The Nuts and Bolts of an Estate Plan
The will, the trust, or the probate court — if your partner didn't have a will — dictate the cast of characters that you'll be working with. Each person has a different role and a different set of responsibilities.
The executor is something like the estate's personal representative. He shepherds the estate through the process of being settled, which is not a speedy process. You're probably the executor for your spouse's estate. Don't put pressure on yourself to get through things quickly. Start by gathering your financial information — review Chapter 1 for suggestions on gathering information — and contact your current financial planner, accountant, or attorney for a referral to a lawyer who can help you with the probate process.
The executor can be personally responsible for managing the finances of the estate. Don't make distributions to beneficiaries until you're sure you have the bills and taxes paid. This delay could extend up to a year or more for a more complex estate.
The trustee is responsible for overseeing a trust and managing the assets the trust owns. Typically, these include things such as investments or real estate, and the trust document outlines guidelines on how the assets are to be managed and how income or principal is to be distributed. You both might have acted as trustee for a trust set up before your partner died, or the trust may have been established by instructions in her will. Trusts are convenient because you take charge of the assets without having to wait for the probate court, but it is very important that you talk to your lawyer for help in understanding the requirements the trust places on managing the assets.
Some trusts have more than one trustee. You may be co-trustee with a professional manager such as a bank or a lawyer. Trustees are often paid for their expenses and a management fee by the trust.
A trust created while you're alive is called an inter vivos, or living or family trust. A trust created in your will is called a testamentary trust. The inter vivos trust keeps the assets from becoming public during probate and may save probate costs if your state law bases probate fees on the size of the probatable estate.
Beneficiaries are the people or organizations that will be given a benefit from the estate. You are most likely the primary beneficiary of your spouse, but other charities or children may also be named. The will or trust document explains what each beneficiary should receive, and when, and it's the responsibility of the executor or trustee, as the case may be, to make the distributions.
Remaindermen are the secondary beneficiaries of a trust after the death of the initial beneficiary. If you're the beneficiary of a trust, your remain-dermen may be your kids, or your partner's kids, or family from a previous marriage. A charity that gets the trust principal after your death could be the remainderman. Remaindermen and beneficiaries can have conflicting interests; if the beneficiary uses all the assets in the trust, there could be nothing left for the remaindermen.
Trusts try to minimize conflict between beneficiaries and remaindermen by stating that the beneficiary can take interest from the trust but not principal, so that the principal is preserved for the remaindermen. The beneficiary in this case often asks the trustee to invest in high income-producing investments that may not be in the best long-term interest of the remaindermen.