Fiduciary Duties – Locating the Assets

You are a recently appointed executor and your attorney informs you that you now need to prepare an inventory of the decedent’s assets along with the date of death values. If you are lucky, the decedent kept meticulous financial records that you were able to find. The reality is that very few people keep such records and if they do, you may not be able to access the information (assuming that the information is on computer and password protected).

As executor you will want to have the mail forwarded to you and this is a good way to discover information; however, more and more people are going the paperless route. Another obvious place to look is in the decedent’s home. If you can, you will want to see if there are any computer records. Income tax returns are always a good source of financial information.

Even if you are thorough, it is not uncommon that an asset may turn up after you have filed your inventory. Fortunately, it is easy to report a newly discovered asset. Finally, our office as a routine matter when we open estates, always checks for unclaimed funds in the states where the decedent spent time.

Fiduciary Duties – The Missing Income Tax Return

You are now acting as the executor of an estate and your attorney informs you that you are responsible for seeing that all tax returns are timely filed. At your attorney’s suggestion, you look for a past income tax return among the piles of papers in the decedent’s home. To your chagrin, you are unable to find any tax returns or information that would lead you to the decedent’s accountant. This is really not an uncommon scenario, particularly if the decedent was elderly, mentally and/or physically infirm. Under these circumstances, you must take the time to gather sufficient information to file all returns (past and present).

If all else fails, you must get the information from the IRS. You will first need to inform the IRS of your authority to act as the fiduciary of the estate. This is done by filing IRS Form 56, Notice Concerning Fiduciary Relationship. You also file IRS Form 4506, Request for Copy of Tax Return, to specify the returns and the years that you are requesting. It may take up to 60 days for the IRS to respond.

Term Life Insurance Becoming More Expensive

Many people like term life insurance, because it is less expensive than other types of insurance. A young couple can protect against the untimely death of the working spouse by purchasing term life. The only downside to term life is that you are insuring that you will survive a period of time (20 years is typical). Once that period expires, you generally have nothing to show for it (other than you outlived the term). Even though there is no savings aspect to term life, it is a very useful planning tool. If you have thought about term life as an option, you may want to pick up the pace. According to an Article in The Wall Street Journal, the premium rates are on the rise and are expected to continue.

Survivorship or “Second-to-die” Insurance

Most of us do not need to worry about planning for the federal estate tax. With the current exemption amount at $3.5M, a married couple can pass along $7M to their children without paying any federal estate tax.

What if you are one of the fortunate few who do need to plan for the federal estate tax? Also, what if in addition to having a large estate your estate contained illiquid assets, like real estate and/or a family business? One possibility is an irrevocable life insurance trust (ILIT). The idea is that you fund the trust with a life insurance policy and the proceeds can be used by your children to pay estate taxes.

This is where survivorship insurance, also referred to as second-to-die insurance, comes into play. Since there is typically no estate tax on the first estate due to the marital deduction, you are looking for the policy to pay after both spouses have died. The second-to-die policy pays the death benefit after the second person dies. Because this insurance covers two lives, it is cheaper than a single life policy.

In most instances, a second-to-die policy is used to fund an ILIT.

Franklin County Courthouse Construction Progress

This morning, I enjoyed a bird’s eye view of the ongoing construction of the new Franklin County Courthouse in downtown Columbus, Ohio. After concluding a status conference in Probate Court Judge Eric Brown’s chambers, he reminded me that the County has posted a webcam of the progress of the construction. You can enter any date and the image will come up for that date. From mid-March forward you can see the construction of the underground tunnel that will connect the existing courthouse to the new one.