How to Avoid Estate Planning Minefields: You Don’t Know What You Don’t Know, 01/10/2010

Some things seem like they should be easy–and they are easy. However, some things simply appear easy–even when they are very difficult. The problem with some complex responsibilities is that they may seem simple on the surface, yet they may be very difficult in reality. For example, crossing a field of fifty yards seems simple, right? However, if that field is a minefield, it might be a very hazardous crossing, indeed! On the surface, both fields might appear the same to the ordinary person. However, experts can spot the hidden problems which the ordinary person may not.

This is equally true for estate planning. Let’s look at two couples, the Browns and the Robinsons:

The Browns have a very substantial and complicated estate which may benefit from tax planning. They own a sizable business. They each have a prior marriage and their marriage together is somewhat rocky. It’s easy to see the mines in that field and know that they would benefit from consulting with an estate planning attorney.

The Robinsons have more modest assets of approximately $200,000. They have a great marriage and two wonderful kids aged 12 and 15. It appears on the surface that they might be able to save some money and use a “do-it-yourself” estate planning method like online forms or software at little or no cost. The problem is that the Robinsons have a hidden mine in their estate plan.

The Robinsons’ case looks simple to the untrained eye. However, the Robinsons’ primary asset is Jake Robinson’s 401k which he started right out of college, before he even met his wife, Sally. Jake named his ex-wife, Allison, as beneficiary. Of course, Jake assumes that his 401k will go to his current wife, Sally, because he will name her as the primary beneficiary in his Will or Trust. Jake doesn’t know what he doesn’t knowi.e. that his Will or Trust will not control his 401k.

While the Robinsons could “save” some money by using some free or inexpensive, “do-it-yourself” software, doing so will end up costing them everything because Jake’s 401k will go to Allison at his death, even if Jake names Sally in his Will or Trust.

Only an experienced estate planning attorney who focuses his or her practice in that field will have the knowledge and expertise to spot and defuse the mines which you may encounter. Some other hazards which you might encounter are:

  • Property ownership issues (Joint Tenancy, Community Property, etc.)
  • Assets with beneficiary designations (e.g. brokerage and bank accounts)
  • Life Insurance
  • Blended family issues
  • Leaving assets outright to minor childrenYour estate planning attorney can guide you through the minefield to the other side. For example, the attorney would have advised Jake to complete a new beneficiary designation form naming Sally as the primary beneficiary of his 401k. While Jake could have done this himself, he didn’t know there was a problem. He didn’t know what he didn’t know. Don’t make the same mistake that Jake did. Meet with an experienced estate planning attorney at Morris Hall.