If you are wise, you will establish a will or trust when you are a relatively young adult. The plan will be tucked away somewhere for safekeeping, and it is out of sight and out of mind.
Along the way, you may take certain actions without considering the implications in light of your existing plan. The intentions can be good, but the outcome can be problematic at the end of the day. With this in mind, we will look at five ways that you can unintentionally create difficulties.
Give Gifts Without Changing Your Plan
Let’s say that you have a plan in place, and you provide gifts to people that are not going to receive the lion’s share of your estate. You leave $50,000 to your nephew when you are drawing up the terms, and 10 years later, he gives you a call.
He tells you that he is behind on his payments to the IRS, and $50,000 will put the matter to rest. You have always liked this nephew, and he fell victim to circumstances that are out of his control, so you give them the money.
All the while, you are looking at it like an advance on his inheritance. You intend to tell the executor that your nephew has already received his bequest at some point. Time passes, and you never get around to it.
Under these circumstances your nephew will receive another $50,000 after you die. Even if you told the executor verbally that they did not have to give your nephew anything, the words would not hold water. The executor would be required to follow the terms of the will, and your nephew would get the $50,000.
You can certainly help out a loved one that is named in your will while you are still living. However, if you do not want to give a lifetime gift in addition to the bequest, you have to work with your attorney to change your estate plan.
Die With Depleted Trust Fund
If you establish and fund a revocable living trust and you draw up terms leaving specific gift amounts to beneficiaries, you have to be sure that the numbers will add up when you die. You do not have a crystal ball, and things can change, but you should adjust your trust terms if it becomes necessary.
Misunderstanding Probate and Non-Probate Assets
A will is admitted to probate after the death of the testator. Property that is part of the estate will not be distributed until the estate has been probated by the court. Some people assume that everything they own will automatically become probate property.
In fact, this is not the case. If you name a specific beneficiary of a life insurance policy, they will receive the proceeds. The money would not be part of the estate, and it would not be distributed according to the terms of your will.
This also applies to inherited individual retirement accounts. You should understand the distinctions when you are creating your plan, and this is one of the reasons why you should work with an estate planning attorney from the outset.
Problems With Joint Ownership
If you establish a plan that includes some form of joint ownership like joint tenancy or a payable on death account, the named party will inherit the entirety of the property. It will be theirs, plain and simple, and this can be a rude awakening for other people on your inheritance list.
Beneficiary Changes
When you work with an attorney to establish your plan, your attorney will explain the importance of the beneficiary choices. For example, you may be advised to make your trust the beneficiary of an insurance policy for a number of different reasons.
Unintended negative consequences could come about if you change the beneficiary on your own without informing your attorney.
Schedule a Consultation Today!
When you develop a relationship with our firm, we will always be there to help you make the right estate planning choices. If are ready to make the connection, you can schedule an appointment at our Glastonbury or Westport, CT estate planning offices if you call us at 860-548-1000. There is also a contact form on this site you can use if you would rather send us a message.
Mr. Horowitz was awarded his Juris Doctor degree with honors from the University of Connecticut School of Law. While attending law school, Mr. Horowitz received the American Jurisprudence Award in Legal Ethics and the Nathan Burkan Award.
After graduation from law school, Mr. Horowitz continued his legal education at New York University School of Law where he received a Post Doctorate Law Degree in Taxation. He has also recently received a national achievement award.
Mr. Horowitz is admitted to practice before all the state courts in the State of Connecticut and the United States District Court.
Mr. Horowitz was selected for Super Lawyers in 2021.