The death of a loved one is never easy. Regardless of your relationship with the deceased, you need space and time to process and grieve your loss. Once you have had time to cope with all that has happened, you should consider updating your own estate plan in light of your loved one’s death. We are here to guide you through the main areas of focus of your review.
Although your estate plan primarily focuses on what will happen when you either become incapacitated or die, the death of a loved one can have a major impact on your planning. If you have an estate plan and a loved one dies, you should review your documents and consider the following:
Deceased Loved One as a Beneficiary
One of the main objectives of having your will or a Revocable Living Trust (RLT) prepared is for you to state your wishes for what should happen to your estate at death. If you have strong feelings about who should receive the money and property, it is essential to consider who should receive them, just in case the person who is your first choice dies before you.
If your will does not list a backup heir (contingent beneficiary), the gift in question fails (lapses). This means the accounts and property become part of your general estate and will be distributed according to the remaining terms of your will. This lapse can be problematic if your beneficiary has descendants whom you would like to receive that portion of the inheritance. States like Texas have enacted anti-lapse laws to protect against this result, meaning the beneficiary’s heirs will receive the gifts in their place. However, there are distinctions from jurisdiction to jurisdiction, and Texas limits the heirs who benefit from anti-lapse laws to those related to you by blood. This means the children of your friend-beneficiary is not protected by Texas’ anti-lapse laws.
When it comes to an an RLT, there are usually provisions in the document which state what should happen to a gift if the beneficiary is deceased. However, if it’s been a while since your RLT was prepared, it’s a smart idea to review the document to make sure that it still reflects your wishes. An up-to-date RLT gives your trustee clear instructions about how to handle your accounts and property. This clarity makes the administration process more manageable and reduces the possibility of fighting among beneficiaries with differing opinions.
Deceased Loved One as a Named Decision Maker
As part of your comprehensive estate plan, you probably selected several different important decision makers. These decision makers will act on your behalf if you become incapacitated or wind up your affairs after your death. If your deceased loved one held any of these positions, you’ll want to make sure there is a backup. Whether there is already a backup or not, you should still update your document to name a backup for your new first choice or to remove your deceased loved one’s name to prevent confusion when a third party reviews the document. Some of the personal helper positions you’ll want to periodically review are:
Personal representative (Executor)
This trusted individual (appointed in your will) is responsible for collecting all your accounts and property, paying your outstanding debts, and distributing your assets to the people named as beneficiaries in your will. This person’s task is to wind up your affairs, which can be time-consuming. If your chosen personal representative dies before you, and you haven’t named a backup, the probate court will use your state’s laws to determine the person who is next in line to serve as personal representative when you die.
Co-trustee or successor trustee of your Revocable Living Trust
Serving either with you (co-trustee) or after you (successor trustee), this trusted person or entity is charged with managing, investing, and distributing the trust property; first to you during your lifetime, and later to your chosen beneficiaries after your death. If your deceased loved one was a co-trustee, review your trust agreement to see what happens next. There may be provisions which either allows you to continue serving as sole trustee, or the document may name a specific person to step in and serve with you, or describes how to determine who your new co-trustee will be.
If you are currently the only trustee and your successor has died, there will be no immediate change to how your trust is managed. Yet, if you die without naming a new successor trustee, your beneficiaries will need to look to your trust agreement for how the vacancy can be filled. Your trust may provide that a certain number of your beneficiaries can appoint a new trustee without court involvement. Or your trust might require that the court approve any potential trustee. The outcome will depend on the trust’s wording and your state’s laws. Because the trust is revocable during your lifetime, you can make changes to any of these provision, to adapt to changes, while you are still able to.
Agent Under a Financial Power of Attorney
Your agent is an individual you choose to carry out financial transactions (such as signing a check or opening a bank account) on your behalf. If the person you selected is deceased and there is no named backup, no one else has authority to act on your behalf. Depending on the reason you appointed the agent, this situation may not be of immediate concern. But if you become incapacitated, your loved ones will have to go to court and have someone selected to take care of your financial matters. Not only is this process time-consuming during a stressful time, it can be expensive and exposes personal details of your condition and family dynamics to public view.
Agent Under a Medical Power of Attorney
Because this person will act only in the event you cannot make decisions or communicate your medical wishes, you may not feel an immediate need to revise your medical power of attorney. However, the unexpected can happen at any time. During that chaos is one of the worst times for your loved ones to go to the probate court to have a guardian appointed. This scenario has two drawbacks. First, the judge will look to state law in choosing the appropriate person (someone who may not be the person you would have chosen). Second, the selected person may not share your views about your medical care.
Guardian for Your Minor Child
If you are the only living parent or if the other legal parent is unfit to care for your minor child and your chosen guardian predeceases you, the probate court will look to state law to determine who is next in line to raise your child. As with other roles, the selected person may not be the one you would have chosen and, absent input from you, the judge may have limited information when making this critical decision.
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Nielsen Law PLLC provides family focused estate planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information and to learn about our firm, please contact us.