Marc A. Hebert: Mistakes with estate planning could nullify your intentionsBy MARC A. HEBERT
December 29. 2017 8:31PM
Estate planning is done for a number of purposes. One is to transfer assets to your heirs according to your wishes once you pass on. Unfortunately, just having the documents in place might not be enough, as mistakes can be made. Here are a few of the most common to review within your own planning.
Perhaps the biggest mistake is procrastination. Failing to do anything at all regarding estate planning is a common mistake. Remember, if you don't create a plan for yourself, your state legislature will step in with a plan of its own. This plan, called the laws of intestacy, dictates who will receive your assets and how they will acquire them. It might not be the plan you would prefer to have had.
If you have had documents prepared, what you think of as done might not be completely finished. Many things change over time, including your life circumstances and the estate tax laws. Maybe the executor you chose years ago is no longer up to the task. A periodic review of your documents is vital to keeping them in line with your current wishes.
Incorrect titling of assets or beneficiary designations can also cause problems. Perhaps your documents are written perfectly, but you neglected to update your retirement plan or life insurance beneficiaries. Retirement plan assets and life insurance proceeds pass to the beneficiaries named. An asset owned in joint tenancy with rights of survivorship will pass directly to the surviving joint tenant. It just doesn't matter what the will states, beneficiary designations always prevail.
Another common mistake is failing to fund your revocable trust. Perhaps you have a trust that accomplishes all that you wish. Remember, the trust does not exist unless it holds assets. Failing to transfer titles of your properties to the trust or name the trust a beneficiary of your assets, where appropriate, will make the whole effort a waste of time.
It can also be a good idea for your will to have "pour over" provisions. This means assets that you missed titling in the trust's name while you were alive will transfer into the revocable trust at your death. Keep in mind that certain assets, such as retirement plans and life insurance, will pass to the designated beneficiary regardless of what your trust or will states.
In a related point, perhaps you only have a will when a trust would do a better job. Trusts can provide management assistance for your heirs, dispense income to your beneficiaries in the manner you wish, provide management during incapacity, and avoid probate and the public process it entails.
Trusts can be especially valuable when dealing with younger heirs. Having a lot of money to spend when one is young might not yield the best results. A trust can control when the income can be received and for what it can be spent on until a beneficiary matures. The funds can even be distributed in stages, just to provide the beneficiary with a test run in handling money.
Make certain you consider the disposition of family heirlooms, collectibles and other items of sentimental value. There have been plenty of fights (legal and otherwise) over these items.
In this digital age, it might make sense to create a master document that lists all your social media, online accounts and passwords so that your heirs can access them and close them down.
As a final step, make certain a family member knows where to find the documents at your passing. If your will or trust document can't be found, or no one knows that these documents exist, your best laid plans will not get carried out.
Marc A. Hebert, M.S., CFP, is a senior member and president of the wealth management and financial planning firm The Harbor Group of Bedford. Email questions to Marc at firstname.lastname@example.org. Your question and his response might appear in a future column.