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The Estate Planning Checkup
By Gary Case

Estate 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. Here's how:

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 benefits
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 heirs.

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 documents say.

Make sure estate-planning documents are up-to-date
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 needed.


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 the beneficiary.

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 document.

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’ death.

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.


Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Cornerstone Financial Planning are not affiliated.