When was the last time you revisited your estate planning? Chances are, it was when you signed a stack of documents at your attorney’s office. Many of us create an estate plan and then forget about it for years, which is where most of our estate planning strategies go wrong.
It is crucial to review your plan regularly due to changing laws and significant life events such as marriage, birth, divorce, or the death of a family member. It is recommended to update your estate plan every 3 to 5 years to ensure compliance with current laws. In this article, we will explore the reasons why many estate planning strategies fail during the probate process.
Issues with Fiduciaries
An executor or fiduciary is someone appointed to manage another person’s estate. It is their legal duty to act in the best interests of the beneficiaries. Therefore, it is crucial to choose the right individuals to represent your estate in court during estate planning. Failure to do so can lead to the failure of your estate planning strategies from the beginning of the probate process.
Executors are commonly named in a will and are responsible for managing the estate during the probate process until the assets are distributed to the beneficiaries. They handle tasks such as collecting the deceased’s assets, paying debts and expenses, and filing estate tax returns.
A trustee, on the other hand, manages assets held in trusts. While an executor’s role is usually temporary, a trustee’s responsibilities may continue indefinitely or until the trust terminates. A key duty of the trustee is to distribute assets to beneficiaries in accordance with the trust agreement.
Overlooking Children’s Growth in Estate Planning
Parents often designate guardians for their children when they are young. However, as children grow into adults, the need for a guardian may no longer exist. This can lead to complications if the child gets married or has children of their own, requiring adjustments to the estate plan to accommodate new family members. Failure to consider these changes is a common reason why estate planning strategies fail.
Trusts created for children under 18 can also pose challenges as they reach adulthood and the trust rules no longer apply. Outdated estate plans may not align with current circumstances or wishes, such as equal distribution of assets among children, which may have changed over time.
Failure to Update Wealth Accumulation in Estate Planning
Financial security is a common goal, but with wealth comes complexity. An increase in wealth often results in higher annual taxes and may impact estate value and future estate taxes. It is essential to update your estate plan to reflect any new wealth accumulated over the years, as failing to do so can render the old plan ineffective in probate proceedings.
If an estate plan only includes previous assets and does not account for new wealth, it may not be considered by the court. It is important to regularly review and update your estate plan to ensure it reflects your current financial situation and goals.
Conclusion
It is crucial to revisit and update your estate plan every few years to account for changes in laws, life events, and financial circumstances. By keeping your estate documents current, you can avoid complications during the probate process and ensure your wishes are carried out effectively. Remember that unexpected outcomes may arise, so it is wise to be prepared and seek guidance from a probate lawyer if needed.
