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Law Offices of Ronald W. Rutz
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September 11, 2000: Simplifying Things for your Personal Representative; Tax Will Dilemma

Q: I just wanted to make everything simple so in my Will I direct that everything will be sold and the proceeds divided equally.

A: Of course that is easy to do but your Will direction probably will cause more work for your personal representative than otherwise might be necessary. Remember, if you place direct instructions in your Will or in your Trust, your fiduciary must follow them.

Consider letting your personal representative have the flexibility to work with your beneficiaries in case certain people wish to receive certain items from the estate, like for example, stock. (Does it make sense to go through the steps and expenses of a sale, even if the sale was to the beneficiary, only to turn around and give the money back?)

And remember legally your personal representative already has the right to liquidate some or all of the assets as part of his or her estate settlement power, unless the asset in question was specifically left to someone in a Will.

In my practice a forced sale clause like the one you requested almost always is present at the wrong time, especially when it comes time to sell appreciated assets. For example, what if the real estate or the stock market has retreated or interest rates are up, or the mechanics of selling an asset like real estate delays the closing of the estate.

Let your personal representative use his or her fiduciary discretion.

Q: I don't want to do a tax will because if my spouse dies first, I lose control over the assets transferred into the marital trust inside the Will or the living trust. My attorney had no solutions.

A: Your attorney was right that as a beneficiary the surviving spouse can only be given very minimal powers over the marital trust. Otherwise the trust tax immunity is lost and even if the assets stay in the trust and then pass on from the trust to the remainder beneficiaries, the assets will be included in the second spouse's taxable estate.

But remember, if for example, a trustee such as a child, who also will be a residuary beneficiary under your Trust, becomes uncooperative or hard to work with, just remind him or her that you still control how assets will flow under your Will. This has always worked in the past and these "moral-suasive" statements can be just as effective as the direct power you request that your attorney place in your Trust but without the tax consequences.

And as an aside, if you are tempted to insist on being able to request 5% or $5,000 of the trust assets in any one year, have your attorney explain to you the devastating, cumulative tax consequences of such a power, especially in the years the power is not exercised.

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