Why Your Will or Trust Could Fail to Work

Why Your Will or Trust Could Fail to Work

By Rustin Diehl

As an estate planning attorney, I often counsel my clients, “Leave behind a legacy rather than a mess.” While everyone agrees with this motto, many people fail to plan adequately and end up leaving a big mess for their family. What is worse, even people with trusts or wills leave behind a mess by not properly maintaining and implementing their plans. Although the importance of drafting and executing a will or trust that fits your unique circumstance cannot be overemphasized, the most carefully crafted plan will fail if it is not maintained and implemented correctly. The following four mistakes are quite common:

Mistake #1: Failure to Deal with Property

Your will or trust must deal with your property, and the failure to do so will result in the failure of your plan. In my practice, I encounter three main problems in the way that many plans deal with property:

·      First, I see trusts which hold property that they should not hold because of tax reasons.

·      Second, I see trusts or wills which dispose of property in ways which violate other laws and may provoke unintended court battles between family members.

·      Last, and perhaps the most common mistake I encounter, are trust plans which fail to hold title to property, which will surely result in the failure of the trust!

Despite the fact that the primary purpose for wills and trusts is to avoid a number of tax and legal pitfalls pertaining to property, I commonly see trusts which do not hold title to any property and wills which do not identify key property. Often, in the case of trust plans, property was never titled in the trust in the first place, or the trust maker accidently transferred the property back out of the trust over time. This mistake may necessitate your family going through a court process called “probate” to prove who should get the property and money when they might have otherwise avoided this process. In the case of a will, where probate is usually required anyway, failure to identify key property may make the probate process messier, lengthier, and more contentious. This is why I counsel my clients to remember that in addition to drafting and executing documents, estate planning also involves properly transferring and dealing with property.

Mistake #2: Disorganization

Another major mistake with wills and trusts is the failure to keep documents organized. I recently visited with a couple who presented me with a rather large folder stuffed full of papers which represented their estate planning documents. After several hours of sorting through the folder, I discovered unnecessarily redundant copies of their plan, unrelated financial statements, and even a parking ticket. Unfortunately, they were also missing several key pieces of their plan, which had the potential to cause complete plan failure. Fortunately, I was able to catch this issue in time and reorganize their planning.

Disorganization, whether major or minor, has the potential to thwart even the best of plans and leave a mess for your family to sort out. You owe it to yourself and your family to ensure that your plan stays organized and discernable. When my law firm assembles an estate plan, we take pride in meticulously organizing and binding the plan in a way that encourages intuitive and lasting organization.

Mistake #3: Inaccessible Plans

A common problem I encounter with my clients is inaccessible or misplaced wills and trusts. You need to remember that your estate plan must be located in order for it to work. Otherwise, if it cannot be found, how will anyone know what you intended?

Because safe deposit boxes are often difficult to access, I do not recommend putting your plans into a safe deposit box. Rather, I suggest to my clients that they leave their plans on a bookshelf or in a closet and—most importantly—inform their trustees and children where to find the plan. Although this may leave the plan somewhat vulnerable to mishaps, it ensures that your plan will be found and used by your family. To insure against the risks of mishaps, I keep backup copies for my clients in a secure place and suggest that private information not be put into the plan.

Mistake #4: Out of Date Plans

Many people fail to update their wills and trusts. It is tempting to assume that after signing your will and trust, you can simply put them away and forget about them. However, wills and trusts are designed to deal with the realities of your life. If your plan has gathered dust from inattention, it is likely out of date. As a rule of thumb, you should review and update your estate plan every 3 to 4 years. By doing this, you will ensure that your plan is updated for changes in law which could impact the efficacy of your plan. You also ought to consider updating your plan when life-changing events occur, such as:

·      Changes in health or finances in your life or in the lives of trust beneficiaries and trustees;

·      Death or disability of you, your spouse, or a family member;

·      Births of potential beneficiaries;

·      Acquiring or disposing of major property;

·      Changes in names and addresses of trustees or beneficiaries; and/or

·      Desire to add someone or take someone out of your plan.

Estate planning must be carefully implemented and maintained in order to work as you intend. Ensuring that your plan deals with your property, is organized, is easily located, and is up-to-date will guarantee that you leave a legacy for your family rather than a mess. This is why I encourage people to choose an estate planning law firm that will be there to help you keep your plan working through the years.