In our experience, most people are unaware of just how poorly their estate plans will actually work. The real tragedy for these families is that most problems don't arise until after it's too late to fix them. We have a passion for educating people about the pitfalls of traditional estate planning and helping them navigate the many estate planning challenges presented by our increasingly tax and legal landscape.
There are many areas where estate plans fail. Some of the more common failures include:
- Probates still happen, MORE OFTEN THAN NOT, even where the client(s) created a living trust with the specific objective of avoiding probate.
- Unintended heirs receiving property that should have gone to someone else.
- Estate taxes being imposed after the death of a surviving spouse, where a married couple's combined estate should have been completely sheltered.
- Adult children failing to manage assets properly, after the cognitive disability of their parent(s). Sometimes these siblings just get mad at each other. Sometimes they sue!
- Retirement accounts passing to the estate of the deceased, or "wrong" beneficiaries where income taxes must then be paid all at once, rather than be deferred for many years.
- Life insurance policies that are poorly managed may terminate before the death of the insured, causing huge financial losses.
- Minor children receiving their inheritance the wrong way.
- Disabled beneficiaries receiving their inheritance the wrong way, causing loss of valuable benefits such as SSI and MediCal.
The above list represents just SOME of the possible problems, several of which could be happening at once.
THE SHIFTING ESTATE PLANNING PARADIGM
THE TRADITIONAL HOLOGRAPHIC WILL
Leaving instructions for the disposition one's property at death is not a new concept. Some form of the will dates back to the Old Testament and the Roman Empire.
Two hundred years ago in America, the creation of a will was a deeply personal exercise. (See, for example, George Washington's will) The testator would often write the will by hand (holographic). Though a legal document, the will often read like a lengthy personal letter. Written in the first person, the heirs would "hear" the maker's words one last time. In addition to passing possessions and real property, people explained their purposes, their hopes, their wisdom, and their memories related to various gifts. The "last will and testament" said something about the person, his relationships, and the nature of the property.
As law and property ownership became increasingly complex, so too did the requirements for planning one's estate disposition. As the legal technicalities mounted, it became more commonplace (and necessary) for an attorney to oversee the creation of the document. In large part, this was a good thing: It ensured-or was more likely to ensure-that what the individual intended actually occurred at death. The attorney used the language and provisions that made it more likely that bequests would pass to heirs in the appropriate/intended manner.
