Attorney & Mediator
Attorney & Mediator

How Often Should I Review my Estate Planning Documents?

Clients often ask this question. Certainly, you should take a look at the documents at least every five years. As you read through your trust or will, durable power of attorney and patient advocate designation, you should ask yourself the following questions. Has anything changed? Do I still want to appoint the same people? Are these the people that I want to give my estate to?

Also you should review all of your estate planning documents when any of the following happens:

• Marriage, divorce or death of a spouse
• Birth of a child
• Your children become financially independent
• Birth of a grandchild
• You have a new business venture
• A substantial growth in your business
• Job promotion or change in jobs
• Retirement
• Purchase of Life Insurance
• Move to a different state
• Substantial increase or decrease in your wealth
• Decision to make large charitable gifts
• Increase in risk of being subject to a lawsuit
• Substantial amounts of property in joint names
• Purchase of real estate in another state
• You inherit a large estate

The Problem of the Unfunded Trust

Carol and Jim had been married for 25 years – their children were grown. Jim took the steps to have an estate plan made – he had trusts made for himself and his wife with pour-over wills. Carol went in to sign the documents though she really didn’t pay any attention to what they were for – she trusted her husband to do the right thing.

Jim was only 52 when he unexpectedly died from a massive coronary. Carol came to me to see if she needed to do anything – after all, Jim had set up these trusts that should take care of everything.

What he had failed to do was to fund the trusts. Their real property had not been transferred into the trust. None of their bank accounts, brokerage accounts, or other assets had been transferred.

Since a number of assets were in Jim’s name alone, it was necessary to commence a Probate proceeding in order to get the assets into his trust. This cost Carol not only the filing and attorney fees but the inventory fees as well.

Additionally, real property had to be transferred requiring that deeds be prepared and recorded.

How could this have been avoided? At the time the trusts were prepared, all real property should have been transferred into the trusts. Additionally, all bank accounts, brokerage accounts and other assets should have been transferred as well. This follow up is critical to having a revocable trust work smoothly upon the death or disability of the grantor.

Agent Under a Power of Attorney? What are you Supposed to do?

Not enough people ask ahead of time but I am seeing lots of people that are getting into trouble with this issue.

When you assume the duties as an agent under a Power of Attorney, you are a fiduciary. That means that you are just like a bank or a stock broker – a position of trust. You have a duty to accurately account for every single penny in the account – not guesstimates – actual numbers backed up with receipts.

Often, when children assume this duty for one or both of their parents, they treat it somewhat casually – after all, it’s just mom or dad’s money – all family. WRONG. You owe the same duty to them that the bank does.

It is not okay to borrow money from their account with the intention of paying it back. I know that many convince themselves that this makes perfectly good sense – why go to a bank to borrow money when you are short? Mom or dad has thousands, and, it is only for a little while, just until you get your cash flow straightened out.

Would it be okay for your financial advisor to just “borrow” money from your account if he or she were short? How would you feel? Well, the same thing applies to you and your duty as mom or dad’s agent.

This means that it is not okay to withdraw cash and pay for your stuff and their stuff at the same time. Their money must be separate and their groceries and toiletries get paid for separately. Keep these receipts even if you throw away the ones for your personal purchases.

But, aren’t you spending your time and effort in caring for mom or dad? Aren’t you using your gas and your car? Yes. If you would like to be reimbursed for this, it has to be done appropriately. Keep track of the time you spend each month and the number of miles you drive and then charge for it (reasonable charges). Keep the log as back-up in case you are questioned.

It is not okay to write out checks to your family as gifts from mom or dad, because they would be okay with it. If your parent had an annual gifting program in which he or she gave a certain amount to children or grandchildren annually, that is one set of facts. If you are starting up a gifting program using your parents’ money, it is not appropriate.

Where do I see this? Doing probate estates and trust administration when people pass away. The Personal Representative (who is often the same person as the agent under the Power of Attorney) or the Successor Trustee must account for what the decedent had at the moment of their death. Then they account for where it goes (bills) and it gets divided and distributed.

When the Personal Representative or Trustee assembles the initial accounting of what mom or dad had, the other members of the family want to know how they came up with that amount. Usually, family members thought there was more money – a lot more money – and they want to know where it went.

If you have kept accurate records, it is easy to demonstrate that all of the monies spent were appropriate and for mom or dad’s care only. If you haven’t kept track, it will be a nightmare to reconstruct – especially if you took cash out of the account to pay for things. If you cannot account for the money, you may be required to reimburse mom or dad’s estate.

Avoid creating a family feud or adding fuel to the family feud fire. Keep accurate records and treat your parents’ money the same way the bank would.

Common Estate Planning Error – No review of documents.

In my office, it is common for people to bring in their old estate planning documents.  They will sheepishly admit that it has been quite a while since they updated them.  How long?  Well, their grandchildren are now older than their children were when they did their Wills.

No document or set of documents can be prepared that can meet your needs for twenty or thirty years.  Life changes.  People we cherish die.  Friends move in and out of our lives.  Our children grow up.

Estate Planning documents should be reviewed every three to five years.  That doesn’t mean that you must make an appointment with an attorney every three to five years – it does mean that you need to take the documents out of the safe and re-read them and ask a few questions.

∙ Have your circumstances changed?  Has a family member who you named as a Personal Representative, Trustee or Agent passed away?  Has a beneficiary passed away?

∙ Have minors you named as beneficiaries become adults?  Have one of your beneficiaries married?  had children?

∙ Have your Personal Representative, Trustee or Agent moved away? or have they aged such that they would not be a good choice?

∙ Have your selections changed?  Upon reconsideration, would you name others instead for your Personal Representative, Trustee or Agent?

∙ Have your assets changed substantially?  Should a different allocation of assets be made to your beneficiaries and heirs?  Should the gift amounts be changed?

If you can answer yes to any of these questions, it is time to make an appointment to have your estate planning documents amended.