Thursday, July 2, 2020
In order to ensure the efficient and orderly dispersion of assets after death, maintaining a valid and current estate plan. Even small mistakes can have disastrous results that can be impossible to correct. There are several key errors that can make an estate plan defective, most of which can be easily avoided by reviewing your or your client's plan periodically and keeping up to date.
A list of these common errors include:
Failing to Update Your Beneficiaries
Marriage, divorce, birth and death can affect who will receive your assets. Whenever one of these changes occurs, make sure you update all financial, retirement and insurance accounts and policies as well as in your wills, trusts and other legal documents.
Omitting Legal Documents
Your will may be in perfect order, but it won’t exempt your assets from the probate process in most cases if the dollar value of your estate exceeds a certain amount. Also, having only trusts without a will can be just as big a mistake, as the will is the primary document used to name the guardianship of children and other dependents if something should happen to you and/or your spouse or partner.
The ultimate key to any successful estate plan is a concise letter of instruction that tells your executor or executrix where everything is located, the names and contact information of everyone they will have to deal with, such as your banker, broker, insurance agent, financial planner, attorney, landlord or tenants, etc.
If your situation is complex, it would be helpful to write a simple letter of explanation that outlines your intentions or tells them why you changed your mind about something.
Failing to Create a Plan
History contains many stories of very, very wealthy people who lost virtually all of their estates to court fees and legal costs because they failed to plan ahead in this area. Having a plan is especially important for those who may have to pay estate taxes.
See Mark P. Cussen 5 Ways to Mess Up Estate Planning, Investopedia, September 30, 2018.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.