E225 3 Recent Solo Ager Estate Plan Questions

E225 3 Recent Solo Ager Estate Plan Questions


The following are three recent questions from our Solo Ager listeners. Thanks for your questions!

Is a bank as an executor better?

This question comes from a Solo Ager who listened to our previous podcast episode 221, where we discussed whether executors are contractually bound to serve.

Our listener asks, “since professional executors are not contractually bound, aren’t banks better?” The short answer is: No. Banks aren’t contractually bound, either. Individuals and banks are on the same level regarding that issue.

Is a bank as executor better?

This leads us to the next question: why wouldn’t a bank take an estate? To answer this question, you have to think far ahead 10, 15, or even 20 years.

What we have seen happen is that the bank shuts down their estate’s division. Or perhaps between the time they agreed to be your executor and the time that you pass away, the bank increases their estate minimums, so now your estate doesn’t qualify. For example, your estate may have been two million dollars when you appointed the bank, and that amount met the bank’s minimum requirements. But, since then, they bumped up their minimum to five million, which makes your estate ineligible.

Even if you meet the qualifications and the bank still has an estate department, the bank’s review committee may reject your estate. Maybe they see the estate as too risky, due to family feuds and potential litigation. Or maybe the estate has too many illiquid assets (house, art, collectibles, etc.). Banks want to be in this business to control your portfolio, and it is a lot of work to liquidate those kinds of assets.

Should a professional executor review my will before I sign?

Should a professional executor review my will before I sign?

I am often asked to be the professional executor for my clients, but I am rarely the attorney who drafts the will. This may be due to the client living in another state, they have an attorney they’re comfortable with, or that we’re not currently drafting wills.

The short answer is: No, it’s not required any more than it’s required for a spouse or best friend to review it.

However, if you name a professional executor (such as a bank or attorney), we can be a good second set of eyes to review your Last Will to make sure it’s what you want. It’s like getting a free second opinion.

But if you’re working with a good attorney, it’s not necessary to have a professional executor review the will. You also don’t want your drafting attorney to feel like he is being second-guessed. 

It could also be confusing having a lot of different people with different opinions looking at the will. You don’t want too many cooks in that kitchen.

Does naming beneficiaries on my accounts help my professional executor?

No, it probably makes things harder! Why? Naming beneficiaries to your account creates liquidity problems. It’s as if you are treating your bank or brokerage account like a life insurance policy: “In case of my death, this account will automatically go to my niece.” You might think this is great because it minimizes probate, but there are complications.
Does naming beneficiaries on my accounts help my professional executor?

Here’s the problem: if you name beneficiaries on too many (or all) of your accounts, you put your executor in a liquidity crunch. Because those beneficiary accounts go directly to the beneficiary, the executor won’t have operating cash to move the estate forward. The executor may not have enough funds to pay bills, taxes, etc.  

An example of this is one of our estates with two houses, a business, a car, and a bunch of accounts. The accounts and car had beneficiaries on them. So, now I am the executor of two houses and a business, and I have no cash. My job is to settle the estate, but I have no money to clean out the houses, secure the business property, or pay to evict the tenant that won’t leave. There are solutions, but they are not ideal. I’ll probably have to sell the business or house at a severe discount, because who is going to want to buy a house full of junk because I can’t pay to have it cleaned? Who is going to buy a business where I haven’t been able to secure it or get the financials done? No cash means selling the property “as-is,” which means fewer buyers. 

When I am named as executor, I make sure there are more than sufficient accounts in probate to cover the estate bills, or else I usually will decline to serve, as it puts me in a tough position. 

These are great, relevant questions, so please keep them coming! 

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