4 Tips for Creating an Estate Plan that Works!

Posted on: July 13th, 2017
In a study conducted by caring.com in 2015, only 56% of American households had a will or a living trust. While most of us understand the importance of having a will in place, especially in seeing to the needs of a young family, there is still an unexplained resistance to attending to legal matters to assure that family affairs are in order. The consequences of failing to prepare can be devastating! In a nation of do-it-yourselfers, the legal community has created online templates for basic wills, some of which you have probably seen advertised on television or radio. While there is nothing wrong with trying to save a few bucks, you might end up costing yourself more in the long run if you fail to consider the following suggestions:
 
(1) HIRE AN EXPERT TO HELP ~ Common mistakes from trying to prepare a will or trust without an attorney result from a misunderstanding of legal terms and the technical aspects of creating these documents. One devastating mistake accidentally resulted from an individual’s confusion about the meaning of the term “beneficiary.” Leanna Hammill, an attorney in Hingham, Massachusetts, wrote in an article published for AARP, (“4 Costly Estate-Planning Blunders,” March 2011; www.arp.org), that an incorrect use of this term resulted in the immediate transfer of all her client’s property to his children. He was required, by law, to pay them an annual income, while nothing was left for his wife. This was not his intent, but he thought he could create his own will after reading a book. An experienced estate planning attorney could have helped the client avoid this unintended result.
 
(2) TIE YOUR BUSINESS INTO YOUR ESTATE PLAN ~ If you own your own business, you may be confused about how to provide equally for children who do and do not work in the business. It is unlikely that a simple will would adequately address your children’s different interests in a way that would help the business be successful after you are gone. Often parents do not want to involve their adult children in their money matters, but if your children are your business partners, it is only fair that they understand what the plan is for your business interests after you pass away.
 
Steve Ciepiela, a financial planner in Albuquerque, N.M., wrote about of a couple with five children who failed to put an estate plan in place.  Both parents died within a couple months of each other, leaving behind only a simple will. “Parents sometimes don’t want to talk to their kids about [money] and just leave the business to the kids,” says Ciepiela, President and owner of Charles Stephen & Co. “That’s a huge mistake.” In this case, the parents believed their business assets would be protected by the will, but by failing to create an estate plan, they failed to provide protection for their two sons who ran the business, or to provide any financial benefits to their other three children. At a family meeting following their parents’ deaths, the three children who weren’t involved in the business wanted to know immediately how much income they would be receiving from the business. Unfortunately, the two sons were forced to close their business and sell the company at a significant loss in order to pay, first, their parents’ estate taxes, and second, be able to divide the assets between all the children. (See AARP: “4 Costly Estate-Planning Blunders;” op cit.)
 
(3) WHY LEAVING A LUMP SUM TO YOUR BENEFICIARY MAY NOT BE A GOOD IDEA ~ If you are leaving money behind, you want to make sure that it makes a difference in the lives of your family members. A trust, rather than cash, can better provide for your children over the long term. An example of why a trust is better than a will is shared by Donald A. DeLong, an estate, business and tax-planning attorney in Southfield, Michigan. He witnessed a situation in which a father left his heroin-addicted son $250,000 in cash upon his death. Six months later, his son was penniless. “He did his own will,” says DeLong. “He knew the problems his son had with drugs because his son lived with him. I think he just wasn’t aware he had other options.”
 
In this instance, had the client met with an attorney and explained his intentions, it is highly likely that he would have been encouraged to set up a trust for his son. “A trust agreement stipulates how you want [your] property distributed. So rather than giving property outright to a beneficiary, the trustee holds your property and doles it out per your instructions.” In the case of the addicted son, a trust would have been an added layer of protection in looking after his son’s best interests by providing for him in a way that better suited his lifestyle and needs, and would have protected the money for his long-term benefit. (See: AARP: “4 Costly Estate-Planning Blunders;” op cit.)
 
(4) DON’T FORGET TO UPDATE YOUR PLAN ~ Your family changes and so does the law. The will or trust you set up twenty years ago may still be legal, but it may not meet the demands of your grown family. For instance, you may have included provisions for younger that are no longer necessary because your children are now all grown.  You may want to include grandchildren in your plan. Or perhaps divorce and remarriage has caused you to reflect on whether your own family’s needs will still be taken care of instead of seeing your assets split between step-children. Examining your present needs frequently, and comparing those needs to what your legal documents provide, will help you identify changes that can need to be made with the help of an experienced attorney.
 
Most importantly, neglecting to prepare and keep your plan up to date can leave a mess for your beneficiaries that can be expensive to resolve, and will most likely end up being resolved in the probate court. If you don’t create your own plan, you’ll be left with the plan the state has written for you. Do you want to leave your estate to those the state has decided should be your default beneficiaries?  A poorly drafted plan can create more problems than it solves, potentially engendering family quarrels, and years of fees. A living trust, on the other hand, avoids probate, and allows you to provide directions about how your assets should be used for the best benefit of your beneficiaries in the future.
 
The Law Office of Russell M. Blood, P.C. offers a ClientCare Program that helps his clients keep their plans up date.  Clients can make minor updates to their plans any time, and have their planning documents completely updated and replaced every three years.  Program participants receive help keeping their assets properly titled so their plans will be funded, and they can participate in annual client meetings and workshops with their children.  These services are included in an annual flat fee paid by those who elect to participate.
 
(Note:  An additional source consulted in drafting this blog was www.cheatsheetcom/personal-finance/the-consequences-of-neglecting-your-estate-plan, where you can find further discussion on this topic.)
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