This is the fourth in an ongoing series of articles discussing the true costs and consequences of failed estate planning. The series highlights a few of the most common—and costly—planning mistakes I encounter with clients.
If you’re like most people, you probably view estate planning as a burdensome necessity—just one more thing to check off of life’s endless “to-do” list.
You may shop around and find a lawyer to create planning documents for you, or you might try creating your own DIY plan using online documents. Then, you’ll put those documents into a drawer, mentally check estate planning off your to-do list, and forget about them.
The problem is, your estate plan is not a one-and-done type of deal.
In fact, if it’s not regularly updated when your assets, family situation, and/or the laws change, your plan will be totally worthless when your family needs it. What’s more, failing to regularly update your plan can create its own unique set of problems that can leave your family worse off than if you’d never created a plan at all.
The following true story illustrates the consequences of not updating your plan, and it happened to the founder and CEO of New Law Business Model, Alexis Neely. Indeed, this experience was one of the leading catalysts for her to create the new, family-centered model of estate planning I use with all of my clients. (Incidentally, I stumbled upon Alexis in 2017, when Dirk and I were co-authoring our book, Happy Lawyer: the Art of Having It All Without Losing Your Mind. Alexis was so impressed with the way I had begun practicing law by that point in my career that she graciously offered to write the forward for our book. The rest, as they say, is history.)
The father-in-law story
When Alexis was in law school, her father-in-law died. He’d done his estate planning—or at least thought he had. He paid a Florida law firm roughly $3,000 to prepare an estate plan for him, so his family wouldn’t be stuck dealing with the hassles and expense of probate court or drawn into needless conflict with his ex-wife.
And yet, after his death, that’s exactly what did happen. His family was forced to go to court in order to claim assets that were supposed to pass directly to them. And on top of that, they had to deal with his ex-wife and her attorneys in the process.
Alexis couldn’t understand it. If her father-in-law paid $3,000 for an estate plan, why were his loved ones dealing with the court and his ex-wife? It turned out that not only had his planning documents not been updated, but his assets were not even properly titled.
Alexis’ father-in-law had created a trust so that when he died, his assets would pass directly to his family and they wouldn’t have to endure probate, but some of his assets had never been transferred into the name of his trust from the beginning. And since there was no updated inventory of his assets, there was no way for his family to even confirm everything he had when he died. To this day, one of his accounts is still stuck in the Florida Department of Unclaimed Property.
Alexis thought for sure this must be malpractice. But after working for one of the best law firms in the country and interviewing other top estate-planning lawyers across the country, she confirmed what happened to her father-in-law wasn’t malpractice at all. In fact, it was common practice.
When Alexis started her own law firm, she did so with the intention and commitment that she would ensure her clients’ plans would work when their families needed it and create a service model built around that.
Keep your plan up to date
I hear similar stories from our clients all the time. Indeed, outside of not creating any estate plan at all, one of the most common planning mistakes I encounter is when I get called by the loved ones of someone who has become incapacitated or died with a plan that no longer works. By the time they contact me, however, it’s too late.
I recommend you review your plan, ideally annually, to make sure it’s up to date, and immediately amend your plan following events like divorce, deaths, births, and inheritances. I have built-in systems and processes to ensure your plan is regularly reviewed and updated, so you don’t need to worry about whether you’ve overlooked anything important as your life changes, the law changes, and your assets change.
You should also create (and regularly update) an inventory of all your assets, including digital assets like cryptocurrency, photos, videos, and social media accounts. This way, your family will know what you have and how to find it when something happens to you, and nothing you’ve worked so hard for will be lost to our State Comptroller’s Unclaimed Property Division.
I’ll not only help you create a comprehensive asset inventory, but I’ll make sure it stays up to date throughout your lifetime.
Properly title your trust assets
When you create a trust, it’s not enough to list the assets you want it to cover. You have to transfer the legal title of certain assets—real estate, bank accounts, securities, brokerage accounts—to the trust, known as “funding” the trust, in order for them to be disbursed properly.
While most lawyers will create a trust for you, few will ensure your assets are properly funded. I’ll not only make sure your assets are properly titled when you initially create your trust, I’ll also ensure that any new assets you acquire over the course of your life are inventoried and properly funded to your trust.
This will keep your assets from being lost, as well as prevent your family from being inadvertently forced into court because your plan was never fully completed.
Keep your family out of court and out of conflict
My planning services go far beyond simply creating documents and then never seeing you again. Indeed, I’ll develop a relationship with your family that lasts not only for your lifetime, but for the lifetime of your children and their children, if that’s your wish.
I’ll support you in not only creating a plan that keeps your family out of court and out of conflict in the event of your death or incapacity, but I’ll ensure your plan is regularly updated to make certain that it works and is there for your family when you cannot be.
This article is a service of Beverly R. Davidek. I don’t just draft documents; I ensure that families and business owners make informed and empowered decisions about life and death, for themselves and the people they love.