"Never, Would I Ever..."

#estateplanning #estateplanningbasics #planning Dec 18, 2023

"Never, Would I Ever..." Estate Planning

When many people are thinking about estate planning for the first time, it is not exactly the most comfortable thing to think about. Because of that, there are a lot of contingencies, pathways, and options that people fail to consider. But that's what a good estate planning attorney is for. Here are seven of the biggest "That would never happen" items that I hear from clients along with some examples of when things don't work out the way we plan.

  • Siblings/parents/friends will NEVER divorce: The natural inclination for naming guardians for minor children is to jump to a family member and their spouse. This is when we remind our clients that there is a 50% divorce rate out there, so we should name one person at a time instead of couples. A natural "pushback" is "oh, they'll never get divorced, so name both of them to be co-guardians." That's when I tell them about the two single mothers who, against my advice, named their parents as co-guardians. Within six months, both of them came back to me to make changes because their parents were getting divorced. Even if you want to name your brother first and your sister-in-law second, that is far better than having a potential divorced couple named to have co-guardianship.
  • Having assets that will NEVER be sold: Usually, this is in the form of real estate that people swear up and down that they will never get rid of. However, life has it's own plans and sometimes a house needs to be sold, or it burns down in a fire, or something else happens. This could force a rewrite of estate planning documents if one child was getting the particular house and the other child received everything else.
  • The beneficiaries will ALWAYS outlive me: No one wants to think about loved ones in the next generation passing on before we do, but it happens a lot more frequently than we would like. This is why we typically build in a few layers of contingencies when it comes to naming beneficiaries in a Will or Revocable Living Trust. When people insist that a child will definitely, positively outlive them and therefore there is no need to name contingent beneficiaries. This happened with the estate of reality TV star Anna Nicole Smith. She named her son as her only beneficiary, and she specifically cut out any future children as beneficiaries. Then her son died of a drug overdose before she died, leaving a legal nightmare for her toddler daughter. (Check out the full video, including my impersonation of Anna Nicole Smith's voice here: https://youtu.be/g7h_ZBA3GCE)
  • I'll NEVER have any more children:  While a couple may not be planning on having any future children when making their estate plans, there are "oops babies" as well as tragedies in life where they may end up as guardians for a relative or friend's child. They may also end up adopting that child and wish to include them in the estate. That is why we often phrase that an estate is allocated among "the children of the Trustors" rather than only stating the names of the children. This way, if there is an adoption, that child is included in the estate without having to amend the estate plan.
  • We'll NEVER have a taxable estate: Money grows over time, especially with smart investing, and estate tax laws change. In addition, some states may have their own state-level estate tax (North Carolina currently does not), and those usually have lower thresholds, and who is to say you will never move? This is why we build in an automatic system for doubling up estate tax credits for married couples as a "just in case." In one case discussed with Henry W. Abts III (author of The Living Trust), a couple opted not to have the credit shelter trust provisions in their trust because they never believed they would have a taxable estate. It cost their beneficiaries more than a hundred thousand dollars, and adding the tax language to eliminate that would have cost $50.
  • I'll NEVER outlive my trustees: When discussing trustees and agents to be named in estate planning documents, we always look to have at least three people named in succession just in case something happens to the first two people. When people wish to cut off the conversation at one or two people, I tell the story of the client who insisted his brother would outlive him, and naming successor agents was not open to discussion. We did convince him to name a corporate trustee as the backup agent, but those institutions cost money. Unfortunately his brother did pass on before him, and since this was an irrevocable trust, the corporate trustee took over. 
  • I don't and will NEVER have a beneficiary with special needs: Unfortunately, health and medical crises happen, and people become disabled. Some of the programs available to help become highly dependent on how much you have in assets. This is why we have as standard in our Revocable Living Trusts that any beneficiary on such a program is to have their share held in trust and utilized by the trustee in their sole discretion to care for that beneficiary so they don't lose their benefits. In one instance, we had two sets of clients contact us within the same month that their son had an accident and were now on disability and Medicaid. (One from a car accident, and the other from a workplace accident). I was able to inform them that we did not need to make any changes to their trust because the protective language was already in place.

We never know what life has in store for us, and it is best to plan for the future with all of the contingencies that are reasonably possible. This often leads to those uncomfortable conversations with clients, but it is better to have these contingencies in place and not need them than it is to need contingencies but the documents are silent. For the full YouTube video on this topic, please click here: https://youtu.be/g7h_ZBA3GCE

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