Essentials
Essentials of Wealth Transfer
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Let’s face it: Estate planning is, for most people, challenging at best. It involves grappling with mortality, trying to remember arcane terms and concepts, and — perhaps most challenging — addressing sensitive family issues. It’s a small wonder that so few people have an up-to-date estate plan.

One of the reasons the process is so challenging is that most people view estate planning in isolation. That is, they think of it as involving things that happen only after they’ve died. Viewed more comprehensively, however, estate planning is really just one component of a properly structured financial plan.

And good planning goes beyond finances. To create a plan that suits your needs, you must first discover those key goals and issues that really motivate you, and then compare your existing financial situation to these goals to see how prepared you are to meet them. Once you’ve uncovered what is most important to you, you can begin to formulate a plan that really makes sense.

Why have an estate plan? The reasons begin with providing for a spouse or children or other family members and aligning your wealth transfer with your charitable vision. But there are other things to consider, such as avoiding probate or reducing the time and cost of estate settlement for your heirs. See the chart below for other pitfalls to consider.

Infographic outlining common estate planning pitfalls and how to avoid them. For details, click "view transcript."

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Common Estate Planning Pitfalls

Settlement Delays

Settling any estate can be time-consuming, but an ambiguous plan can be an extra burden on loved ones.

Best Practices

  • With the assistance of an experienced estate planning attorney, spell out your desires clearly and document them in writing
  • Prepare for the potential of being unable to handle your affairs
  • Consider carefully who is assigned fiduciary duties, such as executor or trustee

Benefits

  • Clear direction
  • Efficient distributions
  • Managed risk

Family Dynamics Issues

While there’s always the potential for disharmony in a family, times of crisis are especially trying.

Best Practices

  • Involve your family in the estate-planning process
  • Discuss your planning intentions with beneficiaries and others who may be impacted
  • Understand the time required and skillset needed of those you appoint to fiduciary roles

Benefits

  • Knowledge of your desires and intent
  • Multigenerational involvement
  • Culture of trust for your family

Unnecessary Tax Liability

Failure to properly structure your plan can lead to a less-than-efficient transfer of assets.

Best Practices

  • Engage a well-credentialed and experienced attorney and fiduciary to build your plan
  • Compare tax outcomes from multiple scenarios
  • Review your plan annually and adapt it as your circumstances change

Benefits

  • Maximum impact on beneficiaries
  • Long-term approach
  • Goals-based outcomes

Lack of a Contingency Plan

If you are no longer able to make decisions on your own, who will be authorized to make them for you?

Best Practices

  • Talk with your estate planning attorney about naming a contingent trustee (individual or corporation) if you are incapacitated
  • Choose someone you know is willing to serve and who will avoid potential conflicts of interest
  • Also talk with your estate planning attorney about other advance planning tools, such as powers of attorney and health care directives

Benefits

  • Helps protect your financial security
  • Ensures continuity
  • Provides comfort that your wishes are followed

Titling Makes a Difference

The way you own your wealth can have a huge impact on whether that wealth will actually pass according to plan. In other words, the way in which assets are “titled” can either support or undermine your estate plan.

Most people may talk to their estate planning attorney only once every five or 10 years. Even if assets are properly titled at the time the estate plan is completed, assets acquired after that will need to be reviewed to ensure that they are owned in the proper form and included in the plan. And these newer assets are generally the ones that may cause an unintended or inefficient transfer.

Even experienced estate planning lawyers will have their share of stories about assets passing to the wrong people. You may have invested a great deal of emotional energy (not to mention legal fees) in establishing a plan that truly reflects the values that you want to pass along with your wealth. Don’t let that work go by the wayside because of titling problems or other pitfalls.