Beneficiaries

3 Examples of Executor-Beneficiary Conflict of Interest and What Happens When This Arises

July 24, 2023 By Gratia P. Schoemakers, Esq.

An executor is a person appointed in a will to manage the estate of a deceased person. They have a fiduciary duty to act in the best interests of the estate and its beneficiaries. However, conflicts of interest can arise when the executor is also a beneficiary of the estate. In this situation, the executor may be motivated to act in their own interests, rather than in the best interests of the other beneficiaries. Here are some examples of executor-beneficiary conflicts of interest and what happens when they arise:

Self-Dealing: Self-dealing occurs when the executor uses their position to benefit themselves at the expense of the other beneficiaries. For example, the executor may sell estate assets to themselves or a related party at below market value, or they may charge excessive fees for their services as executor. When self-dealing occurs, the other beneficiaries can file a lawsuit against the executor for breach of fiduciary duty.
Unequal Distribution: If the executor is also a beneficiary, they may be tempted to distribute assets unequally in their favor. For example, they may take a larger share of the estate or withhold assets from other beneficiaries. In this case, the other beneficiaries can challenge the distribution in court.
Delaying Distribution: Executors have a duty to distribute the assets of the estate in a timely manner. However, if the executor is also a beneficiary, they may delay distribution in order to increase their share of the estate. When this happens, the other beneficiaries can petition the court to remove the executor and appoint a neutral third party to manage the estate.

When an executor-beneficiary conflict of interest arises, it can lead to disputes and legal action. In order to prevent conflicts of interest, it is recommended to choose a neutral third party to act as executor or to include a provision in the will that prohibits the executor from benefiting from the estate. If a conflict of interest does arise, it is important to consult with an experienced probate attorney for guidance. An attorney can help you navigate the legal process and protect your rights as a beneficiary.

Afraid your executor isn’t doing their job correct? We have helped heirs, beneficiaries and devisees get their rightful share; we can help you too! Our office is located at 1100 NASA Parkway, Ste. 420J, Houston, TX 77058. Call our office at 832.408.0505 and book your Legal Strategy Session today!

3 Simple Ways to Avoid Probate Costs

September 5, 2022 By Gratia P. Schoemakers, Esq. Leave a Comment

The bad news: probated estates are subject to a variety of costs from attorneys, executors, appraisers, accountants, courts, and state law. Depending on the probate’s complexity, fees can run into tens of thousands of dollars.

The good news: probate costs can be reduced by avoiding probate. It’s really that simple.

Here are three simple ways to avoid probate costs by avoiding probate:

Name a Beneficiary. The probate process determines who gets what when there is no beneficiary designation. So, naming a beneficiary is the easiest way to avoid probate. Common beneficiary designation assets include:
- Life insurance
- Annuities
- Retirement plans
Create and Fund a Revocable Living Trust. A revocable living trust owns your property, yet you remain in charge of all legal decisions until your death. After your death, your named trustee manages your assets – according to your wishes. A trust works well if properly created and funded by an experienced estate planning attorney.
Own Property Jointly. Probate can be avoided if the property you own is held jointly with a right of survivor-ship. There are several ways that you can establish joint ownership of property such as:
- Joint tenancy with right of survivorship – ownership simply transfers to other tenants upon your death;
- Tenancy by its entirety – is a form of joint tenancy with right of survivorship, but only for married couples in some states;
- Community property – property obtained during a marriage in some states;

State laws play an important role here. We can help you determine which form of joint ownership, if any, is a good fit for you.

We Have the Tools to Help You

Call or contact our office today. We’ll help you decide whether it makes sense to avoid probate in your particular case and, if so, the best way to do so.

3 Powers to Consider Giving to a Trust Protector

March 15, 2022 By Gratia P. Schoemakers, Esq. Leave a Comment

Today many estate plans contain irrevocable trusts that will continue for the benefit of a spouse’s lifetime and then for the benefit of several generations. Since these trusts are designed to span multiple decades, they must include a trust protector who will have the ability to adjust the trust provisions as circumstances, beneficiaries, and governing laws change.

What is a Trust Protector?

A trust protector is an individual or group of individuals who are given the power to ensure that the purposes and goals of the creator of an irrevocable trust are ultimately fulfilled. Generally, the trust protector may be a family member or friend (typically someone who is not a beneficiary or trustee of the trust), an unrelated trusted advisor, or a group of these individuals acting by majority or unanimous agreement. The choice of who to name as the trust protector will depend on the trust creator’s wishes and the intended duration of the trust.

What Powers Should a Trust Protector Hold?

A trust protector can be given as few or as many powers as the trust creator desires. While it may be tempting to give a trust protector a wide array of powers to deal with every possible future circumstance, the trust creator should carefully consider the specific purposes and goals for their trust and only give the trust protector powers that will further those purposes and goals.

Regardless of a trust creator’s intent, below are three powers that all trust creators should consider giving their trust protectors:

Power to Amend Trust Provisions. Some irrevocable trusts that are intended to continue for multiple generations begin as revocable trusts that only become irrevocable after the trust creator dies or at some other time in the future. If the trust creator fails to update the trust due to changes in circumstances, beneficiaries, or governing laws while the trust is still revocable, a trust protector can fix these issues after the trust becomes irrevocable.
Power to Add, Remove and Replace Trustees. Giving this power to the trust beneficiaries may defeat the trust creator’s intent since the beneficiaries may be inclined to hastily remove a trustee who does not give in to their every request. Instead, a trust protector can take an objective look at the trustee’s actions or inactions and determine if the trust creator’s intent is being fulfilled or derailed.
Power to Change Trust Situs and Governing Law. Since it is impossible to predict where the beneficiaries and trustees of an irrevocable trust will live in the future, this power is critical to ensure that the trust will continue for as long as the trust creator intended and with minimum tax consequences. Giving this power to the trust protector will allow an objective party to determine if the change will be beneficial or is necessary.

Final Thoughts on Trust Protectors

Including a trust protector in an irrevocable trust agreement or a revocable trust agreement that will become irrevocable at some time in the future is critical to the success and longevity of the trust. Nonetheless, the trust protector should only be given powers that will ensure the purposes and goals of the trust creator are ultimately fulfilled.

If you are interested in adding a trust protector to your trust or would like to have the trust protector provisions of your trust reviewed, please contact us today! Call our office at 832.408.0505 or schedule your appointment right now.

Who Is Your Beneficiary? Marilyn Monroe Ultimately Had No Idea

July 30, 2019 By Gratia P. Schoemakers, Esq.

When creating a last will and testament, it’s important to know your beneficiary. Sadly, that’s not always the case. Marilyn Monroe, one of the world’s most famous icons, didn’t seem to have any idea to whom she left her money.

Acting Coach & Psychiatrist Got Everything

Marilyn Monroe died at the age of 36 from a drug overdose. The year was 1962 and there have always been questions as to whom she named as beneficiaries. In fact, her business manager, Inez Melson, was allegedly suspicious about Marilyn Monroe’s will when it was first drafted.

Monroe’s will left some money to care for her mentally ill mother and bequeathed some of her personal belongings to Inez Melson. The remainder went to her acting coach and psychiatrist:

25% to her psychiatrist to help those who couldn’t afford psychiatric counselling
75% of the residue (the majority of her estate) was left to Lee Strasberg, her acting coach

A bit strange, but there it is, and Monroe could never predicted what happened next…

Strasberg’s 2^nd Wife Takes Control of Monroe’s Fortune

Lee Strasberg controlled Monroe’s estate for a short while. Then, his second wife, Anna, took over. Although she only met Monroe one time, she created utter chaos for years. Here’s a brief rundown of what happened:

Multi-million lawsuit over publicity rights. Strasberg filed a multi-million lawsuit over publicity rights of Monroe’s image and likeness – and won. Ironically, she has since earned more money thanks to Monroe than Monroe earned in her lifetime.
Licensing deal on products. Strasberg made millions of dollars through a licensing deal with CMG Worldwide who sold products with Monroe’s picture on it such as cigarette lighters, pet clothing, and other “iconic” memorabilia.
Multi-million lawsuit over personal belongings. Strasberg also filed a lawsuit against the heirs of Monroe’s former agent, Inez Melson, for personal belongings in their position. She won and auctioned them off at Christie’s for over $13 million.

Strasberg eventually sold her interest in Monroe’s estate for a reported $20 – $30 million. Interestingly, Monroe has consistently been one of the top highest earning deceased celebrities since her death. Her estate earned $17 million in 2015 alone.

Consider Everything – Carefully

When creating an estate plan, it’s important to consider everything very carefully. While you may want a specific person to benefit from your estate (as Monroe wanted for Lee Strasberg), the probability that someone else will get control of your assets is likely unless you provide otherwise.

Monroe obviously had very good intentions for providing for help to those who are mentally ill. Had she considered those intentions more carefully, many more people could have been helped. Instead, someone she met once bilked her estate for their own purposes.

We can all learn from Monroe’s mistakes. We can help you come up with a good estate planning tool which provides for your family, friends, and charitable organizations. Give us a call or contact us today.$

Are Your Documents Following the Same Script? Basics of Beneficiary Forms and Estate Planning

August 23, 2018 By Gratia P. Schoemakers, Esq.

In the event of your untimely death, the manner in which your beneficiaries — or those people who receive your assets from your estate — are determined is highly dependent on how your property is titled.

Generally, property with title includes vehicles, boats, airplanes, real estate, bank accounts, savings bonds, life insurance policies, retirement accounts, and stock certificates. If you die without a will or a trust and haven’t used any beneficiary or transfer on death options, state law will determine who inherits property with a title. On the other hand, property without a title, such as jewelry, antiques, art, and even your digital assets are usually provided for in your will or trust, and if you don’t have one typically goes to your heirs at law. As you can see, who you have listed as a beneficiary — and not having a beneficiary designation at all — can have serious implications for your family after you have passed away.

Increasingly, a wide range of financial products allow you to name a beneficiary upon your passing. The benefit of naming a beneficiary is that the assets go directly to the named beneficiary upon the account owner’s passing, often bypassing the long and expensive process of probate. The danger is, however, that when these designations are not carefully coordinated with your estate plan you can inadvertently disinherit a loved one, cause a disabled family member to lose government benefits, leave your heirs with a massive tax bill, or otherwise fail to achieve your goals.

What is a Beneficiary Designation?

Simply put, a beneficiary designation is a contractual agreement where the bank, insurance company, or financial company agrees to pay a person or entity, that you have selected, the specific assets upon your death. For example, Bob may list Susan, his sister, as the payable on death (POD) beneficiary for his savings account at ABC Bank. When Bob dies, ABC Bank will pay Susan the balance in Bob’s account, without Susan having to first go to probate court.

But properly choosing a beneficiary and making sure it falls in line with your estate plan is often more complex than it seems at first glance. Completing a beneficiary designation form is not just a routine task that you complete when filling out your bank account, life insurance, or human resources documents. In fact, naming beneficiaries is something that you should take very seriously and should consult your estate planning attorney about.

Coordinating Your Beneficiaries

It’s important to note that beneficiary designations supersede your will or trust.

For example, let’s suppose that Bob’s will stated that his entire estate is to be given to Elizabeth, his daughter. Since Bob used a payable on death beneficiary designation on his ABC Bank account, that asset will instead go to Susan, not Elizabeth. In other words, if you name one relative to inherit assets in your will or trust, but some of those assets have someone else listed on the beneficiary designation, then your entire plan isn’t going to work as you likely intend. For this reason, it is vital to ensure that your beneficiary designations are coordinated or aligned with your estate plan in order to fully protect you and your family.

Of note, many beneficiary forms have a designation for contingent beneficiaries. A contingent beneficiary is basically a “Plan B” to your initial designation. So, in the event your primary beneficiary passes away before you, the contingent beneficiary steps in their place and gets their share of the asset.

Estate Planning Help

The best strategy for ensuring your wishes are carried out is to first understand how naming beneficiaries has a significant impact on your heirs and then coordinate your wishes with an estate planner. We are here to help you coordinate all of your assets and beneficiary designations with your estate plan so that everyone gets the protection they deserve.

How to Leave Your Life Insurance and Retirement Plan to Your Minor Children

August 23, 2018 By Gratia P. Schoemakers, Esq.

Your children are your pride and joy. It is no surprise that at some point or another, every parent likely becomes concerned about who will care for a minor child or children if one or both parents die or are incapacitated. From a financial perspective, many parents turn to life insurance in an effort to take care of their family in the event of death. While it is true that life insurance is a particularly helpful financial tool to protect your loved ones, it is just as important to consider how to leave the proceeds to your minor children. Beyond this, you should also take into account how to incorporate your retirement money (IRAs and 401(k)s), another common, significant asset into your overall estate plan.

mother and child

Once you decide to purchase life insurance you will name a beneficiary of the death benefits. You also name a beneficiary on your retirement accounts. But, if you fail to have a system in place and your children are minors at the time they inherit these assets, the court will appoint a property guardian or a conservator (the title depends on state law, but the role of this person is to “watch over” a minor person’s money). This process will require attorneys’ fees, court proceedings, supervision from the court, and will generally limit investment options — all costs and delays that will not help your children, but rather cost them a significant percentage of their inheritance. Another downside? Whatever’s left when the child becomes an adult (usually at age 18, but may be older, 19 or 21, in some states) will be handed over, without any guidance or boundaries. This can impact college financial aid opportunities as well as open up a ready opportunity for irresponsible spending that most parents would never intend.

How To Leave Assets?

There are several ways in which you can structure your life insurance policies, retirement accounts, and overall estate plan to benefit your minor children in the most streamlined way possible.

First, instead of naming minor children as beneficiaries, use a children’s trust to manage and use the money for the benefit of your children. This lets you designate someone you think will manage the money well, rather than leaving it to the whims of the court.

Second, select and name a guardian to handle the day-to-day care for your children. This person can be different than the person managing in the money, which can sometimes work well depending on the amounts involved and the different skill sets needed to manage money versus raise children.

Third, if you have a living trust, make sure you have properly funded the trust and aligned your retirement assets with the plan. If you do not yet have a trust, consider the benefits of one over will-based planning. Both types of plans will allow you to designate how much and when your children will receive the money, but a trust-based plan will allow you to do so without court involvement.

Benefits of a Trust

Generally, parents list a minor child as the secondary or contingent beneficiary on life insurance and retirement accounts after first naming the surviving spouse as a primary beneficiary. This may work, as long as everyone dies in the “right” order and at the “right” time. But, it’s a gamble, and providing structure through a trust for these inheritances is a vastly better option. Unlike guardianship or custodian accounts, where the proceeds must be handed over once the minor(s) turns a certain age, you can specify at which age your child receives the proceeds. This allows you to specifically designate how the money is to be used, so it will be available for the important life events, while protecting your children from reckless spending. Ultimately you have more control with a trust, and your customized plan will provide the best protection for your family.

If you have any questions about how to leave assets to your minor children — whether it is a life insurance policy, a retirement account, or any other asset — contact us today. A legal professional can explain the options available to your family, determine what tax implications will result, and advise you on the best structure that will protect your family’s needs. Call or contact our office today to schedule a time for us to sit down and talk.