Wednesday, December 12, 2012

Inheritance - The Final Act of Personal Finance

While acting as executor for my parents' estate,  I realized that their transferring of the assets represented their final act of personal finance, even though many of the decisions were made years before. For reference, my parents wishes were very simple: equal division of assets for the two heirs.   However, the execution was a bit more complicated. 
  1. Revocable living trusts.   In the late 90s, my parents both established revocable living trusts to minimize the estate tax impact, when the threshold for paying the tax was much lower.  While their estate was below the limits when the passed away, it was good to have the trusts in case the limits fall again, as could happen in 2013.   In most cases, having the assets in a trust made the easier to transfer.  In a couple cases, the trust made asset transfer more difficult due to internal regulations at the financial institutions.

  2. Asset classes.  Cash was the easiest to divide, as an asset and procedurally.  It was simply writing a check.  Stocks were the next easiest.  Dividing the assets was simple, and the procedures involved a a significant amount of paper work, which varied by institution.   My parents kept stock in 9 different places, which required paperwork to be done 18 times for two heirs. 

    The most difficult was the real and personal property.  Of the personal property, my sister and easily split up the items we wanted.  However, disposing of the rest of the property will require personally selling or donating the items and involve significant time including a trip to the location.  The real property, personal home and investment property will be the most difficult.  These involve appraisals, agreement on value, and sale or joint ownership.

  3. Time and effort required.  I've learned that being an executor is a full time job .   The work is significant to transfer the assets. However, there is a lot of research, preparation and execution effort.  In addition, the assets need to be stepped up to the date of death.  Fortunately, I am retired and can put a lot of time against getting the work done.
My parents didn't have the experience of being an executor.  Now that I have, I plan to structure our estate such that our executor and heir will have a easier time of doing the asset transfer.

For more on The Practice of Personal Finance, check back every Wednesday  for a new segment.

This is not financial or estate planning advice. Please consult a professional advisor.

Copyright © 2012 Achievement Catalyst, LLC

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