5 Triggers for Estate Planning

People don’t always plan ahead the way they need to, and it’s pretty easy to put off uncomfortable topics like estate planning. That is, until one tragedy or another gives my clients that added push to come in and finally address putting together an optimal estate plan. While there are many situations that trigger my clients need to come in for planning help, I have put together the five biggest here. If any of these resonate with you or people you know, then please take action to make sure you and your loved ones are covered.

Situation 1: Parents of Young Children. While most of my clients want to avoid probate and keep the government out of their affairs by using a revocable living trust as the base of their estate plan, what brings them in is something far simpler and far more important to them, and that’s doing everything they can to make sure their children are raised by the people they choose. In a lot of cases, it may be after the second or third child is born that they come in, but it may be because one of their friends or relatives asked them about agreeing to be guardians should anything happen. That gets them thinking about who they would want to have the important task of raising their own children should tragedy strike.

Situation 2: Loved One Died and Left a Legal Mess. Planning an estate is often pushed off “until tomorrow” by many people because there are other priorities. With life being so hectic and busy for people, it may take seeing someone’s estate being in chaos for an extended period of time before they start doing research on what happens with an estate. That research can lead to some disturbing answers and crushed assumptions that many have that their estate will just go where they want it without having to do anything.

The process we are using in my law firm is to discuss the main issues and goals with prospective clients in a free 30 minute call, and then I provide the background materials to review and a questionnaire to fill out that we have put online at www.FreeTrustCourse.com. This gives our clients focused planning information and our firm receives the required basic personal data so that the first Estate Strategy Session in the office can focus on putting together a solid plan rather than discussing the difference between a Will and a Trust, what goes through probate, and describing the basic estate documents.

Situation 3: Health Scare or Accident. Whether someone has their own health scare or accident or it happens to a loved one, people can see the impact of a divided family trying to make health decisions for their loved one and the type of chaos it can bring. Siblings fighting, doctors and nurses waiting for decisions, all while their loved one is lying in a hospital bed. Compare this to a situation when one person is the health care power of attorney agent making decisions while calmly consulting the rest of the family, and medical personnel get instructions quickly and rationally. Just having that health care power of attorney document can make all the difference in the world.

And even worse situation with far more lasting consequences is when a family, or even just the health care agent, is faced with making the end of life decision on withdrawing life support and artificial nutrition and hydration. Several years ago, a couple came in for their Estate Strategy Session and the main goal for the wife was to make sure that her children, nor anyone, had to make the gut-wrenching decision to terminate life support like she had to do for her mother. While we provided her and her husband with a solid revocable living trust estate plan with all of the usual documents, the one that gave her the most peace of mind was the Living Will that addressed her decisions so no one else had to.

And now there is no reason to put off at least putting in a do-it-yourself plan without an attorney until you are ready to do more comprehensive planning. If you don’t have a plan and want to just do-it-yourself, then check out The Estate Patch to see how you can pick your own plan the right way at www.EstatePatch.com.

Situation 4: Money Inherited by Young Beneficiaries. Many years ago, a financial advisor was asking if there was anything that could be done for some clients’ daughter who inherited a lot of money at age 18. He had been trying to get his clients to come to me to do their planning, but they kept putting it off. Unfortunately, they both died in a car accident when their daughter was just a few months shy of her 18^th birthday. Once she inherited the money, she made some very poor life decisions. She dropped out of high school, married an unemployed 25 year old man, and bought an expensive house for them to live in. Realistically, she wouldn’t have any financial means to keep up the house over time, and, according to her, with $115,000 in the bank at 18, she would never have to work a day in her life.

When people hear of situations like this, they may take a look at their own plans, if they even have any, and then optimize their own plan to provide proper ages of inheritance.

While the government may consider eighteen the age of majority, most people don’t consider 18 an age of maturity to handle any kind of inheritance. That is why most of my clients when creating a plan list the age of inheritance as 40 but then give their trustee the discretion to distribute it early. As children get older, possibly having children of their own, some of my clients keep the listed age of inheritance as 40 but exempt those mature children but keep the age of inheritance as 40 as more of a contingency in case grandchildren inherit if a child dies.

Situation 5: Everything to spouse without a plan? NOPE. Most people assume that if a couple is married that their estate automatically goes to the survivor. That is not the case. In many state or jurisdictions, a spouse will only receive a portion of the estate and the rest is split with children, parents, or other relatives. “But that can’t be… X died, and their spouse inherited everything.”

Some married people own everything jointly with a spouse, but more and more people today are keeping separate at least some of their accounts, assets, and especially inheritances from their side of the family. This means that if there is no plan or mechanism for a spouse to inherit, then they are not inheriting everything.

Unfortunately, we receive calls on cases like this all of the time. A husband dies in a car accident, their accounts were kept separate from the wife, and there are young children involved. Now the spouse receives about one third of the husband’s assets, the children split the other two thirds. Even worse, if the wife needs money from the children’s inheritance to care for the children, it has to be taken from court-overseen accounts, and the spouse has to keep going back to the court to justify the spent money until the child receives the balance at age 18.

We hear these tragic stories all of the time when clients come in to do their own estate planning. What’s even more heart-wrenching is when it is the widow or widower coming in to plan to make sure if they die before the kids are old enough that their money doesn’t have to be tied up in a court-supervised process.

So what do you think? What are some other situations you have heard of to make people finally take the leap to do their planning? What prompted you to finally do your own estate planning?