planning can be a touchy subject. Many people
loathe to creating an estate plan because they
don't want to deal with the issue of death, feel
it's too early in their life to think about it
or believe they aren't "wealthy" enough
for one. But estate planning is not just for older
or wealthy people. Younger people, especially
those with young children, need to have a will
and estate plan in place in order to provide for
their heirs in the event of a debilitating accident
or untimely death.
Just like it's important to go to the doctor for
healthy checkups, it's likewise important for
advisors to do estate planning checkups with clients.
Identify that you have the right documents
Every estate plan should include a will, applicable
powers of attorney, and advance directives in
the event that a person becomes unable to make
medical decisions on her or his own behalf. Revocable
and irrevocable trusts are also often part of
an estate plan.
Make sure the documents are structured
properly to reflect your client's wishes and maximize
Having the documents is only part of the equation.
They also need to be structured properly in order
to achieve the desired result for the client.
For example, it's important for advisors to review
the client's beneficiary designation forms to
make sure they are set up properly. One mistake
many people make in setting up a living trust
is to make the trust the beneficiary of an IRA.
If the trust is the beneficiary, the IRA can be
immediately 100 percent taxable upon death, which
can significantly diminish what's left for the
Another issue that often arises is when circumstances
change but people fail to change the beneficiary
on his or her retirement accounts. Say, for example,
you get divorced. Unless you change the beneficiary
form, the former spouse would be entitled to the
money even if that's not what you really intended.
It's also critical to ensure that investment accounts,
retirement accounts and other transferrable assets
are titled in such a way that the assets can pass
to the intended recipient.
Suppose in your will leaves an investment account
to your adult daughter from your first marriage.
Yet all of your assets are joint-titled with your
second wife. When you die, it's the second wife,
not the daughter who will inherit the money. Titling
will always take precedence over what estate planning
Make sure estate-planning documents are
Take a look at your wills and revocable trusts
every few years; consider your kids and make sure
the documents are accomplishing what you want
them to do. Sometimes situations change. For example,
guardians are no longer applicable, kids unexpectedly
get sick, and couples get divorced.
Also, if you first did an estate plan in your
30s and now you have significantly more money,
you might want to rethink how the money is distributed.
Having unrestricted access to too much money can
be really harmful to children. Leaving money in
trust for heirs provides asset protection while
still allowing beneficiaries access to funds as
One thing to think about is the use of an automatic
distribution clause, which directs the trustee
to hand out funds at particular points in time.
Most trusts have such a clause, but it is not
necessarily the best way to go. Instead, you may
consider giving the trustees discretion to distribute
funds based on need or based on a case made by
When there is discretion, it can be a good idea
to provide the trustee with a letter of intent.
It's a non-binding, non-legal document that instructs
the trustees about the settlor's wishes, providing
guidance that is not usually found in the trust
Utilizing a trust protector can provide additional
direction to trustees and beneficiaries. A trust
protector can be given the authority to make changes
in documents, trustees, and distributions to best
carry out the wishes of the trustmakers. A trust
protector should have a deep knowledge of the
trustmakers’ desires and potential issues
that might arise following the trustmakers’
Another good idea is to scan and save your important
estate and other documents in an electronic vault.
In addition if you have specific items of value
you want certain children or grandchildren to
have, you should take a time-stamped photo with
a phone or camera and upload it to your vault
and detail how you want the items distributed.
Make sure your insurance policies are
adequate to support your future needs. Oftentimes,
people buy insurance and set the policies aside
and forget about them. This is not a good idea.
The needs that you are looking to provide for
may have changed and also the policies themselves
may have changed.
At least every four years, regardless of the type
of insurance you have, it's appropriate to review
the coverage amount and the premiums in the context
of what you're trying to provide for at death.