Here’s a secret (shhh…!): Estate planning attorneys are human. We are not perfect. Over a series of four blogs, we’ll look at some common mistakes. Are you making any of them?
In an earlier blog, we saw that not coordinating the estate plan was the first mistake. In this blog, we’ll look at the second mistake in estate planning, not leaving assets in the right way.
Clients usually say they want to leave their assets to their beneficiaries, usually their children. Clients typically start the conversation saying they want to leave the assets outright. Clients know if their child is underage. Some clients even know if their child is immature or unable to manage finances, though many do not. Many clients assume that if these circumstances do not apply, the assets should go outright. Also, many clients think their children’s situation will remain static. If the child is married, they don’t think the child will get divorced. They don’t think the child will get sued. They don’t think the child’s financial situation could change dramatically.
But, of course, all these events could happen because life is change. A good estate planning attorney raises these possibilities in concrete ways for the client to consider. Then then good estate planning attorney offers potential solutions to these possible future “problems.”
For example, if the child ends up having a taxable estate, the assets inherited from the parents would be taxable if left outright. If the assets were left in a trust over which the child did not have a general power of appointment, the assets would not have been included in their estate, even if the child were the trustee and beneficiary. Most clients are not aware of this possibility.
As a good estate planning attorney, you should inform the client of potential solutions, even solutions to problems which they have not yet recognized.
Stay tuned for the third in the series of blogs about mistakes in estate planning: not considering Medicaid planning.
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
- Double Your Gifting with Spousal Gift-Splitting - January 11, 2022
- Tax Planning for 2022 - December 28, 2021
- Donor Advised Funds: Too Good to Be True? - August 10, 2021