Estate Planning Is Not About What You Own... It's About What You Value.

It’s a PLAN, not just a document

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Last week, we saw an extremely sad, but very illustrative example of why a trust should be thought of as a coordinated planning exercise and not just as a document that can be purchased online, from a office supply store, a legal insurance provider, or even from a cheap(er) attorney.

The client’s uncle and mother had purchased nearly identical trust plans from an attorney who clearly followed the one-size-fits-all approach.  The uncle had no children, but his documents were full of references to descendants and creating shares for children, etc.  They were identical to the mother’s plans, other than the uncle’s name appeared wherever the mother’s would have appeared, i.e. the attorney was probably using a fill-in-the-blanks template to create his documents.

The sad part of this story is that there was not a single asset titled in either trust.  Both the mother and the uncle had passed away within the last 10 months and the client was just learning that her sibling’s name was on almost all of their accounts.  In fact, mother and uncle had appeared on all of their combined assets as joint owners and the sibling had been added to most of those assets as a joint owner within the last couple of years, including the uncle’s million dollar investment account.  Unfortunately, the sibling was indicating that he/she had no intention of sharing the value of those assets with the client.

The client had been added to two of the three properties as a joint owner and will receive at least a portion of both estates, but the trust plans would have delivered a 50% share of each, had the trusts been funded properly.  However, because these interests were gifted to the client during the lifetime’s of her uncle and mother, the client is going to have to pay capital gains taxes that she would have avoided if they had been inherited through the trusts.

This example should abundantly demonstrate that you can’t simply purchase a document and assume that you’re golden.  A trust must be thought of as a carefully coordinated planning exercise that involves financial advisors, accountants, bankers, insurance agents and your lawyer, in order to make it work right.  All assets must be evaluated to understand the client’s goals for that asset and then titled correctly or beneficiary designations set up correctly to ensure that those goals are achieved.

Then, the plan MUST be reviewed every so often to ensure that it remains effective, as assets tend to change over the years, objectives change, beneficiaries of your plans may change and the persons you want to manage the process may change.  The law may also change that adversely affects the plans, so that must be reviewed occasionally, too.

If your trust attorney fails to ask you about your assets and how they are structured while preparing a trust, or fails to discuss how they should be structured to make the trust plan work, then there is a very significant likelihood that the trust you’ve paid good money for will not achieve your objectives.

If you want a PLAN that has the best chance of working as intended, then carefully select an attorney that will spend the time to understand your assets, what you want done with them, and will coordinate with the other advisors you work with to ensure that your trust is more than just empty words on expensive paper.