August 21

Stress Testing Your Estate Plan

Cortes Law Firm Oklahoma City Estate Planning Attorney

Stress Testing Your Estate Plan

Today we're gonna talk about six items you need to accomplish and think about to stress test your estate plan. Let's jump right in today.

You've done the hard work of establishing and creating an estate plan. You gathered all of your documents, you had discussions with your significant other, you made decisions on what happens if you become incapacitated, you have provided for your dog, Snoopy. Watch last week's video for more on that, and you have decided who gets your stuff.

Congratulations, good on you, as they say across the pond! However, you still have some serious work to make certain the plan that you created will maximize your peace of mind and protect your legacy.

Guys, you must stress test your estate plan. Estate plans are living, breathing creations. 

You have heard me say this a dozen times: our life can and will change due to new births, children getting older, marriages, divorces, changes to your financial portfolio, career changes, changes to your health, and even the addition of new grandkids in your life. Tax laws might change, and you might need to completely revisit your estate plan if that happens. Think about all the folks that got trusts prior to this decade or in the 1990's, all of those trusts probably need to be seriously examined, because they probably were written with asset preservation in mind, and new laws make that almost completely unnecessary in today's environment.

Today's estate planning focuses on you. So what I'm talking about here is, well, I should say, what I'm not talking about is stressing you out. What I am talking about is stress testing your current estate plan. Now ask yourself the following questions to stress test your plan and determine whether you need to make some changes. I bet you do.

First, when was the last time you updated your will or your revocable living trust? We have had folks come in to probate an estate recently, and the last will was from the early 1980's, I'm not kidding. Except for their kids, and one of their kids had actually passed away, everyone else listed in the last will was either dead or unknown. We couldn't find them; think about that for a second. It was great that they had an estate plan, and they took the time to do it, but we could not and still can't locate some of the heirs, because they did not update their plan. The last will even listed a charity that we can't find any information on. The charity is no longer at the listed address, their phone number does not work, I mean, we couldn't even find them on the Secretary of States' website in their files for listed entities. We don't even know if that charity actually even existed legally. 

All of this is to say that their estate is not going to go to the people that they wanted, because we were working and are working with an outdated last will and testament. Like I said, one of their children and actually pre-deceased them, and now they had grandchildren and other charities that they were recently really interested in, but none of that matters because they failed to update their estate plan.

Second, who have you named as an executor or a trustee? Again, going back to the example I just gave, everyone that was designated as an executor was gone. You know, a lot of folks come into our office and name a brother or sister as their successor trustee, and that might be a great decision when you are in your 30's, 40's and 50's, and even into your 60's a little bit, but if you pick your brother or sister, and well, they're probably the same age as you, right? And that means that they are also getting older and they may not be the correct person anymore to be in charge of your estate or your wellbeing. So as we all get older, we need to reevaluate who we choose for these critical roles.

Third, do you have adequate insurance? Insurance is so critical that attorneys in other states actually sell clients insurance policies. We can't, and I don't. I know we have all heard the pitch before but we need to make certain that there is enough money in place to take care of our loved ones should something happen to you.

We have all seen the duck on that one insurance companies' commercial. By the way, this video is not sponsored by that duck or that insurance company. Their duck commercials are funny, but the point that they are making is very important: if you do not have the actual cash on hand, then you need to have enough insurance to keep your family and your business running. 

Speaking of insurance, one of the biggest mistakes I see with folks who do get insurance is failing to name contingent beneficiaries and failing to update those beneficiary designations. So talk to your insurance agent and get your insurance policies in order.

Fourth, how much of your property is jointly owned with someone other than your spouse? Now, not even talking about tax issues, folks can really mess up by holding real estate in joint tenancy with someone other than their spouse.

Let me give you a quick example of something that we see on a regular basis. Wife and husband have three children, and they own their house in joint tenancy, so they don't have to worry about creating an estate plan, right? Now, their plan is for their house to go to their three kids. Then the wife dies and the house goes to the husband, as the surviving joint tenant, just like they planned. Again, the husband does not want to create an estate plan, so he puts the couples' youngest child on the deed as a joint tenant and he tells everyone that the house is to be split equally between the three of them. He is counting on that youngest child to do the right thing. Can you see where we're going with this? Right off the bat, the husband has created two problems. The first is that if he does not pay the taxes, insurance, et cetera, the youngest child is now liable for all of that, which means the county could have a lean for back taxes, and the youngest child is just as liable as the husband is. The second problem is that the youngest child is under no obligation, and I'm talking zero obligation, to share that house with his two siblings. Further, there could also be some gifting and tax issues if the youngest child does try to honor his parents' wishes. 

Guys, all of the estate problems that come to our office, joint tenancy issues are something we see on a regular basis. Now, you might think you are saving money by not getting a proper estate plan, but in the long run, it might cost your estate thousands and thousands of dollars and not even go to who you wanted your house to go to.

Fifth, record keeping. Take it from me as an estate planning attorney, nothing will cost your estate more money than bad record keeping. If we have to search for assets and pay other professionals to locate items and property, then be prepared for it to cost your estate a lot more money.

Sixth, when was the last time you gave your estate plan a good once-over? Just like I said in the beginning, don't let your estate plan get stale. Even if nothing huge has happened in your life recently, if it has been over five years since you reviewed your estate plan with your attorney, then schedule a consultation and get it done. You know, laws change, just in the last two years we have seen the IRS estate coupon go from a little over five and half million dollars to over eleven million dollars per person, and over 22 million dollars for a married couple. Just like things in your life change, so do the laws and the regulations around us.

Now, I personally like to review with my clients at least once a year, and at the minimum, at least every two years, to see if there's been any major changes in their life.

If you got value today, then please do me a huge favor and hit the like button below, and just to get your thinking, please download our estate planning strategies guide. I'll put a link in the description section below and also in the comments section, and don't forget our other videos on estate planning. Well, that's all for today, have a great day, and as always, have an awesome week. Thanks for watching, and we'll see you next time.


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