Reviewing Your Real Estate Plan After the Death of a Loved One

The death of a loved one is never easy. Space and time is needed to process and grieve your loss. Once you have had time to cope with all that has happened, you should consider updating your estate plan with any changes that might be needed because of your loved one’s death. Here is a discussion of some of the main areas of focus of your review.

Although your estate plan primarily focuses on what will happen if you become incapacitated or die, the death of a loved one can have a major impact on your planning. If you have an estate plan, one of the first items you need to do when a loved one dies is to review your planning documents with the following questions in mind:

Was your deceased loved one named as an heir to money or property under your will or a revocable living trust (RLT)? If so, do your documents address what happens to that money or property should your loved one predecease you?

Your will or trust should be reviewed to ensure that it clearly states who will receive money and property if your first choice dies before you.

If your will does not list a backup contingent beneficiary, the gift in question is canceled, and the accounts and property become part of your general estate and will be distributed according to the remaining terms of your will. Your will should be revised to state who you wish to receive the accounts and property, and who will receive the assets if those now listed should predecease you. If your will does not clearly list these alternates, state law will determine who will inherit. The heirs the state chooses may not be the ones that you would choose.

If you have an RLT, there are probably provisions in the document that direct what happens to a gift if a beneficiary is deceased. However, if it has been some time since your RLT was prepared, 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, making the administration process more manageable and reducing the possibility of fighting among family members with differing opinions.

Did you select your deceased loved one to be one of your trusted decision makers?

As part of your comprehensive estate plan, you selected several different important helpers and decision makers to act on your behalf if you become incapacitated or to wind up your affairs after your death. If your deceased loved one held any of these positions, make sure there is a backup. If not, it is critical that you update the document. If there is already a backup, update your document anyway 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.

Personal representative: This trusted individual, appointed in your will, is responsible for collecting all your accounts and property, paying your outstanding debts, and distributing your money and property to your named beneficiaries. If your chosen personal representative dies before you and there is no named backup, the probate court will determine who to authorize next. The court’s decision will be guided by state law, which lists the order of priority for who will be named next.

Co-trustee or successor trustee of your RLT: Serving either with you as co-trustee, or after you as successor trustee, this trusted person or entity is charged with managing, investing, and distributing the money and property from your RLT to you during your lifetime and 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 a provision that either allows you to continue serving as sole trustee, names 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, nothing noticeable will happen with respect to how your trust is managed right now. If you die and there is no successor trustee, your beneficiaries will need to look to your trust agreement for guidance on 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 provisions and your state’s laws. Because the trust is revocable during your lifetime, while you are still able you can change any of these provisions to adapt to any changes that may arise.

Agent under a financial power of attorney: Your agent is an individual you choose to carry out financial transactions on your behalf, which could be anything such as writing checks, managing your bank accounts, or dealing with your retirement benefits. If the person you selected is deceased and there is no named backup, no one else has authority to act on your behalf. If you become incapacitated, your loved ones will have to go to court and have someone legally authorized to take care of your financial matters. This process is time-consuming, expensive, and exposes to public view personal details of your condition and family dynamics, all at a time that may already be stressful without such additional issues.

Agent under a healthcare power of attorney: This person will act in the event you cannot make decisions or communicate your medical wishes. Because the unexpected can happen at any time, it is critical that you always have someone legally authorized to act for you in this regard. At a time of medical need, you do not want to require the probate court to appoint a guardian to make medical decisions for you and be faced with the financial and emotional cost of such procedures. In choosing a guardian for you, the judge will look to state law to determine the appropriate person, who may not be the person you would have chosen. In addition, 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 or unable to care for your minor child, and your chosen guardian predeceases you, the probate court will look to state law to determine who to authorize 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.

We are here to help.

We understand that you are grieving the loss of a loved one. When you are ready, we are here to help you take the next step in your estate planning journey, whether you are starting, completing, or updating your estate plans. Give us a call to schedule your in-person or virtual appointment.