Does your estate plan work the way you think it works?

Are you sure what your estate plan says?  Could you put your wishes into your own words?  Would they match up with what your will or trust directs?  Why all of the questions?

Estate Planning Surprises

Lately, I have seen an increase in the number of people who are surprised how their deceased parents’ wills or trusts differ from what their parents told them before passing away.  There are a number of reasons for this, including the parents intended to make changes to a will or trust but never put them into place, the parents told their kids what they thought the kids wanted to hear, or there was a breakdown in communication with their estate planning lawyer.

Understanding Estate Planning Jargon

Communication between lawyers and clients is vital for the clients’ wishes to be carried out, especially in the estate planning and business succession planning areas.  Many times a client with a creative idea for his or her estate plan may be misunderstood by his or her estate planning lawyer or the estate planning lawyer may have a “standard” way “everybody” does things or the estate planning lawyer might make decisions for the clients without discussing all of the options with them or the client may be insistent on a specific course of action without taking time to understand the potential risks.  A lot of times all of the above are symptoms of the estate planning lawyer using jargon that the client does not understand.  If the client does not let the estate planning lawyer know this, the lawyer may not know that further explanation is necessary.

What Happens When Good Estate Plan Intentions Go Bad?

A few examples of cases that have come to my office recently where the documents and the client’s stated wishes were not in agreement:

• A trust was established to protect assets given to daughter at death from the daughter’s creditors.  However, the trust directed that the assets should be given outright to the daughter, which exposed them to daughter’s creditor’s claims.
• A woman wanted to give her house to her daughter who was her caregiver for her final illness.  The rest of the assets would be split between the other siblings.  Unfortunately, the caretaking daughter sold the house and bought a much larger house using all of the equity from the previous house as well as all of the assets her siblings were supposed to receive.
• A man left real property in trust for his three sons to be distributed immediately after death.  Two of the sons did not like the third son and did not distribute the property or the income to the third son.  The third son became ill and died before the property was distributed to him.  The third son’s heirs received nothing due to a clause in the trust requiring the recipient to be alive at the time of the gift.
• A woman desired to leave her IRA to her four children, and her attorney advised her to make her trust the beneficiary instead.  Unfortunately, the tax treatment of that position in her case was not in the best interests of her children, who are all near retirement age, to the tune of about a $40,000 extra tax on $300,000 of retirement assets.

Benefits of a Free Estate Plan Review

Each of these problems were spelled out clearly in the trust documents, but only one of the above people had anyone take a second look before it was too late.  Two others resulted in lawsuits, and I am still working on resolving the tax issue.   In the first case, I was able to catch the errors, because the previous attorney died and the father was referred to me for a different change regarding one of the grandchildren who had gotten into some legal troubles.  Before making the small change requested for the grandchild, I provided a free estate plan review of all of the documents along with a summary of the current provisions.   We were able to update the estate planning documents and protect the daughter’s inheritance from her creditors, update the powers of attorney and health care documents to reflect changed circumstances, and give the client peace of mind that his affairs were in order.
That peace of mind was well worth the half-hour or an hour you might spend in my office or on the phone discussing the differences between what you want to do and what your documents say you want to do.  In the next couple weeks, I will go into more detail about what I look for in my free review of these documents with you.  If you are ready for your free estate plan review now, please call or visit our website to schedule a free estate plan or business plan review today.