Five Estate Planning Mistakes to Avoid

Five common estate planning mistakes are easy to avoid with the right information and support, as well as a little creativity.

While it’s true that no estate is completely bulletproof, there are mistakes that people make that are big enough to walk through, while others are more like a slow drip, making things harder in a slow but steady process. There are common estate planning mistakes that can be easily avoided, reports Comstock Magazine in the article “Five Mistakes to Avoid When Planning Your Estate.”

  1. Misunderstanding Estate Law. Some people are so thrown by the idea of an estate plan, that they can’t get past the word “estate.” You don’t need a mansion to have an estate. An “estate” does not mean extreme wealth.  The term is actually used to refer to any and all property that a person owns, regardless of debts. Even people with modest estates need a plan to help beneficiaries avoid unnecessary costs and stress, and typically estate planning is even more critical for such individuals. Talk with an estate planning attorney to learn what your needs are, from a will to trusts to incapacity planning. Make sure that this is the attorney’s key practice area.  A real estate attorney, family law attorney or the friend or family member who is a lawyer won’t have the same knowledge and experience.
  2. Getting Bad or Incomplete Advice. It takes a team to create a strong estate plan. That means an estate planning attorney, a financial advisor and an accountant. Look for a firm that will tailor an estate plan specifically to your goals. The is no one size fits all approach, and many tools are needed for a complete estate plan. Buying an insurance policy or an annuity is not an estate plan, but may helps achieve those goals.
  3. Naming Yourself as a Sole Trustee without a Back-up. Naming yourself as a sole trustee puts you and your estate in a precarious position. What if you develop Alzheimer’s or are injured in an accident? A trusted individual, a family member, a longstanding friend or even a professional trustee, needs to be named to protect your interests, if you should become incapacitated.  This is also why you should have Durable Financial Powers of Attorney and Healthcare Powers of Attorney, among other documents, to ensure someone you trust may act on your behalf if you cannot.
  4. Losing Track of Assets. Without a complete list of all assets, it’s nearly impossible for someone to know what you own and who your heirs may be. Some assets, including retirement funds, life insurance policies, or investment accounts, have named beneficiaries. Those people will inherit these assets, regardless of what is in your estate plan. If your heirs can’t find the assets, they may be lost or there may be a long delay in obtaining them. If you don’t update your beneficiaries, they may go to unintended heirs—like children of prior relationships, someone other than your spouse and so on.
  5. Deciding on Options Without Being Fully Informed. When it comes to estate planning, the natural tendency is to go with what we think is the right thing. For example, people often say “I just need a will,” but learn later that the will requires probate, or doesn’t address the disability of a child.  However, unless you are an estate planning attorney, chances are you don’t know what the right thing is. For tax reasons, for instance, it may make sense to transfer assets, while you are still living. However, that might also be a terrible idea, if you choose the wrong person to hold your assets or don’t put them in the right kind of trust.  It may also make sense to leave income taxable assets to charities, and non-income taxable assets such as life insurance, to individuals.  You don’t know what you don’t know, so it is important to work with an estate planning attorney to craft the plan that’s right for you.   See here for some estate planning frequently asked questions to get you started.  https://www.galliganmanning.com/estate-planning-questions/

Estate planning is still a highly personal process that depends upon every person’s unique experience. Your family situation is different than anyone else’s. An experienced estate planning attorney will be able to create a plan and help you to avoid the big, most commonly made mistakes.  Please contact our office to discuss how your plan can avoid these estate planning mistakes.

Reference: Comstock Magazine (Dec. 2019) “Five Mistakes to Avoid When Planning Your Estate”

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How Does a Trust Company Work?

A trust company may provide expert investment, asset management and estate settlement services for clients who need them.

Although they aren’t for everyone, a trust company can provide a variety of investment, tax and estate planning services for their customers.  Wealth Advisor’s recent article, “Understanding How Top Trust Companies Operate,” gives us a high-level overview of the nature and function of trust companies, as well as the services they provide.

A trust company is a separate entity owned by a bank or other financial institution, or in some cases by a law firm or other professional. It can manage trusts, trust funds and estates for individuals, businesses and other entities. In most cases the assets are held in actual trusts, with the trust company named as the trustee. They typically use several types of financial professionals, including financial planners, attorneys, portfolio managers, CPAs, and other tax professionals, trust officers, real estate experts and administrative personnel to effectively manage the assets.

Trust companies perform a wide variety of services related to investment and asset management. Most companies manage the investment portfolios within the trusts of their clients, however some prefer a client’s financial advisors do so instead. There’s also a variety of investments, such as individual securities, mutual funds and real estate, that can be employed to achieve growth or income.  They also can provide safekeeping services within secure vaults for other types of tangible investments or valuables, like jewelry, and occasionally for important documents, such as an original will or trust.  They also take full fiduciary responsibility for their clients’ financial well-being. This means that the clients’ best interests are always considered in each service and transaction performed.  See here for a fuller list of areas where a professional fiduciary may be utilized.  https://www.galliganmanning.com/practice-areas/estate-planning/

Most clients use trust companies for estate settlement services, either as the executor or a trustee.  They can perform such tasks as valuation, dispersion and re-titling of assets, payment of debts, and expenses, estate tax return preparation and the sale of closely held businesses.  Trust companies frequently work with their clients’ heirs to provide the same types of services to the estate assets’ recipients as to the donor.

Trust companies aren’t for everyone, but serve a vital role in some estate plans.  They are especially useful where there are likely to be family disputes, disabled or very young beneficiaries, or in some cases, where a client doesn’t have someone they feel comfortable putting in charge of their estate.  Most clients who want to use a professional trustee must meet certain financial requirements, usually including at least a certain net worth, but for clients with these concerns, it’s worth it.  See Kevin’s Korner for more ideas on how to pick your fiduciaries.  https://youtu.be/W2LjFQFmY_I

If you expect to avoid family disputes in your estate, have young or disabled individuals or don’t have someone suitable, you should consider the use of a trust company in your estate plan.  Please contact our office for a free consultation to discuss how a professional fiduciary can help you achieve your goals.

Reference: Wealth Advisor (December 10, 2019) “Understanding How Top Trust Companies Operate”

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The Blended Family and Issues with Finances and Estate Planning

Blended families present unique issues in finances and estate planning, but an open conversation about money, your goals and your estate plan can help.

The blended family is a family dynamic that is increasingly common, which can make addressing financial issues much more of a challenge. In a blended family, one or both spouses have at least one child from a previous marriage or relationship, and together they create what’s known as a new combined family.

CNBC’s recent article, “4 ways to help blended families navigate finances,” reports that a staggering 63% of women who remarry come into blended families, with 50% of those involving stepchildren who live with the new couple, according to the National Center for Family & Marriage Research.

The issues in a blended family can be demanding, so couples often delay having the “money talk.” This is an important piece of the family financial puzzle. We’ll look at some of the ways you can work on that puzzle, and see our website for more https://www.galliganmanning.com/estate-planning-life-stages/estate-planning-for-blended-families/:

  1. Get expert advice from your Estate Planning Attorney. Talk to an estate planning attorney about the specifics of your blended family situation.  It is important that both spouses discuss how their separate and joint money will be used, both while they are alive and after they pass away.  This includes whether the spouses want to leave their assets for the children from their prior relationships.  It is also important to discuss the role the children will have in your estate plans so that you can avoid disputes between them.
  2. Create a plan for merging relationship and money. Understanding the role money plays in combining two families is critical to the success of a healthy blended household. A basic step may be to draft a detailed plan of how the couple is going to care for one another in their marriage and in their family, in addition to how they will care for one another’s children. Try to determine the ways in which money plays a role in coming together. The more you can communicate and the more that you can exhibit a united front, even from a financial perspective, the stronger a couple will be.  This may include considering either a prenuptial or postnuptial agreement detailing how your assets will come together in the combined family.
  3. Collect documentation and monitor your money. It’s good to understand the work involved with the preparation and paperwork after divorce and remarriage. You’ll have a divorce decree or a domestic partner agreement, as well as instructions on child support and alimony. You also need to keep track of all the different financial accounts.
  4. Discuss your financial issues regularly. Ask about the financial obligations to the ex-spouses. Make sure both spouses understand if there’s child support and/or alimony, as well as responsibility for paying for housing or their utility bills.

Although these issues may be demanding, they can be successfully navigated with frank, open discussion and the advice of trusted advisers.  If you are in a blended family, please contact our office for a consultation on how these issues may be addressed in your estate plan.

Reference: CNBC (November 23, 2019) “4 ways to help blended families navigate finances”

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