Articles
Losing Your Inheritance to Uncle Sam —
or Others
Successful estate planning takes not one generation, but two.
The first generation needs to make a clear, sensible plan and
the second needs to be involved in that plan.
The best estate strategies tend to be made with the advice of
a financial adviser professional or an estate planning attorney.
Without proper planning, estates can be eaten away by bad planning
in ways ranging from the simple to the complex. They include:
Failure to leave a will: Most Americans know what a will
is. So why won’t they take the time to make one? The estimated
numbers of Americans without any kind of will is staggering
between 60 and 70 percent. Yet without a will in place, some or
all of a person’s estate may be transferred to Probate Court
with a complete stranger assigned to decide the future of the
deceased’s assets. If you are a parent, make a will... your
minor children need you to assign a guardian for them... and for
assets that may accrue to them... in the event of your untimely death!
No plan for incapacity: An 80-year-old grandmother sinks
into dementia. A 30-year-old father of twins is left in a coma
after a car accident. Anyone can be left incapacitated at any
age with no clear game plan for spouses or heirs. This wastes
money, time and creates great emotional hardship. Advance health
care directives designate health-care decision makers and delineate
their powers, and leave very precise instructions about life support
and other treatment options. Some individuals underscore written
directives by videotaping themselves giving these instructions.
Powers of attorney can also be created to assign financial decision
makers to the situation.
Failure to coordinate or update beneficiaries: Any child
who has struggled to settle a parent’s estate is very likely to
have had problems with beneficiary designations on retirement
accounts, investments, insurance policies, savings accounts and
bonds. Many people think that beneficiary designation occurs at
the creation of the will -- not true. Beneficiary designations
should be reviewed every few years for accuracy or when a major
life event requires a change.
Failure to inventory: A parent may think they’ve got a
great system for organizing their investments and estate instructions.
But if they die or are incapacitated, heirs may find it difficult
to navigate their bookkeeping system or find key documents and
investments left inside the house or in safe deposit boxes elsewhere.
Financial advisers can provide a centralized system of organization
for clients by keeping a separate index of those materials to
help guide family members and heirs through a serious illness
or estate settlement. Failure to find key documents may lead to
severe tax consequences later.
No attention to special situations: If both parents die,
how will substantial assets or life insurance proceeds be managed
for minor children? If there is an adult child with a disability,
is a Special Needs Trust or other directive in place? If a parent,
friend or sibling dies without instructions for his pet, who will
get Fido? A person’s last wishes are as unique as they are and
should be considered part of the estate planning process. Heirs
should insist on those provisions so they can distribute assets
with maximum speed and minimum disagreement.
No Power of Attorney or inadequate joint name provisions:
An incapacitated relative not only needs someone properly designated
in his or her directives, but they need that person to have proper
access to funds. To provide for this, a durable power of attorney
can be filed with the account custodian, or joint names can be
listed on the accounts so bills can be paid. Naming a joint owner
to an account may cause negative consequences, so consult your
financial or tax professional before doing this.
Failure to update: Any time there’s a divorce, a change
in permanent residence or a major life transition, it’s a good
reason to review an estate plan. Enlist your legal and financial
planning professionals in this effort. Both perspectives are necessary.
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