By Jeremy A. Wechsler, Esq.
Investment Advisor Representative
[email protected]
At Franklin Retirement Solutions, we look at each client holistically, meaning it’s not just investment planning, but income planning, legacy planning, tax planning, health care planning and more. Legacy planning and estate planning are often on our clients’ minds, so this week, I put together five mistakes that are often not top of mind. Estate planning is unique to each person/family, so always consult a qualified attorney before making decisions. Enjoy, and get in touch with any questions!
1. Making everything joint to “simplify things”
It sounds simple. Mom is getting older, so she adds her daughter to a bank account to pay bills. Maybe she even adds her on the house deed. Problem solved, right? Not necessarily. Adding someone as an owner can create unintended consequences involving creditors, taxes, inheritance and family disputes. Remember, a joint and survivorship designation supersedes a will, so if you leave one daughter as joint owner, the other children do not inherit that asset under the will. There are usually better ways to give someone authority to help.
2. Not considering what happens if a beneficiary dies before you
You leave half your estate to your son and half to your daughter. Easy enough. But what if, God forbid, your son dies first? Does his share go to his children? His spouse? Your daughter? These aren’t pleasant scenarios to consider, but that’s exactly why we plan for them. A good estate plan answers the “what ifs,” not just the most likely scenario.
3. Forgetting about family dynamics
Sometimes the biggest estate planning problems aren’t about money. They’re about people. Naming two siblings who haven’t gotten along in 20 years as co-trustees probably won’t improve their relationship. Neither will leaving three children a vacation home without considering whether they can cooperate with each other. The plan on paper must translate to working in real life.
4. Not leaving enough liquidity
Someone can die with a substantial net worth and surprisingly little available cash. Real estate, businesses and other illiquid assets may be valuable, but expenses still need to be paid. Without adequate liquidity, a family may be forced to sell an asset at the wrong time because the estate needs cash. That’s why life insurance often makes sense for many of our clients, as it’s almost instantaneous tax-free liquidity.
5. Planning for death, but not incapacity
Estate planning isn’t only about what happens after we’re gone. What happens if you’re alive but unable to manage your finances or make medical decisions? Powers of attorney and healthcare documents may never receive the attention of a will or trust, but during your lifetime, they could become the most important documents in the entire plan. The goal of estate planning isn’t simply to have documents in a drawer. It’s to think through what could happen, make thoughtful decisions today, and hopefully make a difficult time a little easier for your loved ones.