The term “estate planning” means different things to different people at different stages of life. Estate planning encompasses – or should encompass – an entire adult lifetime of saving, planning, preparing, and insuring, all with the goal of finishing life well and passing your legacy along to the next generation. Once in a while, then, it’s helpful to step back and consider a list of helpful tips and ominous pitfalls that can either enhance or undermine even a well-intended estate plan.
As part of this week’s Focus on Estate Planning, we want to share this article published on the Fidelity website last fall. It’s called “10 Estate Plan Pitfalls to Avoid,” and it begins with a simple premise: estate plans are not a “one and done” proposition. “Do you remember when you last reviewed your estate plan?” the article asks. “If the answer is when you first signed the stack of documents at your attorney’s office, then you’re not alone. Many of us complete an estate plan and then fail to revisit it for years (and some never do). It is important, however, to review a plan every so often due to ever-changing tax laws and major life events, such as a birth, marriage, divorce, or death.”
Fidelity offers more detail than we have space for here, and we can’t cover all ten – but let’s take a partial look at this list of things to watch out for in making your long-term plans. We encourage you to use this list as a starting place and discuss the details with a planner as part of a more in-depth process. Here’s our abbreviated version of Fidelity’s list.
Fiduciary follies: When the wrong executor or trustee is named
“A fiduciary is someone who is appointed to take legal control over assets for the benefit of another person,” Fidelity explains. Executors and trustees are the most common types. “Outdated estate plans often name fiduciaries or successor fiduciaries that may no longer be suited for the position.” Your executor may be too old or your trustee may have retired or passed away. “Check to see who you have named as fiduciaries in your estate planning documents to determine whether you need to revisit these designations.”
Your “little ones” aren’t so little anymore
“When a child is young, a key estate planning decision parents often make is to determine a guardian,” says the article. Now that your child is an adult, guardianship is irrelevant, but there is a long list of other considerations. Have you adjusted your plans to take into account variables such as divorce and remarriage, the rights of step-children, or the fact that one of your kids may be far better off financially than another? “Periodically review the ways that assets will be left to your children,” Fidelity advises, “and encourage them to have the appropriate estate planning documents in place as they get older and their circumstances change.”
Privacy please: HIPAA rights and when they should be waived
HIPAA, the Health Insurance Portability and Accountability Act, became law in 1996 to protect the confidentiality of medical records and health information. Unless you’ve taken proper steps, these well-intended rules may prevent doctors from sharing information with your loved ones in an emergency. “As a general rule,” says Fidelity, “health care powers of attorney, living wills, and advance health care directives should contain provisions waiving an individual’s HIPAA rights with respect to their health care representatives.” The advice? “Take stock of your family’s health care powers of attorney, living wills, and advanced health care directives, to ensure that health care representatives can make informed decisions regarding your family’s care.”
More money, more complexity: Wealth accumulation can create estate tax issues
“Financial security is a goal for us all, but with wealth comes complexity,” says Fidelity. “An increase in wealth not only typically causes an increase in annual income taxes, but it may also beget estate and gift taxes.” Outdated estate documents may include planning that was appropriate for smaller estates or old estate tax laws. “Take the time to review the formulas in your estate documents with your attorney and tax professional to determine whether the planning you have in place is still appropriate,” the article advises.
Getting out of Dodge: Changes in state residency
If you’ve moved from state to state since your plan was drafted, your plan may be seriously off target. “Each state has its own estate and income tax laws, and it is important to plan appropriately,” says Fidelity. “There are significant differences between [states] when it comes to transferring assets, and a document drafted in a common law property state might not be appropriate in a community property state.” It’s imperative that you make appropriate adjustments. “Review your estate plan with your attorney and tax professional, with an eye toward reducing federal and state estate taxes, and make sure to reevaluate and potentially update your plan to establish residency in another state.”
Don’t stop giving: Fulfilling philanthropic goals
“For many, with success comes a desire to give back to the community or to causes they feel most passionate about,” Fidelity states. “Many of us, however, forget to include our important charitable causes in our estate plans, so our intentions are often not carried out after our deaths.” Giving has major tax implications and if handled improperly can cause resentment and dissent among your own family. Make sure to discuss your charitable intentions with your estate planning team to ensure that your philanthropic goals are included as part of your plan.
Your Plans Are Dynamic, Not Static
There’s much more on the Fidelity list of estate planning traps: estate taxes, life insurance, family communication, and so on. The bottom line is that estate plans are dynamic, not static. “Many estate plans no longer meet their original intent due to inattention and a lack of routine updating,” Fidelity observes. “Successful estate planning requires more than just having signed the initial documents: Your plan should evolve as your circumstances do.”
Two Important Retirement-Planning Announcements from AgingOptions
At AgingOptions our chief desire is to help you prepare for the kind of retirement you’ve always dreamed of having. Toward that end, we want to share two important announcements that are designed to facilitate your LifePlanning process even during this period when most of us are required to avoid gathering in groups.
First, Rajiv Nagaich has scheduled several of his popular, free LifePlanning Seminars in the form of webinars that you can watch conveniently at home. Simply visit our Events Page and register for the webinar of your choice.
Our second announcement: in cooperation with our partners at LifePoint Law, we are excited to launch a ground-breaking new service called the LifePoint Law Emergency Legal Kit. Without leaving your home, you can now consult with a LifePoint Law attorney who will work with you to prepare and sign a complete set of vitally important legal documents including both Financial and Healthcare Powers of Attorney, a Living Will/Advance Directive, a Will or Trust, and much more. Click on the link or call us at AgingOptions and we’ll explain this excellent service to you.
Reliable information has never been more important – and that’s our promise to you at AgingOptions and LifePoint Law. Age on!
(originally reported at www.fidelity.com)