Ten Steps for Successful Estate Planning

With the heartache and mixed emotions that occur upon someone passing away, the best gift of all to heirs may be a well thought out and thorough estate plan.  There can be many pitfalls for an estate plan.  These pitfalls can be avoided by taking a little time to make some honest assessments about your life, your heirs, and your goals.

  1. Do Not Take Shortcuts – In order to avoid the expense and the time of forming or administering an estate plan some people try to use the exchange of gifts with promises of future actions.  For instance, a gift during life of one’s house to a beneficiary with a future promise that the beneficiary will sell the house and share the proceeds with other beneficiaries.  This indirect estate planning can result in many problems.  First, the person receiving the gift is under no legal obligation to follow through with fulfilling the future promise.  Second, even if the recipient of the gift wants to follow through on fulfilling the promise, the gifted property may be subject to liabilities to which the recipient is subject.
  2. Have Open Communications – Frequently heirs are surprised by the bequests that are left to them.  It is best to have open communications during your life so there are no surprises after your death.  If there is a reason why one child receives additional funds, such as another child received more support during your lifetime, let everyone understand your decisions.  That way there are no questions or finger pointing after your death.
  3. Take Steps to Ensure the Survivor Has the Tools to Survive – It is quite common for the non-breadwinner of the family to be the surviving spouse.  A number of surviving spouses make the comment that they are overwhelmed after the death of his/her spouse because the deceased spouse handled all of the financial affairs.  Make sure your spouse understands all financial affairs and has the ability to pay bills.
  4. Revisit The Plan – It is best to revisit an estate plan at least once every five years or sooner if there is a life-changing event.  A life-changing event includes death, birth, marriage, divorce, or disability.  The only thing that is guaranteed in life is change.  In addition, make sure your advisors (including estate attorney and certified public accountant) are kept up to date on changes to your plan or any life-changing events.
  5. Title Your Assets to Match Your Goals – It is critical to understand how your assets will pass upon your death.  For instance if accounts are created as Transferable on Death (TOD) or Payable on Death (POD) then the assets will go to the person named as the beneficiary on the account.  Neither a will nor a trust can override a beneficiary designation.  Similarly, there can be issues if trusts are set up and never funded.  For instance, if the trust agreement disposes of property in a specific way, while an older will disposes the property another way, the will must be followed if the property was never re-titled in the trust’s name.
  6. Go to Experts – Estate planning is a complex area of law.  Sometimes clients comment that they will create their own documents or go to an inexperienced advisor only because the advisor is less expensive.  It is best to use advisors, such as certified public accountants and estate attorneys who have a strong background in estate planning.  Using an expert will ensure that the client’s wishes are followed.
  7. Build Your Team of Experts – It is important for your advisors to understand the complete picture of your current well-being and your estate plan.  If your financial advisor, certified public accountant and/or attorney are only given partial information, then their ability to give valuable advice will be limited.  The best way to maximize your advisors is by fostering a team atmosphere among all advisors.
  8. Use of Living Will and Health and/or Financial Power of Attorneys – Have you considered other estate documents.  A living will lists your wishes for your healthcare after you are no longer able to make the decisions due to illness or incapacity.  A power of attorney can be set up in order to give another person the power to act in your behalf for your health care and/or financial needs.
  9. Selecting an Administrator or Trustee – When selecting individuals to take over the administration of an estate or trust, it is usually best to consider what their strengths and weaknesses are during everyday life.  For instance, if an adult son is always in need of funds, the son is probably not the best to select as a financial power of attorney.
  10. Take Steps to Avoid Assets Being Frozen on Death – One area commonly overlooked in an estate plan is the ability for the surviving spouse to have access to assets.  For instance, make sure utilities are listed in both spouses’ names in order to avoid the surviving spouse from not being able to manage the account.  In addition, each spouse should have at least one separate credit card, instead of having a credit card in one spouse’s names and having an additional card issued under that spouse’s account.