happens more than you think, Let’s say the Vanguard account was supposed to go to the nephew with $100,000 and you pay that. We say, “Oh. Yeah, that’s what the will says.”
But then you find out as the months go on that there was a huge tax liability, the house was underwater, et cetera, et cetera. And you really weren’t supposed to pay him the full $100,000. Everyone was supposed to get 50 cents on their dollars.
So how are you going to get that $50,000 back from the nephew? That’s not happening.
So even things like that, understanding the order and how to mitigate your risk, those are things where having a professional involved, it really can save your bacon.
Do creditors have a certain amount of time that they can make a claim to a debt, or can it be ongoing?
Technically, they have seven months from when the executor receives their court appointment. That’s the date, when I get that certificate that I can wave around, the letters of testamentary. Thats the date when the clock starts ticking. And between that date and seven months after it is when creditors need to send me what’s called a claim. If I don’t get that, I’m good. I can distribute to the heirs.
They might be able to go after the heirs directly, but that’s actually very hard for them. It’s really much easier for them to go after one person, the Executor.
But they’re very good about that. They have runners in the courthouse every week, checking the files to see who died. They’re on top of that.
You mentioned not being a central database on the assets or liabilities that someone has. Is there a central database that lists when someone dies?
So what happens is, number one, they’re constantly checking the Social Security Death Index for notifications of death. And then they’ll run that across their accounts to see, “Hey, this guy owes us some money.”
But in addition to that, they send these runners down to the courthouse. The courts don’t allow online access to the death records. So you’re literally having these guys sitting there with yellow legal pads scribbling down, okay, who died this week. And then they take that information back to their main database, cross-reference that, and figure out, “Do we have account holders who we need to send notices to?”
Does the Executor get involved in the valuation of an estate?
Absolutely. When you start the process, you have to give the court an estimated valuation, but that’s a real rough number. You’re not doing anything for tax purposes at that point. You’re just trying to tell the court roughly what the size of the estate is. And that mostly relates to paying the court the appropriate court filing fee.
When valuations get really sticky is if you have estate tax liability, which is not a huge issue, because I think right now it’s $11 million dollars or more. So it doesn’t impact that many people. You’ll contact your financial advisor or your financial institution to get date of death valuations. it’s a fairly standard procedure.
With real estate, you might want to get an appraisal as of date of death. But if you end up selling the property within six months to a year of the death, the IRS will take that sale price as current, as a date of death value.
What happens if the person has property in multiple states. Let’s say they live in New York, but have a vacation home in Florida. Can that make things more complex?
When you have property in different states, sadly, Florida will not acknowledge just right off the bat a New York executor. You have to do a whole other proceeding in Florida.
What is Ancillary Probate?
It’s called ancillary probate. You have to get a copy of the New York court file and you send it down to Florida and you say, “Hey, can you respect this?” And they’ll have their whole thing where they review it, and you probably have to hire a lawyer down there. And once everything is good, then they’ll give you ancillary letters testamentary in Florida for Florida activities or assets.
We’ve been talking a lot about estate planning from the perspective of the person who died. What about for the heir? What is their involvement in this? And how is it different when there is an independent or a professional executor involved?
That depends on the heir. So ideally, an heir doesn’t have to do anything. If they have confidence in the executor, they sign off on some paperwork in the very beginning. If they don’t want to, they don’t even have to. There’s ways around it. And then they just wait. They’ll receive a copy of the will. They are entitled to that so they can see, “What am I getting?”
But if you’re getting 5% of the estate, but you don’t know what the estate is, that doesn’t really mean anything for a while.
You have to go through this whole process. The best advice I have for heirs is to sit tight, have some confidence in your executor, and unless you see some real red flags let the process play out. At the end you are going to get something called an accounting.
The executor puts together this real thick financial ledger of every transaction that he did as executor. It contains every dollar he collected, every dollar he spent on accountants or appraisers, and then whatever’s left and how he divided that up. You have full transparency as an heir. You get to see exactly what happened.
But you don’t get that until the end, because how could he? It’s very hard with current technologies to do that in real time. Your opportunity to say, “Hey, I don’t like how things are going” is at the end when you’re given that they’re transparent ledger.
One thing that I see come up a lot when working with people in financial planning is whether or not they should leave property or assets to their children who are minors. How is that dealt with? And I’m sure it’s dealt with differently in different places, but is there a general way that the executor would deal with something like that?
In my planning experience, I’m pretty sure you’ve seen this too, the fallback position is to have a will that creates a minor as trust, which says … because kids can’t own money. That’s just not a thing in the United States.
The fallback position is to have a will where I give an equal shares to my kids. But if they’re minors, then it goes into a trust for them, which is like a holding entity for their benefit. And they usually have a payout schedule, like when the child reaches 25 years old, they get a third. When they reach 30 years old, they get the another third. And when they reach 35 years old or, they get the rest. Nobody wants an 18 year old to get a windfall.
Do you see a lot of people that die without a will?
Yeah, absolutely. That’s probably, I want to say two thirds of my probate business. And that bears out, because statistically 60% of people don’t have a will.
What happens in that case?
There is a default inheritance regime. There’s a set of rules called intestacy. And that’s basically, if you don’t have will, this is your estate plan. And for most people, it’s going to be real similar to what you would’ve done anyway. It’s a little different, but it’s essentially half to your spouse, the other half divided equally amongst your kids.
If you have the traditional Simpson’s nuclear family, that’s probably what you were going to do anyway.
If you have young kids, you want to get a will to make sure that you don’t get a weird situation where your kids are getting everything at 18 or you have to get a guardian appointed. You want to avoid all that.
You hit it on the head. One of the things I always will recommend getting a will, not only because you want to ensure your assets go where you want. You also want to make sure you’re naming the right guardian that you want for your children and that’s just as or even more important than where the assets go.
I talk about this more with my solo ager clients. One of the main motivations for doing a plan is to avoid the dreaded court-appointed stranger. So for my older clients, that could be the person who you could end up with. As your health perhaps declines a little bit, you may get stuck with a court-appointed attorney who is in charge of your whole life. That’s a nightmare for my older solo ager clients.
For young parents, the nightmare is having a court-appointed stranger as the guardian for your kids. That is something you definitely want to avoid. If that gives you any heebie-jeebies at all, get a will done right now.
You mentioned the solo ager, and I know that’s the title of one of your books. Can you explain what a solo ager is?
A solo ager, which I’ve only learned of the parlance recently, are our citizens who are older, usually in the fifties or sixties, who are essentially childless for whatever reason. And childless doesn’t mean literally childless. We do have many solo agers who have biological children, but they’ve essentially gotten estranged or just don’t have a great relationship or their kids just live the Instagram life or jet setting and they’re not going to be around if anything happens. Even though they have a great relationship, they’re just not physically around.
I’m sure a lot of people who are in that category don’t think they need to do estate plan or don’t think they need to do a will, but everyone goes through probate. So they probably should do one as well.
Solo agers need a will, a to plan probably even more so than traditional family structures, because their plans actually protect them, not their descendants. They protect them from getting stuck in a court-appointed nursing home type situation.
And talking about solo agers, I’ve seen them leave assets to pets. Can someone leave an asset to a pet?
Oh yeah. That’s actually in the statute in New York. There is a pet trust. I’m not a big fan of those. I’m not a pet lover, so I’m probably not the right person to ask.
All right. There’s a couple of levels to that. Number one, work with a professional. I understand that sounds self-serving. I actually don’t do that many wills or estate plans. At the very least, hire somebody to supervise the signing ceremony. If you want to do a legal zoom or rocket lawyer, I’ve actually reviewed all those. And I have thoughts on those, but I’ll glaze over that for now. Fine. You want to do a DIY will? That’s fine.
The signing ceremony is so easy to get wrong, and it’ll invalidate all the effort you put into doing your DIY or do-it-yourself will. At least have somebody who knows what they’re doing, an attorney, supervise the signing, corralling the witnesses for you. Don’t just get your doorman and the guy who delivered your Uber Eats to be the witness to your will. Get it done right.
Do you have to have one witness, or is it two witnesses
Two is the minimum. Three is good to have as a backup in case you have trouble tracking down a third.
Another thing, I can’t stress this enough is the importance of choosing the right executor. It doesn’t have to be a professional like me, but really, really understand that this is a big ask. I don’t think I’ve met anyone, literally anyone, who said, “Oh, that was fun. I’m glad I was the executor.” There’s people who will grin and bare it and say, “This is my duty. I owe it to my uncle to do this,” and they’ll do it. But nobody has fun with it. It’s not fun. Just imagine going through all these processes as they were 15, 20 years ago before the internet, basically.
Do you recommend that, when someone names an Executor in their will they actually check with that person to make sure they’re okay with being the Executor? Or do you see people just put an Executor in there and hope that they’ll accept the duty.
It’s recommended, but it’s not necessary. There are some times when it makes sense to not say something in the idea of preventing any friction. “Oh, Bobby named me the executor. So at Thanksgiving, I’m going to ask …” Maybe behavior changes a little bit. So there’s reasons not to, but yeah, it’s generally recommended.
So you host a podcast show as well?
Oh yeah. It’s mostly me and Janice, my paralegal. Lately, we’ve been talking about recent cases and just trying to give you a window into what probate is like so that you can either avoid it when you’re doing your plan, or if you’re an heir about to embark on that journey, just understand, “Do I really want to be doing this for the next year to 18 months of my life?”
Has probate administration been a lot different over the past nine months with the pandemic going on?
Surprisingly, it hasn’t been that different. Everything’s a little slower, which is probably true with most other bureaucratic type things. But requiring original signatures and things like that is how it’s always been. It’s actually like we’ve leveled the playing field. Everything else is as slow as us.
How best can someone find out more about you and more about what you do as a professional executor and your estate planning services?
The best place to start as in my website, AnthonySPark.com. From there, you can find a podcast, blog and YouTube videos. Or just Google my name on Amazon and pick up one of my books and see if that tickles your fancy.