Estate Plan Review Louisiana and Life Changes

“Life Changes” is not only a great song by Thomas Rhett, but it’s also guaranteed! The best way to keep up with those changes is to review your estate planning documents (including beneficiary forms) every three years or whenever life-changing events occur. These events may include births, deaths, divorces, disabilities, lawsuits, and other events. When I meet with some of my long-term clients (20+ years!) for a review of their estate plan, I notice that very few of them have followed this advice.

Specific Bequests and Long-Term Estate Planning Concerns

Specific bequests can also affect your estate plan. (A specific bequest in your Will/Trust names a particular asset to be distributed to a particular person/ entity, which is distributed first.) I am not a big fan of most specific bequests in Wills/Trusts because assets/values, and circumstances can change significantly over time. Imagine what the passing of 20 years can do to these bequests! For example, specific bequests can cease to exist when the condo is sold, or your financial advisor moves to a new brokerage firm, along with your portfolio, or the value of your estate has decreased substantially because you retired, or you were ill and needed to use the money. In these circumstances, we must ask, “Is the original plan still fair and accurate?”

When Trust Provisions No Longer Match Family Circumstances

It is not uncommon for our clients to leave their children’s inheritance in trust until they reach certain ages or upon a certain event (e.g., half at college graduation, remainder at age 35), then 20 years go by, and those children now have their own children! Perhaps “Aunt Sue” was named Trustee; now the child is a very successful engineer with children of her own, and Aunt Sue has dementia. In this case, it is probably time to leave the children’s assets to them outright and maybe create a grandchildren’s trust. Let’s do a 180-degree turn here and say that “child” is now 40 and still lives at home and can’t hold a job or manage a checkbook, and/or has a drug or alcohol problem. Then it may be wise to make that child’s trust “purely discretionary” to last for his/her lifetime. In that case, a “professional” trustee (like a bank or trust company) that cannot die or be manipulated may be the best choice. In my opinion, you don’t want a sibling or any family member to be a trustee under those circumstances.

Beneficiary Designations: The Most Overlooked Asset

Now let’s talk about the most overlooked asset we have: beneficiary-driven assets. The biggest is usually our retirement accounts (IRA, 401k, 403b, etc.). It’s also any life insurance and annuities, whether through employment or privately owned. You are allowed to choose both a primary beneficiary and a secondary (or contingent) beneficiary in case the primary beneficiary predeceases (or dies with) you. Some beneficiary forms even allow for a tertiary (third) beneficiary. Be sure to keep these updated and accurate because your Last Will/Trust does NOT override your chosen beneficiaries.

Per Stirpes and Equal Beneficiary Designations

If you want your child’s children to inherit their parents’ share of your IRA or life insurance if they die before (or with) you, then don’t forget to check the “PER STIRPES” box. (If there is no box, just write it in.) Yes, I have discussed this many times, but it is remarkable that financial advisors rarely raise this option when helping clients complete these forms. And your last LAW-niappe…if you have three beneficiaries, don’t pick one (sorry oldest children) to be the big winner of an extra 1% – simply write “EQUAL” in the box instead of 34-33-33.

Life Changes Happen — Estate Plans Should Keep Up

Yep, Thomas Rhett nailed it when he sings about Life Changes:

Ain’t it funny how life changes; You wake up, ain’t nuttin’ the same and life changes; You can’t stop it, just hop on the train; You never know what’s gonna happen; You make your plans and you hear God laughin’…