RHP Market Talk

Family Meetings Part 2: Estate Planning and Probate Basics

October 21, 2021 Royal Harbor Partners Episode 13
RHP Market Talk
Family Meetings Part 2: Estate Planning and Probate Basics
Show Notes Transcript Chapter Markers

What exactly are the duties of an executor?  What is probate?

Continuing our series of conversations on the importance of family meetings, Royal Harbor Partners' Natalie Picha and her guest Vanessa Solis-Maduzia of Waldron & Schneider Law Firm explain the process of probate in way that informs and educates.

Get to know us at: www.royalharborpartners.com

Natalie Picha:

Welcome to RHP Market Talk. I'm Natalie Picha, Partner with Royal Harbor Partners Wealth Management and joining me today, from the law firm of Walden and Schneider, PLLC is Senior Probate and Family Law attorney Vanessa Solis-Meduzia. Since 2005, Vanessa has concentrated her law practice in the areas of family, guardianship and probate law. Probate includes probating wills, contesting, and defending wills, heirship determination , small estates administration, and applications for guardianships of adults and minor children. She has served as guardian and or attorney ad litem in various probate matters. Welcome, Vanessa. We're delighted to have you on our RHP Market Talk today.

Vanessa Solis-Maduzia:

Hello, Natalie. And thank you for having me. I'm glad to be here today.

Natalie Picha:

In our September 1st podcast, we began a series of conversations on family meetings. During that episode, we focused on family values and the importance of starting a rhythm of family meetings and communicating values to the next generation. Today, we want to focus on family meeting conversations that communicate how and who will execute your estate plan after your death. Things that can really complicate family dynamics. So, Vanessa, thank you for joining us. You know, in the preparation for this discussion, we had so many, I say good words, right? A lot of conversation. A lot to talk about. And some of the things that you really talked about that caught my attention, were things like executorships, blended families, contested wills. And so for today's conversation , I think our listeners will be really interested in hearing what your experience is, but also what are the pitfalls and what are the things that, you know, someone like RHP can help with the family meetings to try and circumvent those issues that might come up in the future. So, let's just jump right in and start with executorships. That tends to be a pretty big conversation. Who's actually going to is actually going to be the executor of your will? Some people might not even completely understand what an executor ship entails, as far as responsibility.

Vanessa Solis-Maduzia:

So Natalie, I'm glad that your organization, your company is actually having these discussions. Because it's very, very important for families to understand that communication is key, to ensuring that somebody's wants wishes, desires are all through it? And one of the key issues is executive ship. What is executorship? An executorship is an individual that a person we call it, the testator, has appointed in their estate planning document specifically a last will and testament that person, their executor, is going to administer their estate upon their passing, pursuant to the last will and testament. So, it's really important that the person to be served as an executor is someone that's going to your wishes pursuant to your last will and testament. Many people don't understand the role of an executor. And that person's job literally is to administer the estate. When a person passes away and they have an estate, you've got to have a personal representative or somebody with some sort of authority to be able to gather assets, to distribute assets, to have some sort of authorization. And so that's what an executor does basically. And it's important to find somebody that you know is going to honor your wants and wishes. That are going to follow your intentions under your last will and testament. So that because once you pass away, obviously you can't give direction for beyond the grave . And so you want somebody in that role that you can trust to ensure that your wants your wishes, your intent, your desires, are fulfilled as you've listed them in your last will and testament

Natalie Picha:

And great question here is the executor can't do anything that's not in the will. So, I've had executors think that they might have some leeway to do some things and it , they have to follow to the letter of the law what's in that will.

Vanessa Solis-Maduzia:

That is correct. And there actually are circumstances where the executor has a little bit of leeway. So, let's say for example, there's a will contest, right? And the will may say, okay, I have an example, a person might say, okay, I disinherit John Smith out of my estate. And John Smith is licensed studio state. Well , the executors job is to honor that last will and testament to ensure that John Smith does not inherit, it does not benefit from the estate. However, that could waste the state assets. That could waste the, the funds that aren't meant to go to others in the estate. So the executors job is also to see, okay, even though this is truly my job, how do I also administered this estate so that it is fair to all the other heirs. Because would you really truly want your executives ? So you're an heir . Would you want the executor to defend that will, to the last dime to assure John Smith gets nothing and assets means you get nothing because all the estate funds have been depleted or would you as an heir say, okay, you know what I would want the executor to do its also in my interest as a beneficiary and to negotiate or settle so that this matter can move on. So, the executor does have to follow the spirit of the letter of the law with regards to last will and testament, but also has to have the ability to administer the estate for the benefit of those that are also intending to benefit from the estate.

Natalie Picha:

Well, we have, we actually have a case right now that , we're working through where the deceased gave some direction to the family members and ultimately to the executor. Really making her responsible for everybody and everything, but the, the will itself although fairly clear is making it more challenging for her, which I would assume that's kind of when you guys get involved, right. Where all of a sudden, everybody's trying to figure out what's the next step. And tell me a little bit about when things are gray. When it's not real black and white.

Vanessa Solis-Maduzia:

Many times the gray areas come into play is when the will is not specific or doesn't give specific instructions. For example, the will might say, you know, I give certain heirs the certain amount of money, you know, if five heirs get X amount each and then the remainder go to my heirs at law. Well, but they don't, maybe it will classify who the heirs at law is. Well, so now we're going to have to determine who are the heirs at law? The will doesn't specifically say, okay, after these specific individuals, the rest go to these specific individuals. It just says everything else goes to my heirs at law. Well, that's a grayish area because it doesn't specifically dictate who your heirs at law are, but it says that's who they go to. So, that's where you would try to figure out or make a determination on how to identify who those heirs are. Lawyers get involved many times in a, and not necessarily in a will contest, but in the estate process, because the executor truly doesn't understand what their role is. An executor has multiple duties that they have to fulfill. They have fiduciary duties and obligations that they must follow. And so many of them will come to an attorney or law firm like such as Walden and Schneider, and will say, I was appointed as an executor. What does this mean? What am I supposed to do? Because again, tying back into your family talk, people don't tell them, Hey, just to let you know, if something happens to me, you're my executor. And this is what I like to see happen. Most people say they passed away. I came across papers, it's got my name on it. And your business card just happened to be enclosed with their documents. What do I do next? And that's when we guide them, we explain the process. We explain what their fiduciary duties are. We, you know, read the will with them. Make them understand this is what you need to accomplish. This is how it's going to be accomplished. And this is how we will help you accomplish that.

Natalie Picha:

I think those steps that you just lined out is very important, because a lot of times we get the call and say, what is probate? Literally? What is probate? So what is your answer to that?

Vanessa Solis-Maduzia:

My answer to what is probate. Probate is the process where the courts appoint a personal representative, the executor to help execute the test testators intent through their last will and testament. Another question I get along with that is why do we have to probate? I don't understand. I mean, everything was left to me or my name's on stuff. Why do I have to go through the probate process? And in many instances, if an individual had done the proper estate planning, you can avoid the probate process. The problem happens is when they don't do the proper estate planning. And one of the things that we see a lot of, is the failure to designate a beneficiary or a joint with the right of survivorship on a financial institution account. Because many times people will come to me and say, oh, I spoke to Edward Jones. I spoke to Merrill Lynch, Ameriprise, some financial institution. And they're telling me, I need some sort of letters, testamentary, or an administration or court order. What does that mean? And that's when I say, Hmm , you got to probate, you know, cause this is what they're requiring. And it's sometimes what you're making me probate for just this? It's not worth it, you know? And unfortunately that may not be, but it's what has to be done.

Natalie Picha:

So we , we have another situation in our office, where someone was very confident that they had everything taken care of. And they missed one small account for about $35,000. That did not have a transfer on death. Or a payable on death on it. And now we're probating a will. We have to have an attorney. We have to go through the whole court process for that one small bank account. So I'll kind of tie all of this back together with communication, communication, communication. And what our office does is, we're not attorneys, we're not CPAs. So we can't advise, as such, but we will get the CPA in the office. We will get the attorney in the office. We will sit down with everyone and hopefully also the executor. And we'll have those conversations about how this is going to go. What the responsibility is. We look at all of the accounts we determine, do we have those accounts that maybe we are going to have to probate because there are assets that we'll just have to go that way. But if we can't, if we don't have to, then this is what it's going to look like. And we try to have those conversations upfront .

Vanessa Solis-Maduzia:

And those are very important conversations. And we do the same thing. We will have a person come to us and say, oh my gosh, they left behind a lot of money. What do I do with it? I don't know anything about Texas or how do I invest? And so as, as per personally, me, I'm not a CPA or tax accountant, nor am I a financial advisor. So I have those discussions. Similarly, I'm like, look, I can refer you to find a supervisor from , I can refer you to a CPA. Let's sit down together. Let's have a meeting. Let's talk about what we have out there in the probate or the estate asset world. What do we do about, you know, inherited IRA , for example, I just inherited an IRA. What am I supposed to do with that? You know, or my gosh, what about capital gains taxes or is there an estate taxe or inheritance tax? What am I looking at? Tax implication wise. So again, it's communication. It's, it's having a community, you know, they tell you it takes a village to raise a child. Well , it takes a village to also manage a probate. You've got to have those sources.

Natalie Picha:

You need a team. It's not just one person.

Vanessa Solis-Maduzia:

Exactly. You need a team.

Natalie Picha:

So, let's talk a little bit about it. I mean, we've, we've gone from an executor ship to what is probate. Let's throw in there into the mix here that the things that can complicate the issue . So, let's talk about a blended family. And again, I'm trying to tie all this back to our process of, of having family meetings and encouraging our clients and our listeners to engage someone like us to start this process of family meetings. So throw in there a blended family.

Vanessa Solis-Maduzia:

So the most common I've seen with blended family, is you have husband and wife. And they come to us for e state planning and they say, well, we want to be each other's executives, which makes sense. You know, my husband, my executive wife, my executor, and then the question comes, okay, great. Who do you want to be? Your alternate? My what? Your a lternative. If something happens to your spouse. If your spouse predeceases you, o r you guys perish o r common disaster. Y our s pouse i s in a coma due to whatever situation happened. Who is the alternate? And that's where the issues come into play because mom or wife might say, well, I want my child f rom my previous relationship. And husband might say, well, wait a minute. I want my child from my previous relationship. And so there's always some, sometimes not always a heated discussion between the spouses on who the alternate is, because they both might want someone from their family camps. So to speak, to step in, r ight? Many times with e state planning, I hear a lot of discussions about, well, if we appoint this one person to do this role, w ow, I think we're obligated to point somebody else to do another role. And my response or my advice to that is look, you need to appoint somebody that you know, can manage that role. You know, for example, I always, when it comes to power of attorneys, right, we offer a statutory general power of attorney, which handles finances. We o ffer medical power of attorney that had medical decisions. Well, sometimes the parents a re like, okay, well, I guess we'll put Susie Smith as our power of attorney for finances, but we g ot t o give something to Johnny Smith because he's going to feel left out. Let's put him in our medical role. And my response i s always, look, you need to put people that, you know, are going to follow your wishes. That know what your wishes are. Don't just assign somebody a position because you feel you can't leave them out. You feel like they have to have something, otherwise their feelings will get hurt. And so that sometimes leads to some heated discussions, you know, between the parents or the couples on who's on each role. But again, it's communication. You know, I know listeners are saying, I hear that key word communication, but that's it. Once you select somebody have a family meeting, sit down with your siblings, sit down with your blended and families and say, look, we've met with an estate planning attorney. These are who we're putting in our positions. This is who's going to be our alternate. And this is why maybe Susie Smith is an accountant in the family. Maybe she's a great money manager. And so she's optimal for the role of power of attorney or the executor. You know, maybe Johnny is in the medical field. Maybe, you know, he's got medical background and he'd be the best person to serve as the medical power of attorney, you know. But make it known because the biggest hurdle is when somebody passes away, they're gone. And they can't answer the questions that the family asks, which is typically why them, why were they selected? Why not me? Why? You know, I was the better one. I was, whatever the case m ay be. You know? S o again, communicate your, wants your wishes, your desires, and make sure your family understands. This is why you want it. And this is why it was done. To not necessarily eliminate, but hopefully minimize the disruptiveness. That's going to come down the road.

Natalie Picha:

So that is a perfect segue-way into what I call aging with dignity and grace. And if you want to title a family, meeting that or whatever. But when I think of aging with dignity and grace, I think of, you know, we do a lot of retirement planning, but we also do a lot of, a lot of life in stage planning. And so aging with dignity and grace means I want to put a plan together that allows me to relax and enjoy the fruits of the labor. So to speak all the way through the end. And having the communication upfront, not just about, okay, well, who's going to carry out my wishes of the will, but if I'm incapacitated, who can I trust, to make the medical decisions? Who's that medical power of attorney? Who can I trust to make financial decisions on my behalf? Because we end up, I always say probably the most common situation that we see in our office, is a stroke. And having that person that already knows that's their role, step in, and they're already named as power of attorney. The paperwork's all done. Oh my gosh, it changes the situation dramatically. Because if you need additional care. If you've got to go into a facility, even if it's just temporarily for rehab, that person's there and we have that person, to call on to say, okay, they need X number of dollars to pay for all of these, you know , needs. So, when we talk about that communication in as far as the aging with dignity and grace , how do you guys see that play out? Maybe when there are situations where you have adult children or even adults, that need guardianships.

Vanessa Solis-Maduzia:

So we see that play out a lot when we do estate planning, because I I've actually had some clients come to me and say, you know, I worked hard for my money. It's my money. I want to be able to spend my money, how I choose to spend my money. And we encourage that. You know, absolutely the parent earns it. It's their money. Many times I will jokingly say to my client, you know what, it's your money. If you want to go take it to Vegas and liquidate it all, but it all 13 black. That's your prerogative. If you want, and this was before the pandemic. If you want to liquidate and go live on a cruise ship and travel around the world and die on a cruise ship. That's your prerogative. And then I've had some clients come to me and say, you know, my kids expect something from me. They expect to get money. They you know, they're just waiting until I pass away to count the green, you know. And my comment again it's your money do as you want with it. And so we'd say to them, look, if something happens to you, if you have that stroke, if you have that guardianship let's prepare the necessary documents. We do have , um , the appointment of a guardian in case the need arises where an individual can ahead of time say, look, if sometime in the future, a guardianship may be necessary. This is who I want to be my guardian. So, it's not necessarily race of the courthouse. It's not, you know, sister versus brother or, you know, sibling versus step parent it's the individual has already dictated before the event has occurred, who they want to be their guardian, you know, has dictated who they want to be, their power of attorney, you know? And then again, sit down with the family. We pushed out a lot. With, so talk to your family, talk to your children. Because the biggest issue I've always seen is the lack of communication. You know, dad, we got sister got guardianship over dad. We were fine with that. Sister communicated the entire time, six months ago, communication stopped. We have no idea what's going on. We can't get ahold of dad. Sisters being silent. What do we do? What are our rights or executor? Executive was perfect. And sending us information. We asked for information some more. It stopped. What are our rights? What can we do? And so again, communicate. You know, people don't want to communicate because maybe it's a private matter. It's nobody else's business. And I get that and I understand that. But eventually something's going to happen where your private business is going to become public matters.

Natalie Picha:

I always say that you may think at this point, that no one else is going to be involved in your financial life. Eventually other people will be involved in your financial life, right ? It is just part of the process. So, engaging in that rhythm. I'll call it a rhythm of family meetings is just so important to , I think, a family's wealth and a legacy and the legacy. It really, you know, yes, maybe there's more zeros behind certain people's legacies. But truly it's not that much different, from one family to another. it's having that, that level of communication upfront. So we kind of encourage clients, to go ahead and start thinking about that rhythm of family meetings and let us facilitate. Because family dynamics can get weird. They just can . It's just a fact of life. So, sometimes having a neutral party in the room. Setting the agenda. Saying here are the topics that are going to be hard to address already. Having them on paper really helps to ease that tension and kind of address some of the things that could come up. So, why don't, before we wrap this up, I think the last thing to discuss is maybe contested wills. Because that's, so now we're, we're already in the middle of probate. We already have an executor. You know, we've gone down this whole road of we've got a plan in place. What happens when you get someone that says, nope?

Vanessa Solis-Maduzia:

The main reason people tend to contest wills is when they want to state that either the testator did not have testamentary capacity. Meaning that at the time, the testator executed or signed their last will and testament, that they didn't know what they were signing. That they didn't understand. Right? And, and the law basically says is at the moment, the testator, the individual who's executing the last will and testament. Signs the last will and testament, that's when you look at testamentary capacity. If a will is executed properly, meaning it is prepared by a lawyer, done at a lawyer's office with two witnesses and a notary. The argument of tesserae capacity or the lack of testamentary capacity is diminished greatly. Because you got a lawyer who's questioning capacity. The lawyer asked specific questions to the testator to gauge capacity. The witnesses are there to ensure that the testator knows what they're doing or what they're signing. And the notary is there to verify that everyone is present is who they say to be. You get the issue of testamentary capacity, mainly when mom, mom, or dad's at the hospital, right. And sibling says, oh, they don't have lots of state planning. I'm going to go get a lawyer. They're going to come see mom and dad at the hospital, at the nursing home. Maybe mom and dad are in a morphine drip, or maybe they're in and out of consciousness. And you know, there's a mobile notary and two witnesses from down the hall and everyone signed an execute, rush, rush, rush. So that's, a lot of times we're testamentary capacity comes into play. Another argument for invalidation of a will or will contest, is if there's undue influence over a testator. In other words, somebody has unduly influenced the testator into executing the last will and testament. A caretaker maybe, or a sibling that's there 24/7, you know, and the other siblings that come around. And next thing you know, mom has, mom or dad has left everything to that particular caretaker. That particular sibling has cut everybody else out. There must be some undue influence or some sort of coercion or duress or something to that effect. Another way for will contest is when somebody gets cut out of a will. Why would mom or dad cut me out? They love me, you know, okay. So maybe I'm the black sheep of the family, but they would not cut me out anyway. And so those are the main areas of a will contest. And many times you can help eliminate a lot of that by executing the will in the proper place, in a lawyer's office, right. And somebody that can safeguard some of those issues. But when a will contest happens, that's where you really guide your executor. And advise your executor on what they have to do and what they can do and what needs to be done to try to resolve the estate in a manner that upholds the spirit of the last will and testament the, attended the testators. But maybe also resolves it so that everyone can move on. You know, so that everyone can, can get their peace of mind or whatever it is that they need to move on with their lives and let the testator rest in peace.

Natalie Picha:

Right. And I realized that, I mean, this is your, this is how you make a living, right? This is why Walden and Schneider exists. But, what I have found in working with you guys and with other attorneys, is that most attorneys will say, if we can do this right up front , it will save you thousands and thousands of dollars later. And that's why I always say communicate, communicate, communicate. Plan, plan, plan. And so for our clients, you know, we want them to have the opportunity to use their assets in a manner that fits with their goals. Right? And we have, we have, I mean, clients that are terribly generous, you know, that do so much charitable work , who have made plans, you know , for their families. Are going to leave a legacy. We have clients that say, I'm not leaving any legacy. That's fine. I always say the goal, is not the dollar. The goal is what you're going to do with those dollars. And if you communicate upfront , then your goals, even after you've passed away, will be met and we don't end up spending it on you guys. Right. No offense!

Vanessa Solis-Maduzia:

You know, let me tell you, non taken. And I'm sure if my partners hear this comment, they'll probably put me on the rollers as well. But I tell people, I said, look, the purpose of coming to an estate planning lawyer, is to do proper estate planning, so that we avoid or, or try to at least eliminate the necessity of a probate. Right. Any good estate lawyer is going to tell their client, look, if we estate plan perfectly, if we do what we need to do, we will eliminate the necessity for your family to probate. Because it's not the individual that's going to probate their own estate. It's their family. You know ? And so you've got to set it up for the benefit of the family. But a good estate planning lawyer will also say, I know you are human, just like everybody else. And I'm willing to tell you, go ensure that all your assets are set up the way we want to. And most of them forget, oh, I forgot about that asset. You know, I had one case where literally the wife forgot about an asset. Left her ex-husband on it as a designation beneficiary. And after her passing, he still got it. Because of ERISA laws and federal laws and a little bit more complicated issues. But she forgot about that asset. So it went to her ex-husband, which is somebody she never wanted him to get any of her assets. But it goes back to listen to your estate planning lawyer or your financial advisor or whatever advice you're getting follow through with it, execute, and communicate it. Because if you miss something, if you forgot something, go to your, whoever, your executors , whoever your alternate agents are and say, look, if something happens to me, I have already taken care of it. But, if I've missed something, this is what needs to be done. And this is who you contact. You could talk Royal Harbour , you contact Waldenand Schneider and here's their contact information. Here's the point of contact. To make it easier for your family. There was a commercial long, long time ago that I always mentioned to my clients. It was an old insurance commercial. I can't remember the company, but it used to say, life insurance is not for you. It's for your loved ones. And estate planning is not necessarily for you, the client. But it's for your loved ones so that they know what you want to do. So you left the legacy or maybe not, but they know what you're trying to accomplish and they can help you execute ,what you're trying to accomplish. Right.

Natalie Picha:

We do. We do a lot of that end of life transition. And I always say, that's a really tough time. People are grieving. We want to make it easy. And so we can stay ahead of that. Then that makes just everything so much smoother. So thank you. I just want to say thank you so much for spending the time with us today. Certainly for your insight , thank you for helping me encourage our listeners and our clients to communicate, communicate, communicate. So have those rhythms of family meetings. Execute. When you put a plan in place, please make sure you actually go follow through and execute the plan. Right? And this, this, I think overall will help us create an easier transition for those out there that are looking to leave assets to their loved ones. So thank you Vanessa, for the conversation. And so in closing, I just want to thank our listeners for listening to Royal Harbor Partners Market Talk. We are passionate about planning for your financial future. We believe in creating a rhythm of regular family meetings for open communication about your legacy. We're devoted to our relationships with multi-generational families, for the creation of successful legacies. Through our one-on-one conversations, we can help you discover a clear path forward for your personal wealth management and investment journey. How different will your life look with the right advice? Call us today, or visit our website at www.royalharbourpartners .com to start your conversation and let us help you plan your next family meeting.

Disclosure:

Royal Harbor Partners is a registered investment advisor and the opinions expressed by Royal Harbor Partners on this show are their own. All statements and opinions expressed are based upon information considered reliable. Although it should not be relied upon as such. Any statements or opinions are subject to change without notice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investment, or investment strategies. Investments involve risk, and unless otherwise stated are not guaranteed. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal or investment advisor to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.

Introduction
All About Executorships
All About Probate
Communicate. Communicate. Communicate.
Blended Families and Complications
Aging With Dignity and Grace
Contested Wills
Plan. Plan. Plan.
Disclosure