What can cause a well-thougt-out estate plan to fail?

What can cause a well-thougt-out estate plan to fail?

Group News posted in on 22 June 2017| comments
audience: The Boston Foundation | last updated: 22 June 2017
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You’ve met with your estate planning attorney. After careful consideration, you’ve decided who you want to benefit from your estate. You’ve executed your estate planning documents. Congrats, but…

What can cause your well-thought-out estate plan to fail?

“Failing to name a beneficiary on your retirement accounts, like IRAs and 401(k)s, results in your estate being the beneficiary. Under IRS rules, the retirement account assets must be withdrawn, and subject to income tax, by your estate within five years of death. If a specific beneficiary, such as an individual, is named, then the withdrawals and income tax payments can be spread out over the life expectancy of the named beneficiary. This allows for continued income tax-free appreciation of the retirement account until it is withdrawn.”—Deborah L. Anderson

“Failing to update your beneficiary designations on life insurance policies and retirement plans to complement the terms of your updated estate plan can have unintended consequences. In some instances, not taking these final steps can result in property passing to unintended beneficiaries or the payment of taxes that may have otherwise been deferred or reduced.”—Stephanie A. Bruno

“The biggest thing that can cause an estate plan to fail is the lack of allocation of assets between a husband and wife. In order to take advantage of some state estate tax exemptions and the GST tax exemption, assets must flow separately into each spouse’s trust. Therefore, it is important that each spouse has enough individually in his or her name and/or beneficiary designations that name his or her trust to fully fund the exemption amount. If this is not done, the estate plan cannot be properly implemented and extra estate or GST tax can be paid needlessly.”—Sarah T. Connolly

“In some cases, typically at the urging of a broker and too often without the knowledge of the estate planner, securities are registered in transfer on death or TOD format. The perceived benefit is the avoidance of probate. However, as often as not, this thwarts an expectation that those same assets will be available to the executor or trustee of a revocable trust to pay debts, expenses and taxes. TOD registration isn’t necessarily a bad thing, but it needs to be considered within the overall estate plan.”—John L. Garrett

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The Boston Foundation
75 Arlington Street 10th Floor
Boston, MA 02116
United States
Phone: 1 617-338-1700
Fax: 1 617-338-1605

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