Working with the best and most qualified financial experts to create and manage one’s will, trust and estate is one of the most important decisions that people with assets must make. It is important to ask the right questions to guide this process.
Fortunately, the Granite State is blessed with its share of highly skilled financial planners. This week, New Hampshire Business Review reached out to some of the state’s leading experts in this arena.
Our panel: Valerie J. Nevel, esq., senior financial advisor and fiduciary consultant, Ledyard Financial Advisors, ledyard.bank; Earle Rosse, senior manager of commercial lending, Service Credit Union, servicecu.org; Mallory D. Vincent, CPA, MBA, individual and trust tax manager, Mason + Rich, masonrich.com; Ann N. Butenhof, esq., CELA, and Judith L. Bomster, esq. Sheehan Phinney’s Estate Planning Group, sheehan.com
Valerie J. Nevel, Esq., senior financial advisor & fiduciary consultant, Ledyard Bank, ledyard.bank
Q: What are some ways that Ledyard Bank’s financial advisors can assist customers with creating a will or trust for their estate?
A: Ledyard Financial Advisors can provide their clients with valuable guidance when they create their will and/or trust, reducing the time and money they will need to spend when meeting with their lawyer.
Advisors can assess whether clients only need a will or whether a trust is also desirable. They can also explain how a will and trust interact, how they are to be administered, and what they may accomplish.
Advisors bring years of experience to help clients create provisions that match their family situation. For example, they will likely know if a client’s child might benefit from a spendthrift trust or would be better off receiving an outright distribution.
Since the bank is not licensed to practice law, clients must use an outside attorney to draft their will and trust. Once the documents are drafted, the bank’s advisors have the experience to review the documents before they are signed to ensure that they follow the client’s wishes. Where appropriate, the bank also serves as an executor of a client’s will or as a corporate trustee of their trust.
Q: What is the one important thing a customer should consider?
A: Determining who will be the executor of your will and trustee of your trust is an extremely important decision that can be challenging. Ideally, you want a person who is trustworthy, financially savvy, experienced and who will respect your final wishes.
Even if you have a family member who exhibits all these qualities, you may want to consider whether you want that family member to assume such responsibilities at a time when he or she may be grieving your death. At such times, naming a corporate trustee may be the best option.
Sometimes it is beneficial to have both a corporate trustee as well as a friend or family member who serves as a co-trustee. The corporate trustee can provide the investment and administrative experience, while the personal trustee may have intimate knowledge of the needs of the beneficiaries. Even if you decide not to name a corporate trustee, an individual trustee can hire a corporate investment manager such as Ledyard Financial Advisors. Managers, with corporate fiduciary experience, can provide valuable insight on issues that the individual trustee may encounter while overseeing the trust.
Q: What happens to someone’s estate if they do not create a legal will or trust before they die?
A: Without a valid will at your death, you will have lost control of how your assets are distributed. Instead, your estate will be handled in accordance with the laws of intestacy in the state in which you reside. While your estate will generally go to your closest living relatives, the distribution may not be the way you anticipate.
For example, in some states, a surviving spouse receives the entire estate, while in others, the spouse splits the inheritance with the decedent’s children or parents. Failing to have a will at your death will remove your ability to appoint an executor to administer your estate. Instead, the court will appoint an administrator who will likely lack the personal knowledge of your final wishes.
Earle Rosse, senior manager of commercial lending, Service Credit Union, servicecu.org
Q: Why is it important for businesses to have an estate plan?
A: If we’re talking about closely held family businesses, then it’s more important for the owner(s) of the business to have an estate plan. Businesses usually have succession plans as opposed to estate plans.
When the sole business owner, or partner, dies, it’s important to know how the ownership structure of that business will change. A business succession plan will be useful in guiding the selection of individuals who will fill key roles in the business now that the owner has passed on.
Q: If I am a small business owner and my spouse is listed as executor of my estate, is that who would have to run my business?
A: The executor of an estate is the person who has the authority to settle the decedent’s affairs and distribute the estate’s net assets in accordance with the decedent’s wishes.
In the circumstance where the spouse (executor) of the deceased owner has been involved in the business, they may naturally assume the role of the deceased spouse. However, a spouse of a deceased business owner is often not involved in the business and may know very little about its day-to-day workings. In this case, it may be the spouse/executor’s job to select the best available person to assume management responsibilities.
Q: Would the executor of my estate be able to sell my business?
A: In general, the executor of an estate has complete authority to act in place of the deceased person. Of course, if after the owner’s death, ownership of the business is transferred to others by virtue of pre-existing agreements, then those new owners would have authority over all aspects of the business.
Q: What is the difference between a will and trust, and which one do I need for my business?
A: A will is a legal document that directs who will receive your assets and property at the time of your death. The executor of your will manages the assets and the process of disposing of those assets with the goal of successfully moving through the probate process.
A trust is a legal arrangement where a “trustee” (someone you select) manages assets held in the trust (a separate legal entity) you’ve created. You select which of your assets will be transferred to the trust and who will benefit from the income created by those assets over time. Your assets will remain in the trust for a period of time, and sometimes indefinitely. The trustee will manage the affairs of the trust throughout its lifetime, and income created by assets held in the trust will be distributed to the beneficiaries you have selected.
In summary, a will instructs an executor to wrap up your affairs after your death. Your debts will be paid, and any remaining assets will be divided among those you’ve selected as your heirs. A trust will create an entity to hold some or all of your assets. A trustee will manage these assets, which hopefully will continue to generate income and grow in value, distributing income to the beneficiaries in accordance with your instructions.
Q: What are the most important steps to take when it comes to planning for the future of my business if something happens to me?
A: Evaluating the impact and consequences of our passing on those we leave behind is a daunting task. Try asking yourself these questions: What is the legacy I’d like to leave behind? Do I want the business to remain in operation and the management and ownership of the company to pass to specific individuals? Am I interested in having my assets liquidated (converted to cash) and leaving that cash to grandchildren for their education, for example?
Once you think you know what you’d like to do, consult trusted legal and accounting professionals. With a little planning, almost anything you want to happen, can happen. Having a clear vision and providing the legal structure to allow that vision to be realized after you’re gone is essential to the success of your plan.
Mallory D. Vincent, CPA, MBA, individual and trust tax manager, Mason + Rich, masonrich.com
Q: As a fiduciary, what do I do in regards to taxes?
A: You are responsible for filing the fiduciary tax returns required by tax law and assuming responsibilities outlined in the will or trust document. As the personal representative of a will, you are responsible for proper transfer of assets to the person or entity entitled to such assets, potentially filing with probate court, and following the directives of the will.
Similarly, as the trustee of a trust, you are responsible for working with a trusted team of advisors, including an attorney, certified public accountant, and financial advisor to coordinate distributions of the trust’s assets in accordance with the trust agreement.
Q: What is the tax return filing threshold for a trust? What about an estate?
A: For a non-grantor irrevocable trust, the tax filing threshold is annual gross income of $600 or more. For estates, the filing thresholds are different for an income filing versus asset filing. For an income estate, the tax filing threshold is annual gross income of $600 or more (same as trusts).
For an asset estate, a Form 706 Estate Tax Return is required when an individual’s gross estate, adjusted taxable gifts, and specific exemptions total more than the exclusion amount ($12.92 million per individual for tax year 2023). State tax filing thresholds vary by state.
Q: What happens to a person’s estate if they do not establish a will or trust?
A: If no will or trust document is fully executed before death, then assets of the deceased individual will be administered by the probate court. Even if you have a will or trust, you could still end up with probate assets. Therefore, you should consult with an attorney when probate is involved.
Ann N. Butenhof, Esq., CELA and Judith L. Bomster, Esq. are shareholders in Sheehan Phinney’s Estate Planning Group
Q: When do you need an estate plan?
A: Estate planning is not just about determining where your property goes upon death, but also planning for potential incapacity during life. Anyone over the age of 18 should sign advance directives that appoint agents to manage medical and financial decisions during an emergency or prolonged disability. Parents of minor children should consider naming guardians under a last will and testament, and persons to manage inheritances privately under a revocable trust.
If you want to benefit a loved one who relies on government programs for medical care, financial support or to live independently, you should consider special needs planning to manage that person’s inheritance and to preserve eligibility for public assistance.
Other individuals who would benefit from advance planning are those wishing to recognize charitable organizations, to transition a business or lake home, to manage wealth for future generations through estate, gift and generational tax planning, and to avoid court oversight through use of a revocable living trust.
Q: What might happen if you fail to plan ahead?
A: The ramifications of failing to plan ahead are varied and broad reaching. Without advance planning like signing a last will and testament or living trust, or designating beneficiaries on insurance and retirement accounts, your assets may be distributed to heirs you never intended to benefit.
Important estate and gift tax savings may be lost if options are not evaluated in a timely manner. Individuals with significant disabilities may lose eligibility for critical supports by receiving assets outright, rather than in a special needs trust for their benefit.
Likewise, failing to hold funds in a trust for an heir with significant creditor or divorce concerns, poor decision-making skills, substance abuse or mental health issues may result in a loss of the inheritance to third parties. Finally, if you fail to sign advance directives selecting individuals to handle financial and medical decisions, a court will appoint a guardian if you lose mental capacity long-term, and the person appointed may not be the one you would prefer.
Q: What are some common estate planning pitfalls to avoid?
A: One big mistake is failing to do any advance planning. For those who have a plan in place, another consideration is making sure to change the plan when there are changes in circumstance. Modifying a plan may be necessary due to the birth of a child, marriage or divorce, death of a loved one, receipt of a substantial inheritance, starting or selling a business, or moving to a new state.
An early diagnosis of dementia or learning a family member has a permanent disability may prompt the need to update the estate plan. Another common pitfall is failing to properly retitle assets, like stock, real estate or vehicles, even though you created a revocable living trust to avoid the probate court process upon death. Forgetting to name contingent beneficiaries on retirement assets or insurance policies also can cause a gap in planning.
Q: How do you choose a legal advisor to help prepare an estate plan?
A: It is crucial to work with an attorney who listens to your objectives and concerns and with whom you are comfortable sharing personal and financial information. Similarly, if your circumstances require advice concerning individuals with special needs or creditor problems, family members facing a nursing home admission, or management of unique assets like a closely-held business or commercial property, it is essential to find an attorney with the specific knowledge and training to offer counsel that is tailored to your needs.
Finally, it should go without saying that the attorney should have a good reputation and high ethical standards.
