Lessons I Learned From Being The Estate Executor For My Parents

Introduction

Of my parents four offspring, I wasn’t surprised being asked to be their Executor and receiving their Power-of-Attorney, or POA. I joked they are finally getting their ROI for paying for my BS in Finance from Virginia Tech and partially for my University of Georgia MBA degree. Following the same logic, my sister, the RN, has their Health Proxies.

While my wife was both for her dad, his Advanced Directive covered medical needs and the estate was covered by beneficiary designations and settled in six weeks without any probate required. My parents estate is more complicated and includes the following, subject to change of course. Both of my parents turned 90 last year.

I divided the article into three parts before discussing how this can affect my parents and the siblings portfolio strategy.

Moving parts of my parents’ estate

• Trust: In 2021, my father completed his Trust agreement, on which I am executor once he passes. He started this paperwork ten years ago but it came critical last summer as he had to have delicate surgery that would have necessitated me completing it as POA. The first step in moving assets into the Trust was consolidating his portfolio into one from five different accounts across four firms. That allowed us to retitle just one account and makes managing the portfolio much easier. Except for the beach house, no other assets are going into the Trust. One big advantage of having a Trust is those assets avoid Probate disclosure and delays.
• Beach House: Since this was bought years ago, selling it now doesn’t make sense now so it was retitled into the Trust. Last year will be the last for renters, except for the IRS-allowed two weeks of free income. The plan is to sell the house once both parents pass and divide the value amongst the four children. With most of the other estate assets in stocks, this will provide any cash settlement required and/or cash for the offspring without us needing to sell inherited stocks.
• IRAs: When one parent passes, the surviving spouse inherits the other IRA. Once the second one passes, the remaining balance reverts to my Donor Advised Fund and from there distributed to the charity list my parents have provided. I’ve verified that the IRS accepts this process as valid. A major part goes into our family endowed scholarship fund at Africa University, a school under the United Methodist Church umbrella.
• Life insurance: At the end of 2021, my father’s employer cancelled his company retirement term policies after paying premiums for over 20 years! My mom has no life insurance and my dad’s only remaining policy is his small VA one. This won’t be an estate-settling concern as cash is available elsewhere. No need for the $9.95 plans hawked on tv!
• Personal property: Currently they live in a Continuous Care Retirement Community in their own cottage. They will move into the main building and/or Assisted Care wing when they feel that is best. There are limited possessions now, less with each move. My youngest sister gets the car. If they follow the same pattern as the last downsizing, we will all mark what we want. Either the “grands” or charity get the rest.
• Beneficiaries: I have worked with both parents to be sure every account outside the Trust has the beneficiaries listed as desired, both primary and contingency ones. Trust accounts do not need any as the Trust is the beneficiary. Accounts with beneficiaries should not have to wait on Probate.
• Power-of-Attorney: Since this ends with death, the plan is to add me as co-signer on the joint bank account once one parent passes (bank won’t allow three co-signers). I’m already added to their Safe Deposit box. Without these steps, I would have to wait until the funeral home sends you copies (get plenty) of the death certificate as experience shows any account renaming, insurance policy and other providers will want a copy first. When settling my FIL’s estate, most would return the official copy if asked.

Other critical elements to deal with

• Income change: Most likely, when a couple becomes single, the surviving spouse could face a drastic income drop. The smaller of the two Social Security checks stops; even worse if they fail to qualify for the spousal benefit and the dead spouse had the larger benefit. Second change for many in the Boomer and before generations is a possible change or loss of pension benefits, depending on what the employee chose to provide their spouse when they retired. Few post-retirement marriages are covered. Having term or whole life insurance on one or both spouses helps, though it can take months to get that insurance check. Currently, dividends will be enough to cover the lost SS check and reduced pension income.
• Advanced Health Directive/Living Will: As mentioned, my sister has their (and mine for that matter) POA for their healthcare. They also have Living Wills in place. Both are critical to prevent family infighting at emotional times.
• Wills: Both parents have wills to handle anything the Trust doesn’t cover. Except for her own IRA and being listed on their Joint bank account, my mom has no financial/property assets in her name only. I’m listed to handle both wills.
• Funerals: Their burial plots are paid for. Funeral home is selected with payment upon usage. Burials arrangements already done. Working on each designing their own service, which will be held at the funeral home. We also know where the “people to inform” list is when the time comes.
• Passwords: I know my father’s passwords to his phone, computer, all his online accounts. My mom has none. I believe my state, as estate executor, gives me the right to them in case one is missed or has changed.
• Account list: Not all accounts, such credit cards, utilities, or subscriptions might have passwords thus not on that list. Be sure there is a list, its current, and you know where it is. We are working on closing any account not in use.
• Autopay: With my father’s pending surgery, we put every ongoing bill, including credit cards, on autopay. While most will stop with lack of usage, others might need to be cancelled. Eventually all will stop with the account closings.

Plan ahead

My father, except for skin cancer that was being treated, was doing fine until that cancer invaded his brain. Lucky for the both of us, and my mom, we had about two months before the treatment option (surgery) was scheduled, so we were able to complete the POA and Trust paperwork and my dad covered most of the points listed above. Remember, accidents happen and cancer doesn’t wait for paperwork to be completed. This can be a tough talk if one or both parents do not want to talk about their passing and the estate executor is left clueless on many of these critical points.

Portfolio Strategy

Being that Seeking Alpha is an investment site, closing with how the article’s topic can affect one’s portfolio strategy is highly recommended. In this case, all parties could be affected. Of course, in most cases, when the estate will settle is unknown and the further away it might occur would influence each of the following scenarios.

Estate’s portfolio

My father is almost 100% in stocks of large US companies. There has been two major changes we made since last summer. One was the consolidation of all the taxable accounts into one and that account moved into the Trust. The second was to improve their cash available by turning off most of the dividend reinvestments on the stocks now held by the Trust. With the step-up law not yet cancelled, that change should meet their needs without having to sell any of his highly appreciated stocks. His bank sends me a weekly alert as to the balance in their bill-paying account (he didn’t want one) so I know if a phone call or visit to discuss is warranted.

Beneficiaries’ portfolio

This might be odd or too personal, but for my siblings, it is important they have some idea what they might inherit. I will say this wasn’t shared with them until I thought it could make a difference to them as each looks to me for financial advice and so I have a good idea how it could affect decisions they are debating. Both sisters are Social Security eligible but not at their FRA yet. While they still might file pre-FRA, understanding how their portfolio could change in the next 1-10 years might cause them to wait longer to start collecting.

One sister is in the process of setting up a Trust as her only child has poor money-management skills and her live-in is even worse! Based on that sister’s current estate size, she planned on that Trust being available to this child soon. With the money that should flow into it, she is revising the Trust to delay those potential withdrawals for at least ten years without mom’s or my, as the trustee, approval.

For us, it has affected our allocation in two ways. My dad has a high percent in three sectors: drugs, energy, and staples. I don’t have sector funds in those areas. Second, I less worried about my “low” equity ratio.

Lessons learned (so far)

As with most tasks you take on for the first time, you learn these days by “googling” the topic and experiences you encounter and feedback from others.

lesson #1: Start the discussion and actionable steps as soon as you are appointed. This should remove the time pressure to get things done. In my case, it allowed for consolidation of accounts and completion of critical paperwork. Also, do not assume the first discussion is the final one. Do at least an annual checkup as assets and family situations will change with time.

lesson #2: Don’t assume first opinions are best. My dad has an estate lawyer who wrote up the Trust agreement and then said what assets would be best placed into the Trust. An article I found questioned that strategy as it could have tax consequences. Unless there are other reasons, IRAs, life insurance policies that have beneficiaries (up-to-date) do not need to be in the Trust.

lesson #3: Related to #2, do not assume you know everything or the focused-experts covered all the bases. I found both Here’s a Guideline of Responsibilities for the Executor/Executrix or Estate Administrator to Follow and The Executor Checklist: 7 Tasks Before They Die articles very informative.

lesson #4: Relax and do not sweat over it! I am a VERY analytical, “cross the t’s, dot the i’s” person. I had to dial back to the comfort level of my dad, otherwise he would have gone crazy.

Final thought

First, not being an expert, this article shared what I have done to prepare. My desire is for readers to share their experiences, especially as to what worked and, as important, gotchas to watch out for.