Here’s a secret (shhh…!): Estate planning attorneys are human. We are not perfect. Over a series of four blogs, we’ll look at common mistakes. Are you making any of them?
The first mistake in the planning process is not coordinating the estate plan. A client has many types of assets. Let’s look at a typical client. John has $1,000,000. This includes his home, worth $250,000, a brokerage account worth $400,000, and an IRA worth $350,000. John is unmarried and wants 45% to go his son, 45% to his daughter, 5% to his brother, and 5% to his sister. The estate planning attorney drafts a trust with the appropriate percentages.
But, how were the assets titled? Were the non-IRA assets funded into the trust? Perhaps he inherited the home from his parents and it is in joint tenancy with his sister. If so, his sister will get the entire house, and his assets will not be distributed as contemplated. If the brokerage account is not in the trust, it might have a beneficiary designation which could thwart the distribution scheme. What about the IRA? What is the beneficiary designation? Is there any life insurance? What is the beneficiary designation?
Often, clients forget to mention an asset which has a beneficiary designation. They may forget about a 401(k) or pension plan. They may forget about a group life insurance policy through the office. A good estate planning attorney will ferret out these assets in the interview process and take them into account when putting the plan together.
You cannot make sure you are achieving the client’s goals unless you know what the assets are and where they will go. A good estate planning attorney will coordinate a plan for all the assets.
Stay tuned for next week’s blog on the second mistake: not leaving the assets in the right way.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555
www.aaepa.com
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