I believe the single most important purpose of an estate plan is to ensure you control what happens to your estate and when. A Will or trust is an important part of that plan. Unfortunately, even if you have a Will or trust, other decisions you make can undermine that plan.
Take the example of a widowed parent who wants to divide her assets equally among her children when she passes. Of course, she should have a Will or a trust drafted to reflect her wishes. But if she also adds a child to her financial accounts, as innocuous as this move seems, she has potentially jeopardized her intended estate plan.
That child now “owns” those accounts as well. Money can be withdrawn or “borrowed” from that account by either the parent or the child. Upon the parent’s passing, issues may arise about how much of that money (if any) was to be shared with the other children. Perhaps most importantly, the funds in those accounts may now be subject to the creditors and predators of the child.
Similar risks apply when parents add children to the deed of their property.
Beneficiary designations on retirement plans (such as IRAs), insurance policies and annuities are another example. Beneficiary designations control how that money will be distributed, regardless of what is stated in your Will or trust. It is critical that your Will or trust work together with your beneficiary designations to ensure your assets are distributed as you desire.
These types of well-intended decisions unintentionally created unnecessary risks which too often take control out of the hands of the owner. No matter how carefully a Will or trust is drafted, a misstep taken for the sake of convenience may create results you never intended.
© 2016 Steven J Wright