When you signed your Estate Plan Documents in the past -- those documents reflected your estate planning needs AT THAT TIME. As time goes by, your assets change and your family situation changes turning a good estate plan into an outdated estate plan. Below are the Top 10 reasons good estate plans ultimately fail. Do any of these reasons apply to you?
1. Your Beneficiary Designations Are Out of Date
Beneficiary Designations control a large portion of most people’s assets in their estate plan. When reviewing estate assets we discover outdated beneficiaries ALL OF THE TIME. To learn more about the importance of Beneficiary Designations, read my article, Why Neglected Beneficiary Designations Cause Many Estate Plans to Fail.
2. Your “Helpers” are No Longer the Best Choice
Your Estate Plan documents have many named “Helpers” such as Executors, Power of Attorneys for Health Care and Property, Trustees, and/or Guardians for your children. Are these people you named still the most appropriate to act on your behalf when the need arises? Do you remember who you named as your Helpers? Many times estate plans are originally done when children are minors. If you children are adults you may want to update your estate plan to name them as your Helpers.
3. You Haven’t Updated Your Estate Plan Since Having Children
What would happen to your children if both you and your spouse were gone? At minimum, you need to have a Will with a Children’s Trust so that your assets are placed in trusts for the benefit of each of your children until they reach an age designated by you. Read more about Estate Planning for Young Families by Clicking Here.
4. You Don’t Have a TODI for Your Home You can guarantee your home will avoid probate by naming beneficiaries for your home through a “TODI” which stands for “Transfer on Death Instrument”. If you have a Will-Based Plan and own a home, you should seriously consider having a signed and recorded TODI to help avoid probate for your estate. Click Here to learn all about how TODIs work. Note: On January 1, 2022 Illinois passed a new TODI statute that allows people to name beneficiaries on non-residential property (such as farmland and commercial buildings) as well as you residence.
5. You have a Blended Family A Blended Family is when you have a married couple and one of both partners have children from a previous relationship. Upon your death how would you want your estate to be divided to provide for your spouse AND your children from a previous relationship? To learn more about estate planning options for Blended Families – Click Here.
6. Your Children Have Grown Up
An estate plan for a family with young children looks different compared to an estate plan for a family with grown children. If your adult children are trustworthy you may want to name them as your power of attorney. If your adult children have special needs, creditor issues, or in a bad relationship you may want to further protect their inheritance with a trust.
7. You’ve Experienced Divorce If you (or your adult children) are experiencing any stage of divorce you should consider updating your Estate Plan as soon as possible. Do you want your ex-spouse to still be your power of attorney or the beneficiary of your life insurance policies? You should also review your documents to make sure you do not have any ex “in-laws” still named as “Helpers” in your estate plan documents as well.
8. You Haven’t Thought About Your Digital Assets Each one of your online accounts has a Login ID and password. Would your executor or beneficiaries know how to access all of your social media, e-mail or financial online accounts? Click Here to learn more about planning for your Digital Assets. If you own BitCoin or other types of “Crypto Currency” read this article for more information.
9. You Don’t Understand How Retirement Accounts Work with Estate Planning Some people describe inherited Retirement Accounts as “Tax Bombs” waiting to explode. The Beneficiaries of your pre-tax dollar Retirement Accounts will have to pay income tax on money they inherit through those accounts. There are very complicated rules when it comes to naming a Trust as a beneficiary of a Retirement Account as well. Click Here to learn more about Estate Planning for Retirement Accounts.
10. New Legislation Every few years, Congress passes legislation that could potentially have an impact on your Estate Plan. As of January 1, 2020, we have a new Illinois Trust Code which overhauled the trust existing Illinois Trust Act. Congress also passed the SECURE Act at the end of 2019 and this new law became effective January 1, 2020 – which effected how we plan for Retirement Accounts in estate planning. New Rules and Regulations have just been published on the Secure Act in 2022.
Note: This Blog Article was originally posted on December 10, 2020. It has been updated and reposted on August 7, 2022.
At the Ritchie Law Office, Ltd., we recognize the importance of having an up-to-date Estate Plan. Do any of these 10 Reasons apply to you? Call our office at (309) 662-7007 to schedule an Estate Plan Review Meeting.
This article is a service of Attorney Chad A. Ritchie and the Ritchie Law Office, Ltd. Click Here or call (309) 662-7000 to learn more about Ritchie Law Office, Ltd. and our Estate Planning process, which starts with an initial consultation called our “Ritchie Legacy Planning Session”.
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