David's desire to work directly with people, not just numbers on a screen, led him to pursue a career as a Financial Advisor. Being able to work closely with clients and families is his passion, helping them realize their goals together and build a stronger financial future. David strives to build long-lasting relationships in order to best serve clients and create an exceptional experience.
You’ve done the hard part: You’ve met with your financial advisor and your estate attorney and had the conversations necessary to create a gleaming, watertight, comprehensive estate plan. But have you ensured your wishes will truly be carried out efficiently when the time comes? Implementing and maintaining an estate plan involves more than just signing documents; it requires rigorous attention to detail and ongoing vigilance. Let’s explore five of the most common and critical mistakes high-net-worth individuals and families encounter—and how you can avoid them.
- Failing to Fund Trusts
One of the more common aspects of estate planning is creating trusts to ensure assets pass seamlessly to beneficiaries. Simply establishing a trust, however, is not enough. Assets intended for the trust must be properly re-titled in the name of the trust in order to be governed by the trust’s language. This step is crucial to avoid probate, the public process by which the distribution of a will/estate is overseen through the court system, and ensure your assets are distributed according to your wishes rather than being subject to a potentially lengthy and costly legal process.
Moreover, while revocable trusts do not provide protection in the event of legal claims against your assets during your lifetime, funding your trust can provide your beneficiaries future protection against creditors, offering an added layer of security for your legacy.
- Overlooking Re-titling Out-of-State Properties
Owning property in multiple states can create complications during the probate process if these properties are not properly titled in the name of your trust. Each state has its own probate laws, and failing to address this issue could result in your heirs facing multiple court proceedings. By ensuring that all properties, regardless of location, are titled correctly in the name of your trust, you can streamline the administration of your estate and minimize delays and expenses.
- Misaligned Beneficiary Designations
Your trust is funded and your assets have been re-titled, so you’re all done, right? Nope. Beneficiary designations on retirement accounts and life insurance policies often supersede instructions in your will or trust. It’s critical to ensure these designations are aligned with your intentions, and they should be reviewed and updated regularly, especially after major life events such as marriage, divorce, births, or deaths in the family. Failure to coordinate these designations with your overall estate plan can lead to devastating consequences.
» Glassman Pro Tip: As part of aligning your retirement account beneficiaries with your estate plan, it’s also important to consider how to do so in the most tax-efficient way. Do you have a charity you plan to support as part of a bequest? Naming charitable organizations as beneficiaries on traditional (pre-tax) retirement accounts can offer your heirs significant tax advantages. Retirement assets, such as 401(k)s, IRAs, and other qualified plans, are usually subject to income tax when your beneficiaries withdraw from the account. By designating charities that can receive the assets free of tax, you can have the same philanthropic impact while minimizing the tax burden on your beneficiaries, allowing them to inherit other assets that receive a step-up in basis.
- Allowing Documents to Become Stale
Your estate plan should not be a static document. Life-changing events, such as new assets, births, deaths, or changes in financial circumstances, may necessitate updates to your wills, trusts, and powers of attorney. Even if such changes haven’t occurred, the language within your documents, especially powers of attorney, may become outdated over time, which could lead to difficulties for your intended representatives in an already difficult situation. Institutions like hospitals and banks may reject powers of attorney based purely on the age of the documents. We recommend clients update these powers every 7–10 years to protect against this type of issue.
» Glassman Pro Tip: For Maryland residents, there are special statutory powers of attorney, which should not require frequent updating due to changes in acceptable legal language.
- Keeping Decision-Makers in the Dark
Choosing executors, trustees, and powers of attorney are significant decisions that require careful consideration. It’s crucial to inform these individuals of their roles and responsibilities in advance. This ensures they understand your wishes and can effectively carry out their duties when the time comes. Even in situations where privacy concerns are paramount, providing instructions while omitting specifics about your wealth can still help your future representatives be prepared to act on your behalf.
Conclusion
Implementing and maintaining an estate plan involves more than drafting documents; it requires proactive management and periodic review. By addressing some common pitfalls and staying vigilant, you can ensure your estate plan reflects your current circumstances and effectively safeguards your legacy.
At Glassman Wealth, we specialize in guiding individuals and families through the complexities of estate planning with precision and care. Our team understands the intricacies involved in funding trusts, coordinating beneficiary designations, and ensuring documents remain current to help you avoid common pitfalls and safeguard your legacy. If you’re interested in taking the next step toward securing your family’s future with confidence, give us a call. Your peace of mind is our priority.