Efficient estate administration minimizes the amount of time it takes heirs to receive an inheritance. Estate expert Peggy Atkins Munro, author of Estate and Trust Administration for Dummies, explains the basics that everyone should know when dealing with an estate, whether it is preparing your own estate or an inheritance. Find out the difference between a will and an estate plan and why both are important.
In addition to estate planning, it is also important to pay attention to your investments while you are still alive. On today’s show, Doug Goldstein CFP® discusses how a brokerage firm works. Where does your money go when you invest it in a brokerage account, and how is it handled?
Follow Peggy Atkins Munro at www.taxpanacea.com
Read the Transcript
Interview with Peggy Atkins Munro
Peggy Atkins Munro, U.S-based tax advisor and author, explains what you need to know about estate planning, why it’s so important, and how to avoid making mistakes.
Douglas Goldstein: I’m very excited to have on The Goldstein on Gelt Show, Peggy Atkins Munro, who is a U.S.-based tax advisor. She’s been in the business for over 30 years. She wrote a book that would not be appropriate for any of the listeners of The Goldstein on Gelt Show because it is for dummies. I’m kidding – it’s called Estate and Trust Administration for Dummies. Peggy Atkins Munro, a real pleasure to have you.
Peggy Atkins Munro: I’m delighted to be here, Doug.
Douglas Goldstein: Before I go into the questions, I just to want to know if, when you wrote a For Dummies book, did you feel bad calling your readers “dummies”?
Peggy Atkins Munro: When I wrote my first For Dummies book, the editors of the For Dummies series explained to me that we are all dummies in some aspect of our lives. Rather than being this pejorative term, it just says, “Hey, you are smart about so many things but this is an area that you don’t know a lot about. Let’s help you.”
Douglas Goldstein: That is a great explanation. I don’t want to dig into that too much lest I say something wrong. Let’s talk about estate planning and actually settling an estate. There are a lot of terms that people like you and I use all the time that I don’t even know if people really know why we say them. Why, for example, do you call it “settling estate” as opposed to “grabbing money from the deceased”?
Peggy Atkins Munro: Because what you are actually doing is wrapping up the affairs of the decedent. The person who died may have been incredibly well organized, or maybe not.
Douglas Goldstein: More often than not, yes.
Peggy Atkins Munro: More often than not, they are very well organized, but there’s a lot of work, a lot of nit-picky just pulling things together, marshaling the assets. That’s another term we use for making sure we have all the assets, all of the debts. As the executor or administrator we are responsible for paying all of the decedent’s debts, and we are responsible for paying all of the debts of the estate.
What are the first mistakes that people make when a loved one passes away?
Douglas Goldstein: What sort of mistakes do people make? Normally, a lot of times people are not experts at money or law or accounting, and all of a sudden they are in a sad position that they lost, let’s say a parent, and they’ve got to deal with this. They don’t know anything. They don’t even know what to do. What are some of the mistakes that they should be watching out for?
Peggy Atkins Munro: The first mistake happens almost immediately, and it’s almost universal. You call the funeral director, and the funeral director says, “I’m so sorry for your loss,” and then says it will cost you $7,000 or $10,000, or whatever it’s going to cost you. You sit there and you have mom or dad’s checkbook, and you just write the check because you have signing privileges on that checkbook before they died. You can still sign, can’t you?
No. You really can’t. Once they die, any power of attorney that you might have had over that account dies with them, and so what you are doing actually is illegal. You’re spending money out of the assets of the estate without having been appointed and having court supervision of that. That’s the first mistake that we see. The funeral director wants to get paid, and here’s the secret: the funeral director’s not going anywhere. He may stand there with his hand out, but you do not need to put anything into it immediately.
Douglas Goldstein: That’s good to know. What if you just put out your own money?
Peggy Atkins Munro: You can put up your own money and then reimburse yourself out of the estate, once the court has given you the authority to use the estates’ money.
What is an executor?
Douglas Goldstein: Let’s go to a few more basics. You used the term “executor.” What does that actually mean, and what are the responsibilities?
Peggy Atkins Munro: An executor is a type of fiduciary, and a fiduciary has control over but does not actually own assets of another person outright. You can have executors, administrators, personal representatives, trustees, guardians, and conservators. These are all different types of fiduciaries. The court oversees the fiduciary, in this case the executor, and the executor is charged with pulling together all of the assets, paying all of the debts of the decedent and of the estate, and then an orderly distribution of the assets of the legacies. The specific legacies: my house goes to my son, John, and my car goes to my daughter, Ruth, and the residual requests, and John gets 50% and Ruth gets the other 50% of the remainder. Those are the kind of things that the executor does.
Douglas Goldstein: It’s a lot of responsibilities. We are hearing about responsibility from a very responsible woman, Peggy Atkins Munro, who wrote the book Estate and Trust Administration for Dummies, and she’s a U.S.-based tax advisor. Peggy, let’s dive into this a little more because from time to time people have even asked me to be the executor or trustee of their estate. I tell them that I’m a financial advisor and I help people invest the money. So frankly it would even be a conflict of interest to take that position. But a lot of times people need to ask someone to be their executor. So let’s say you say yes. What are you obligated to do, and is it really fair to ask a friend or family member to be an executor?
Peggy Atkins Munro: I think it’s important to ask before you put somebody’s name down in your will. I do think it’s really important to ask that person if it’s okay and if they are willing to act as your executor. The second thing is to look for somebody who has some of inkling of money and finance. It just helps to be able to add two and two and come up to four.
Should a child be an executor?
Douglas Goldstein: That’s a quality. Is it normal that it’s usually a child, or grownup child, that takes over?
Peggy Atkins Munro: Very often, it is a child. One of the mistakes that people make is that they've got four kids and they appoint all four kids to be executors - not a good move. You think the fights they had as kids was something. Wait till you see the fights they have as adults over who gets that clock and the carpet in the front hall.
Douglas Goldstein: You recommend choosing one of them?
Peggy Atkins Munro: I recommend choosing one, or at most two to act together, but if you put everybody down because you don’t want to leave anybody out, you’ve just done more to destroy your family potentially than anything else you could have possibly done.
Douglas Goldstein: I agree with you. With all due respect to lawyers, they often fail to sit with the client and say, “What would you like to do?” If the client says, “Well, I want to be fair and make all four executors,” it’s nothing to do with being fair. You can be fair and make all four of them equal beneficiaries, but from a financial standpoint, because we deal with the actual accounts, it’s much harder. It’s exactly what you are saying. It’s much harder when you have to get everyone to sign along. We so much prefer if there’s one person who handles it all and checks with the other kids. Does that person with legal responsibility know how to be fair?
Peggy Atkins Munro: That person has legal responsibility to follow the terms that have been laid down in the will. That’s where the responsibility ends, so fairness really doesn’t have anything to do with it. Whatever the person who wrote the will puts in the will, the executor’s job is to carry out those wishes. When people sit there and tell me, “I don’t have a will because it’s all going to go here,” or “It’s all going to go there,” I look at them and I say, “No its not. Without a will.” Having a will, and we are not even talking a full-blown estate plan but just having a will, a last will and testament, is your chance to have the last laugh.
Douglas Goldstein: It’s a funny way to put it.
Why having an estate plan is always important
Peggy Atkins Munro: Well, it is. But if you don’t want to leave something to your son John because you bought John a house, you can put down in the will, “I am intentionally leaving John out because I have provided for him during his lifetime.” Otherwise, without a will, even though you gave John hundreds of thousands of dollars to buy a house or millions of shekels, John’s going to share equally in what’s left.
Douglas Goldstein: You distinguish between a will and an estate plan. Let’s assume that none of the people listening to the show have the $10 or 11 million needed to be subject to estate tax. So do they need an estate plan or just a will?
Peggy Atkins Munro: Most people need an estate plan. I would say almost everybody needs an estate plan because the various parts of an estate plan are not just your last will, but also something that in the States we call a “durable power of attorney.” This gives another person a power of attorney in case you are unable to sign documents, for example, a medical proxy. What happens if you take ill, or you’re in an accident and you are unable to answer the doctor’s questions yourself about what you would like to have done?
Douglas Goldstein: I think it’s important just to clarify the definition. An estate plan could be related to your estate when you are still alive. I think a lot of people often think of an estate plan as only applying to what happens after a person dies. But that’s not the case. That’s why you need other documents in place.
Peggy Atkins Munro: Exactly, and then there’s the fourth piece that some people may or may not have. The first three pieces are what everybody should have, but the fourth piece is whether or not you are going to have individual trusts that will keep your assets under the trustee’s supervision for a period of time.
Perhaps you have minor children or a child who the kind of person where money runs through his fingers too quickly, or somebody who has special needs. Maybe you want to put your grandchildren through college, and a trust is a way you can do that. There are all different sorts of reasons why you would set up different trusts. You want to be charitable, so you can set up charitable trusts. The list is pretty endless no matter what you want to do. How you want to structure your financial life while you’re here and then after you’re gone can be handled through the estate plan as an entirety.
Douglas Goldstein: I think it’s important and I think the fact that we are talking about it I hope is inspiring people to think about it. Unfortunately Peggy Atkins Munro, you and I are just about out of time today. But tell me how can people follow you and follow your work?
Peggy Atkins Munro: Well, Doug, I have a website called www.taxpanacea.com because we cure everybody’s tax ills. My book is available widely through my website, through Amazon, and local book sellers. I was in my local Barnes and Noble yesterday and there was a copy of not only this book but a couple of my other books as well. So it’s out there. Thank you so much for having me, Doug. It was a real pleasure.