Although we do our best to make sure our clients' estate plans are properly designed, drafted, maintained and administrated, things can still go wrong - because the client fails to take some easy steps, despite our reminders.
Here are the Top 10 Reasons
We See Estate Plans Go Haywire
Don't Get Assets into the Living Trust. This is a problem because assets outside the Trust may wind up in a Court Conservatorship (if a parent becomes incapacitated or incompetent) or a Court Probate (when he or she passes away). Sometimes, people fail to transfer assets (or beneficiary to assets) into the Trust after signing it, using the letters we provide. Or, people acquire assets after setting up their Trust that they neglect to put in.
This can cause the spouse, Successor Trustee and beneficiaries lots of needless expenses and headaches!
Don't come back in every 3 years for a free review.
Over time, a client's situation can change (marriage, etc.) or relationships to those named as Successor Trustee and beneficiaries can change, the needs and circumstance of beneficiaries can change and laws can change. Plus, we may have new upgrades to our legal documents. The failure to address these changes can cause the estate plan to be out-of-date and not function as intended. We also check at the review meeting that all assets are properly in the Trust, so we can correct that before it becomes a problem!
Don't renew the Health Document Emergency Card. This card helps assure that, when someone is rushed to the hospital in an emergency, the named health decision makers (spouse, child or other persons) are contacted right away and the health care provider immediately gets a copy of the legal authorization for that decision maker to act (the Advance Health Care Directive and HIPAA Authorization). Otherwise, the clients', health decisions and proper treatment may be held up "in limbo" when critical matters need attending to. We provide clients with this card and pay for the first 3 years when they set up their plan or do a substantial upgrade. Then, the client must periodically renew it (the outside company which services the card sends a renewal notice). It's only $100 Single and $150 Married for another 3 years, but often clients ignore the notice or otherwise don't renew. This is yet another thing we try to catch at our 3 year review meeting!
Don't fill out a few key pages of the Owner's Manual. When people set up a Living Trust estate plan with us, we give them a spiral binder that says "Estate Planning Portfolio" on the cover. We also call this book the "Owner's Manual" and instruct clients to fill in a few items of information under the tabs "Location List", "Contact List" and "Directions Letter". This way, the Successor Trustee can immediately have at his or her fingertips certain key information - where various assets, statements and other important papers can be found, how professionals (doctor, accountant, financial advisor, etc.) and beneficiaries can be contacted, and special directions about details like distribution of personal possessions. By parents taking just a little time to fill these out, it will make the trustee's and beneficiaries' lives a lot easier!
Won't do planning beyond the Living Trust, when appropriate or necessary. Often, a Living Trust plan alone isn't sufficient protection for the client and beneficiaries. Sometimes an additional trust known as the "IRA Inheritance Trust ®" is warranted if there are IRA's and retirement plans exceeding $150,000. Or a separate "MAPT" (Medi-Cal Asset Protection Trust) may be used if the client or his or her spouse is likely to enter a nursing home. Or a separate Gift Trust could be used to reduce estate taxes, sometimes holding a life insurance policy. Often, the failure to get these types of additional planning is "penny wise and pound foolish"!
Clients make changes to their documents on their own. This almost always is a disaster because everyone typically is forced into court when the plan is to be implemented! Clients aren't trained to write in proper "legal language" and usually fail to follow the right formalities when making changes so they won't be deemed valid. Or the changes are overturned because someone else was inappropriately involved or it can be argued the client didn't have legal capacity to act. Do-it-yourself surgery is a really bad idea!
The Successor Trustee receives no advance instructions.
Most Successor Trustees have never acted as one before (and can get into a lot of trouble, unintentionally). We try to help our clients' Successor Trustees, but we need the clients' cooperation. First, we offer our clients, as part of their plan, a Trustee Manual containing critical step-by-step checklists and a "Quick Start" DVD. The Manual is only $199 but many clients don't want to pay for it, even though its value to the Successor Trustee (and the future legal fees it can save) are worth many thousands of dollars! A second thing we do is a periodic free seminar for Successor Trustees where we help prepare them for what to do when the time comes for them to act. Yet, clients fail to attend and bring their Successor Trustees! (If you'd like to attend our next Trustee Seminar,
The plan isn't administered properly at death. Certain steps much be taken to carry out the Living Trust plan. The plan itself is like a "blueprint" or set of directions, but they must still be implemented by the Successor Trustee (surviving spouse, child, etc.). The failure to implement the plan timely and properly can cause considerable taxes or conflict among the beneficiaries (family disharmony). We offer the Successor Trustee a free consultation when the client becomes incapacitated and when he or she passes away. We even put a free consultation certificate in with the Owner's and Trustee Manuals as reminders. But clients often fail to let their Successor Trustee know where these manuals are kept, so they aren't immediately located and utilized when the time comes.
Assets and records aredisorganized.
If a client owns assets or accounts all over the place (including on the internet), this can be a nightmare for the surviving spouse or other Successor Trustee to put together and figure out. We often refer clients to a financial advisor who can help consolidate or otherwise get all this paperwork in order now! (If you'd like such a referral, give us a call.)
If you've read this far, you're probably shaking your head "yes" to several of the items above. The question is, what are you going to do about it?... A good first step, if someone hasn't come in to see us and review their estate plan in the last 3 years, is to give us a call at 1.800.756.5596 and set up a free meeting soon. In addition, whether the client has been in the last 3 years or not, he or she may want to attend one of our free Living Trust Seminars, to bring them up-to-date with recent law and planning changes. And, if you're a Successor Trustee, don't forget to attend our Special November seminar,
By the way, if you're a client of ours and not sure what to do next (or know, deep down inside, that you probably won't get around to doing anything), please forward this newsletter to your children or other beneficiaries!