5 Ways to Wreck a Good Estate Plan
You’ve taken the important step of working with an estate planning attorney to create an estate plan tailored to your needs. Maybe you’ve created a trust, a will and powers of attorney. You feel a sense of peace of mind. And you should. Estate planning need not be on your mind on a daily basis. But, just as you wouldn’t walk out of your auto dealership with a new car and fail to get periodic oil changes and tune-ups, there are maintenance items to keep in mind with your estate plan.
From the perspective of what NOT to do, here are 5 surefire (and all too common) ways to wreck a good estate plan:
1. Title assets incorrectly/failing to fund trust
It is critical to understand how asset titling and ownership effects your estate plan. If you hold assets in joint tenancy, those assets will not be controlled by the terms of your will or trust If you create a living trust, the trust should be funded immediately. The trust can only direct the disposition of assets actually in the trust. If one of your goals is guardianship and probate avoidance, then your trust will not meet your goals unless adequately funded. Not only should your trust be funded upon creation, but vigilance is needed to insure that any new assets and accounts are also property titled within your trust.
2. Don’t complete or update your beneficiary designations
Certain assets are not funded into a trust (at least immediately) but is instead governed by a beneficiary designation. The most common of these are retirement accounts, life insurance and annuities. Beneficiary designations must be completed correctly and updated when necessary. If you rollover an IRA or take out a new insurance policy, care must be taken to make sure the new designation fits with your existing plan. Perfect estate planning documents cannot fix neglected beneficiary designations.
3. Amend your trust or will with cross-outs and margin notes
Wills and revocable living trusts are amendable. However, like most things, there is a right way and a wrong way. Altering original documents by cross-outs or margin notes is the wrong way. For a Will, all terms must be properly signed and witnessed. Changes made subsequent to the original signing that are not properly witnessed are not valid. A trust must be amended in the manner provided by the terms of the trust. At a minimum, cross-outs and margin notes are likely to create ambiguity and confusion. The right way is to create a new written will, codicil or amendment prepared by an estate planning attorney in the same manner as the original signed with proper attestation.
4. Hide your documents and asset information to never be found
Don’t turn your estate into a treasure hunt. Proper storage of original estate planning documents is important. Be sure that your agents, trustees and executors can easily find and access your documents when they need them. Equally critical is providing your successors with the ability to discover and gather your assets and handle debts and expenses. This includes not only providing a list of assets and statements, but also in many situations a list of online accounts and passwords.
5. Never update your estate plan
Ch-ch-ch-ch-ch-changes. They’re inevitable. Your estate plan should grow with you. Updating your estate plan both at regular intervals and as your personal and family situation evolves is critical. Changes in tax and property laws may necessitate updates as well.*Image courtesy of Flickr via Rhys A. (*it was remarkably difficult to find a wrecking ball image unrelated to Miley Cyrus)