I have previously blogged and responded to Frequently Asked Questions about the need to periodically review your estate (FAQ: I Already Have an Estate Plan, so I am Good, Right?) and business plans (Blog: December 25, 2019, End of Year Checklist For Your Business.). So, what would be more appropriate during this holiday season than a gentle reminder on that same topic?
Two Examples of How Estate Plans Fail
These days, our lives are surrounded by a lot of uncertainty, leading to more people thinking about their own mortality. Many people are choosing to review and update their estate plans during this challenging time. One thing that can easily trip up an estate plan is not paying attention to how assets are owned. Titling assets in a way that does not work with your estate plan can result in additional cost to your estate, or to assets being passed on in a way that does not correspond to your wishes.
Forgetting to Re-Title Your Assets
You have just finished your estate plan. You and your seasoned counsel have reviewed your current and expected assets, discussed the possible estate, gift, property, income, and capital gains tax implications. You have a plan that provides you with the best expected advantages of the existing tax laws, with some flexibility to change your plan if those laws change. Now you are done and can set it aside for a bit. NOOOO! Did you not read the title of this paragraph?
If you forget to re-title your assets, its not too late. Many times clients will let me know that they would rather wait a bit to change over their bank accounts, or real property, or other titled assets. Just too much on their plate at the moment. Well, if that is you, consider this holiday season as a reminder to revise your plan and make sure you get this done.
Remember, waiting too long has consequences. If you pass, your heir may need to file a petition to correct this mistake. (Blog: December 2, 2020, One Order of Haggstad Please.) But this will cost your estate money, time, and potential exposure to public scrutiny. Also, depending on how well your estate plan is written, there is no guarantee this petition will succeed. Additionally, even if someone reminds you to do this before you pass, should you become incapacitated before re-titling the assets, this can again lead to unnecessary costs and delay. Review your Schedule A’s. Update if your Trust allows it. Re-title your assets as soon as you can.
Conflicts Between Estate Planning Documents
We have as many clients under the age of 50 competing estate plans as those over that age. Some are as young as their early 20s. Really, it’s not an age determinative task. Furthermore, if you have minor children, your family will be very relieved if you have an estate plan. (Blog: January 28, 2020, Estate Planning Parents with Minor Children.)
Because your assets will change over time, or more particularly, the types of your assets will change, your estate plan must change as well. If your plan is well written, this can be as simple as titling new property in the name of your Trust, and updating your Schedule A. But what if you don’t have a well-written plan?
As an attorney who practices both estate planning and trust and probate litigation, I am well versed in how estate planning can go wrong. Once common problem is finding conflict in the documents. Here is an example:
Your Trust calls for an equal division of property among your children. But, over the course of time, you open a new bank account. You update the Schedule A of your Trust to include this account, but rather than titling the account in the name of the Trust, you list your name, and name only one of your children as an additional account holder. You have perhaps unwittingly created a joint account with right of survivorship for that one child named on the account. What is the result?
Well, if you read my previous blog on conflicts between estate documents, you already know the answer. (Blog: July 1, 2020, The Deceased’s Will and Trust Are In Conflict, Which Wins?).
Takeaway
Its good practice to mark your calendars once a year and set aside time to review your business and legacy plans to make sure they are still fulfilling your needs. This past year we have witnessed a sharp rise in “economic” planning by attorneys new to these fields, or who perhaps are not quite keeping up with the many changes. Don’t settle for generic planning. Whether Legacy or Business Planning, Contact CASHMAN LAW today for a free consultation to get the Plan You Deserve.™
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