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Five Big Threats to your Estate Plan

Monday, June 3rd, 2019

Estate planning is a wonderful way to love your family and completing a plan often brings relief.   There are several threats however, that you must be aware of so that your estate plan does not fail when you need it the most.

#1 Avoiding One-Size-Fits-All Planning

The first rule of thumb is to make sure your estate plan is custom written for you.  Each and every family is unique with different needs.  For example, if your family has conflict and you treat beneficiaries differently under the estate plan, there is often an assumption that a mistake was made or that someone may have exerted undue influence on a parent. Without guidance from you in the plan drafting, family members can begin to think the worst of each other. 

If you have not done any estate planning or if what you have in place is an ineffective one-size-fits-all plan, your estate will be subject to your state’s intestate laws.  State intestacy laws dictate who will inherit your assets and in what amounts.  Often, these laws are contrary to what you would truly want to have happen.  The laws may also have adverse consequences for blended families and multiple marriages, with children from prior relationships.  Even worse is when you may have a special needs beneficiary relying on government programs—the state intestacy laws or a one-size-fits-all estate plan may get your loved one disqualified from the much-needed government programs.  If you do not have a customized plan, or if you have not done any estate planning yourself, you are leaving your estate and your legacy to be distributed how the state dictates.  A successful, customized estate plan will help ensure that your wishes are being carried out.

#2 Missing Opportunities to Eliminate (or Minimize) Tax Burdens and Costs

Watching an estate get dwindled away by taxes and fees will often lead to a lot of frustration and hard feelings. As you are preparing your estate plan, your major intent is to benefit your loved ones, not the government, courts or attorneys. A well-designed estate plan can help successfully ensure that your assets are being handled in a way to eliminate or minimize administrative costs and avoid or minimize any tax burdens.

#3 Not Choosing Your Own Representatives

Your chosen representatives are important for your estate plan to be successful.  You need representatives in two areas—medical decisions and financial decisions.  Representatives help you during life if you cannot make your own decisions, and after death with settling your estate according to your estate plan.   Choose representatives you trust who understand you and your wishes.  It is not always wise to choose someone just because they are the most convenient.  Leaving the selection of representatives to chance or choosing the wrong ones may lead to litigation and wasted estate assets.  Do not hope that everyone will know who you want to be in charge.  You need to set forth proper authority for your chosen representatives whether you are using a trust or a will as the center of your estate plan.

#4 Asset Disorganization

A successful estate plan begins with a process to identify assets and correctly integrate them into the plan.  Integrating assets into an estate plan correctly means that assets must be owned and beneficiary-designated correctly to work in tandem with your plan.  If you do not address this type of asset integration, not only will your chosen representatives likely be lost when their help is needed, but your assets may not even transfer as your estate plan sets forth.  Correct forms of property ownership/titling and proper beneficiary designations are critical to making sure your plan will work as you intended.

#5 Keeping Up-to-Date

Life can change quickly, as can the laws surrounding estate planning.  You have worked all your life to build what you have.  Do not leave what happens to you and what you have built to chance or government control.   Successful estate planning should address the risk for incapacity, and plan for the effective transfer of everything you have to everyone you love, the way you want.  It is important that you review your estate plan periodically and with each life change (i.e. birth or death of a loved one, marriage, purchase/sale of a major asset, health issue, etc.), make necessary updates.  It is also important to keep up on the changes in estate planning laws.   

Working with a thoughtful estate planning attorney will help you avoid the foregoing.  Contact Anderson & Jahde for competent, professional tax help.

This entry was posted on Monday, June 3rd, 2019 at 2:09 am and is filed under Articles.