Estate Planning May Be Harder for Couples Without Children

You might think that estate planning would be easy when couples don't have children. In fact, it can sometimes be more difficult - and also more important.

Couples with children generally agree about passing on their assets to their kids, and can rely on their kids to serve as caregivers and executors. It might not be so easy for other couples.

For instance, suppose Mike and Helen write a will leaving their assets to each other. If Mike dies first, Helen will inherit everything. When Helen dies, who will get Mike's assets? Helen could make a new will, but if she doesn't, all of Mike's assets will go to Helen's relatives. 

But what about Mike's relatives? They would be left with nothing. And the same is true for Helen's relatives if she happened to die first.

Of course, Mike and Helen could agree that the surviving spouse will sign a new will that's fair to both families. But what if the surviving spouse gets remarried, or has a falling-out with the in-laws, or dies shortly afterward, or is elderly and simply doesn't get around to it?

A better approach might be for Mike and Helen's wills to say that if one dies, his or her assets will go into a trust. The trust can benefit the surviving spouse during his or her lifetime, and then go to the other spouse's family. That solves the problem

Another issue is who will serve as power of attorney or health care proxy. If Mike and Helen name each other, and one dies, who will be listed as the alternate for the surviving spouse? If there are no children in the picture, this requires very careful consideration. 

Four Big Mistakes That Executors Frequently Make

Executors have a tough and often thankless job. They have to marshal all the estate's assets, file tax returns, and distribute property according to the Will. Sometimes, they make mistakes. Here's a look at the most common ones:

Paying bills too soon. Executors often see bills arrive in the mail and decide to pay them right away to avoid any problems. But this can actually create problems.

There is an order in which bills must be paid: Items such as taxes, funeral expenses and the costs of estate administration typically take priority over credit card statements, for instance. If an estate turns out to have a lot of debts (perhaps the person who passed away had an unexpected tax bill), and the executor has paid off low-priority debts first, there might not be enough money to pay the high-priority debts, and the executor might be personally liable for them.

It's best not to pay low-priority debts until the estate administration has been completed, or at least until you know exactly what the estate's tax and administration liability will be. 

Paying heirs too soon. Often, beneficiaries are impatient to receive their inheritance and pressure the executor to start making distributions. An executor can get into trouble if he or she makes distributions quickly and it later turns out there aren't enough remaining assets to pay off the estate's debts.

A related issue is that an executor has an obligation to secure and properly value estate assets. If beneficiaries are using "self-help" to make off with personal property - vehicles, artworks, furniture, a piano - before the executor can have them appraised, the executor could be personally liable for this as well.

(It can be an even bigger problem if a family member takes an asset that the Will says should go to someone else.) 

Handling real estate. If real estate is going to be sold, deciding how quickly to do so can create a minefield for executors. Sometimes an executor can be caught in the middle between one heir who's living in a house and another who wants it liquidated quickly. And sometimes it's hard to sell a property unless certain repairs or improvements are made first - but it's not always clear whether the executor has the authority to use estate funds to make the improvements.

Another issue arises if a property sits empty for a long time. If a house isn't occupied, it may be hard to obtain insurance for it, and it may become subject to maintenance problems, burglary and vandalism.

Investing estate assets. If an estate will take a long time to settle, executors may be tempted to invest some of the estate assets. That might be okay if the investments are extremely safe, but an executor could be on the hook if an investment loses money and an heir inherits less as a result. 

It's important to remember that while executors have an obligation to conserve estate assets, they have no legal duty to try to grow them.

Of course, the opposite problem can come up if the estate assets are already invested in risky things. In that case, an executor must decide whether to leave them there or move them into safer investment vehicles.