It’s a big galaxy out there, so it’s up to smart financial advisors to help their clients avoid these five estate planning black holes. If you know and warn the families that rely on and trust your advice, you will dominate your local market. As an estate planning advisor, I often see these five areas missed, to the detriment of many families.
The simple things are sometimes the most important. Where do your clients keep their estate plan? Is it in the bank vault, where the successor trustee can’t get to it because the documents giving the successor trustee the authority to get into the bank vault are in the bank vault? It’s happened way more often that you might think that the family has to jump through many frustrating legal hoops just so they can get access to the legal documents that express the intended wishes. Do those left behind know where everything is? And can the successor trustee find it? Does the bank have a copy of a current power of attorney, or is it still in the binder? Does the doctor have the health care directive, or is it still in the binder? Inattention to these little details could prevent a family member from receiving the care he or she needs and cause a lot of wasted time and expense for the heirs.
The beneficiary designation
An attorney preparing a trust may not review things that are outside the estate, such as life insurance and retirement plan beneficiary designations. Yet these often comprise the largest portion of what a client will pass on to his or her family. When reviewing these designations, remember that classes (e.g., “my wife,” “my children”) are better than individuals in most cases. Also keep in mind that there may be court orders, which may dictate a certain beneficiary designation. It is surprising to me how many people have no idea where their retirement or life insurance is going. Be sure to ask the company for a copy of the beneficiary forms on file. The estate planning documents may name a current spouse or family member, but if the beneficiary form states another individual, the beneficiary form will be honored, even if it is dated before the new estate planning documents.
The beneficiaries themselves
To whom will the money go? Sometimes the answer to that question can make a huge difference in the kind of plan that needs to be in place. A beneficiary on government assistance or with a disability may require a special needs trust. Is a beneficiary having significant financial issues? Distributing estate assets to a creditor can be avoided through spendthrift clauses. Beneficiaries are as unique as clients, and a good plan looks at their circumstances, too. Sometimes a little forethought and decision by the client can head off years of family squabbling in the future.