Five Totally Avoidable Estate Planning Mistakes Advisors Make

Even experienced advisors can overlook details when carrying out estate planning directives on behalf of their clients.

When a will is worded properly, the right people are taken care of.

When it’s not, they can be left out in the cold.

Accountants, attorneys and financial professionals see the same lapses time and again.

Before we list a few, here’s the good news:

All of them are preventable.

  1. Not creating a last will and testament
  2. Beneficiaries not designated or updated
  3. No sharing of estate plans with family
  4. Failure to review existing estate plans
  5. Not consulting a lawyer in complex cases

We previously referenced a report by CNBC about a forthcoming transfer of wealth in this country. It’s happening as baby boomers pass on their estates to younger generations.

Boomers are the most prosperous generation in our nation’s history. They will bequeath $68 trillion dollars over the next 25 years, according to CNBC.

Proper estate planning is a must to ensure the bulk of this wealth gets to the intended recipients.

Where there’s a will, there’s a way

Even if you’ve sketched out a estate planning strategy with a client, the absence of a will can render it useless.

That’s because when an individual passes away without a will, they die intestate. (Investopedia says this also applies if a will is deemed legally invalid.)

Distribution of their estate becomes the responsibility of the probate court.

Often, family members meant to receive the assets have to spend significant sums of money proving their relationship to the person.

This, according to The Money Guy Show website, creates a hot mess for everyone involved.

An average executor will spend 570 hours to settle such a messy estate, they say.

Choose who will inherit carefully

Ken Cella, who leads the Edward Jones client strategies group, encourages individuals with estates to inform people who are named in their wills in an Advisor Magazine November article, “Legacy & Wealth: Is Your Estate Plan Really in Order?”

While 73% of Americans believe their beneficiaries know how to manage their estate and spend its assets once they are gone, Cella says, only about half (49%) of beneficiaries feel that way.

Stress to clients how important it is to name beneficiaries – and to make updates as needed.

These two actions alone could prevent a number of potential issues.

Let’s say your client’s son John is the sole heir named in his will. Is John also entitled to the proceeds of his father’s IRA or 401 (k) accounts?

Not if his sister Jane is named as beneficiary. She would receive those funds.

Periodically re-examine estate plans

Say your client’s will clearly indicates who should receive assets from his estate.

And, he has designated beneficiaries for accounts not under the jurisdiction of his will.

But marriage, divorce, births and deaths can all impact a client’s life.

His net worth, assets and employment status are also subject to change.

These are all reasons to sit down with your client and review the plan from time to time.

Is a lawyer necessary?

Do you have clients wishing to address unique relationships in their estate plans?

This could include those who have married multiple times, have unmarried partners, or children with disabilities.

If so, they may want to seek legal advice, according to Harry S. Margolis, an estate, special needs and elder law practitioner in Boston and Advisor Magazine contributor, in an article titled, “The Top 8 Mistakes People Make in Estate Planning”.

Consulting with an attorney can help ensure the people your clients care about are provided for, Margolis says.

Prepare for tomorrow, today

To summarize, advisors sometimes skip some steps when drawing up estate plans for clients.

While these may seem relatively minor, leaving them out can cause big problems later on.

Fortunately, these slip-ups are easy to correct, if you take action before your client becomes incapacitated or passes away.

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Three Ways an Estate Planning Attorney Can Ensure a Client’s Will Withstands a Legal Challenge

As an estate planning attorney, clients trust you to manage their precious assets.

Though it seems like a straightforward process, you may encounter issues along the way.

For instance, parties with a potential interest in your client’s assets may surface at some point.

Disgruntled heirs and disinherited family members are two examples.

Because we know you have your client’s best interests at heart, here are three ways you can help protect their wealth.

1. Put beneficiaries in writing

Estate planning attorneys need clients to see how important beneficiary forms are.

In a recent Forbes article, financial planner Jeffrey Levine noted that a will often covers an individual’s personal property, such as jewelry and other possessions.

It does not, however, cover real property, bank accounts, or retirement savings.

“A will only controls assets that pass through the probate estate,” Levine said, “but many assets avoid probate altogether and pass by contract or operation of law.”

With this in mind, IRAs, Roth IRAs and 401 (k) accounts should all have beneficiary forms.

The forms generally supersede a will, he said, “even if it clearly states you hate John and want all your assets to go to Jane.”

2. Consider a no-contest clause

Here is another tool estate planning attorneys can use to shield their clients’ assets:

Put a no-contest clause in their last will and testament.

According to personal finance website the Balance, if this clause is present, a beneficiary who unsuccessfully challenges a will in court will likely lose his or her inheritance.

However, this process can vary by state. Some may not enforce no-contest clauses.

3. Create a living trust

A third option you and your client could consider is a living trust.

According to the American Bar Association, a trust can address a variety of estate planning issues that cannot be tackled in a will.

What’s more, your client can manage their assets and protect them in the event they become injured, ill or disabled.

Most trusts are set up to allow the client to revoke or amend them whenever they want.

While a living trust is subject to estate taxes, it can help your client avoid probate proceedings.

Keep in mind, though, an irrevocable living trust may not be revoked or modified. These are designed for tax and asset protection purposes.

Shaking a financial FIST

Do you have a client who is passing on wealth on to another generation of their family?

This requires especially careful planning, as explained in a recent Wealth Management article, This FIST Can Knock Out Multigenerational Family Wealth.

Here’s what FIST stands for:

Family units supported by the family wealth (number of)

Inflation, which eats into wealth over time

Spending rate (percentage of assets being consumed by the family)

Taxes, including income, capital gain, estate and gift

Some final thoughts…

As an estate planning attorney, your clients rely on your knowledge and expertise to make the most of their life’s assets.

Depending on the situation, one or more of the courses of action identified here may be appropriate.

The only way to know for certain is to ask your clients.

If you have not discussed any of these scenarios with them, you have a very good reason to initiate a conversation.

And click here if you would like to learn more about our client acquisition services for estate planners.




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