124 // Wills and Trusts with Charlie Ehrenfried

Have You Been Avoiding Estate Planning?

 

Estate planning is not a topic people often want to dive into. Charlie came up with a list of common mistakes people make regarding wills and trusts and how you can overcome them. Let’s jump in.


There are 5 big mistakes that I see. The first one is delaying getting started. They don’t want to think about it or talk about it, so they ignore it and continue to procrastinate. I think it’s human behavior to ignore things that are not pleasant.

People assume the government has a program or a design, and it’ll just work itself out. Yeah, there is a probate system, but it won’t work the way you think it does.

Usually, you have to learn from someone else’s mistakes. You have to see the pain and the inconvenience somebody else went through after they lost a loved one who did not take that responsibility to set it up themselves. When you talk about estate planning, part of the challenge is there is no trial run. A lot of this stuff doesn’t get implemented or executed until after you’re gone. 

Intimidation is a significant factor. You don’t want to get it wrong, so you don’t do it at all; but by not doing it, you get it really wrong. Having a simple will-even if it’s not perfect-will be better than what the state will assign if you die in testate (dying without a will.)

Estate Planning tends to get a bad wrap, but it is extremely important. Click here for a simplified Estate Planning Checklist that will ensure that your property and assets are left behind in a way that you wish.

The Living Will

That leads us to the second one, which is when people have an incomplete plan. The reality is, for most people, a complete, comprehensive estate plan will include a few additional documents. You might have a will, but we will typically recommend some additional documents like a healthcare power of attorney or a general power of attorney.

The classic example of that is the living will. They may have gotten what happens if I die, but they don’t have the document that decides if you pull the plug or not. A living will is just one of those extra steps that can make a big difference.

You’ll Need More Than a Simple Will

 

This is an area of your life where working with a trusted professional makes sense. There are some things you can run the risk of the DIY route. This is at the other end of the spectrum where there could be a lot of risk with a simple will.

There is so much you can accomplish if you work with somebody. What is your goal here? What are you hoping to have your kids experience, what do you want to be provided to your family in your absence? The attorney can help make sure that what you are envisioning for your family takes place. Sometimes that involves one or multiple trusts. It adds some complication, but it achieves what you’re looking for.

We have seen so many scenarios where people can aim incentives at their loved ones and put them into wills and trusts. People lose sight of how important that piece can be to rest easy knowing your kids will have that guidance and direction you want for them. You can put a lot of that into these documents and make sure it happens that way.

That’s a great segue into the third one, which is, when it comes to wills and trusts, if you are leaving assets to a younger generation, there will be restrictions on when they get access to those. These are called age gates. Some attorneys have default age gates, so they set those in every document they create. Outside those ages, it is up to the trustee to distribute the funds for that beneficiary’s support or wellbeing. When you factor in everything that could flow through a trust at your death, whether it’s retirement accounts, other investments, life insurance benefits, we could be talking about significant amounts of money that these children would be inheriting. You can be as creative as you want in these distributions. Maybe it’s an increasing schedule, so as they grow and mature, they get access to more and more.

Because there can be so many moving parts to this process, people get to this exhaustion point, and they throw their hands up and ask for the standard boilerplate. That extra level of intentionality can make all the difference in how these things work. We want to incentivize these kids to have reasons to be productive and effective in the roles they work in and incentives to grow.

The next one is when clients set up a will once they start to have kids. We often see the grandparents of the minor, named as guardians. I don’t disagree with that logic, but you also have to be forward-thinking. We encourage clients to consider a younger generation that would be more suitable to take on that responsibility for that length of time. A concern I hear is, “we would love to name our brother or sister or cousin or close family friend, but I think it would be too much of a financial burden.” If you’ve done the proper insurance planning, there should not be a financial burden. You can have the trust document say that if there’s real estate property, they can move into your house for those kids, or you can provide funds for those guardians to purchase a new house for this new family. The trust can provide and fill that gap.

If you choose a similar generation, it allows the grandparents to stay grandparents. It’s healthier for your kids if they stay in that role because that’s familiar and comfortable, and that relationship grows closer and tighter.

This particular issue is one of the biggest reasons why people delay estate planning. It gets put off, so a lot of times, they default to the easy path of the grandparents. This is an important place to spend some time and be intentional. I am confident that the state will make a much poorer choice than even your worst choice.

With Wills and Trusts, the Devil’s In the Details

 

The last one we see is related to beneficiary designations. Sometimes people go through all the time and trouble and cost, and then they have insurance policies or beneficiary accounts with outdated beneficiary designations. What they don’t realize is that the beneficiary designations trump everything else that you do. If you have a trust, that’s great, but if that’s not listed as a beneficiary on your account or policy, then those assets aren’t gonna go to the trust. They will go to the named individuals on the beneficiary designations.

If you’ve gone through the work to set up these documents and take this responsibility, make sure that everything is talking to each other. If you need somebody to review all your stuff to make sure that’s coordinated, find that person. A lot of attorneys will take that extra step. I think where we add value is in knowing where all these different moving parts are.

The other thing I always tell clients is to make sure at least one person outside of your household has a general understanding of this. Wherever that file is of important documents, make sure somebody outside of your normal household knows where it is so that if something happens to you unexpectedly, it’s so much easier for them to start putting the pieces together and clean up that mess.

To save time and money down the road click here for some common “aha” moments clients have when they sit down to review their estate plans.

If you have questions, we’re an open book. Please reach out to me jlenhoff@wqcorp.com 

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