Archive for the ‘Health Team Legal Documents’ Category


Who Is Dropping Your Estate BallHave you ever watched a world series baseball playoff game, or the final world series game, and observe two outfielders miss a fly ball? Well, it happens all season long but when it happens in a world series game, there is additional consternation amongst the players and us, the audience. As an active estate advisor, I too, observe other estate or financial advisors drop the ball. Often!

The lawyer who drafted the estate plan thought the banker, insurance agent or securities broker would take care of the beneficiary elections for the client. And of course, the banker, insurance agent or securities broker thought the lawyer would review and make any changes, if needed. And so, the work doesn’t get performed properly, if at all! A recent survey in a financial magazine I serve on the advisory board with, stated up to 90% of families suffer from a beneficiary mistake. And, those mistakes can cost a fortune!

Having three or four separate financial advisors licensed or trained to help clients elect proper estate beneficiary elections on beneficial type asset/estate products is really quite normal. Yet, it is rare for them to talk or get together on your behalf to be sure each has helped you, the client, to properly elect the proper elections when you die.

But more rare, and sadly — are the lawyers who ignore the beneficiary reviews and leave it up to the other financial advisors. Now, this could be for one reason. Lawyers aren’t usually licensed for insurance based and payable upon death bank or securities type products or accounts that name a beneficiary. Additionally, lawyers don’t always tell you how you can leave your home or another property in a few states, including my home state of Arizona, just by filling out a simple one or two page “Beneficiary Deed”.  As an Arizona Realtor, I must admit most of my piers in the real estate business are not going to be much help if you ask for one here. So, they are used rarely by the lower income (asset base) clients who need them the most!

In baseball, the player who has the most confidence in his position on the field is supposed to holler out they have the ball. Yes, it is a future tense sudden audible expression that might be “I’ve got it!” or “It’s mine!” or something similar to show control and intent. But in the typical estate plan conference conducted by a typical lawyer who may advertise themselves as an “estate expert”, — no such audible calls can be heard when it comes down to grabbing the ball before it falls to the ground in failure. A professional beneficiary review being absent, leaves the ball on the ground indefinitely. Often, the mistake is discovered only when it is too late to correct it.

A simple little “Discussion Points for Your Other Advisors” sheet would be all that’s needed. Or, a nice little checklist of follow-up procedures for the other money advisors to use after the client’s estate plan legal documents are signed would do just fine. It’s true, a lawyer doing a living trust may print a funding sheet for others to follow. Yet, the followup doesn’t exist for the most part. No one calls out for the ball even in the living trust field of legal practice. The client is expected to leave the law firm and figure it out on there own, even though a big slice of cash was expended for “professional estate” advice.

For the lawyers who promote a “round robin” review by the other advisors after the new estate legal documents are signed, trouble still lies ahead in many cases. They do their job, but yet legal malpractice can still sneak in if they don’t “inspect” what they “expect” from them. You, the client, can easily get a mixed review. A bank employee may convince you that a P.O.D. account is better than the trust on your CD accounts. So, the trust with ink barely dry, gets forsaken at the bank sometimes because the bank advisor happens to be pushing payable upon death accounts. (probably because the bank legal team told them to always be sure it isn’t tied up on probate if the client dies) 

Note: That works in some cases, but the professionally prepared and expensive trust wasn’t prepared just so another bad financial advisor can “fund” assets with the cheaper (and less protective) alternative of using payable upon death elections to avoid probate.

Also, things don’t always work out so well when you stop at the insurance agent’s office either.  Minors are often named as first or second beneficiaries, trusts are ignored as first or second beneficiary, and IRA money is left to a trust as primary beneficiary. And no secondary names are listed, thus erasing any post death chance to disclaim the funds away from the trust so they go to your kids*. Also improper use of “per stirpes” vs. “per capita” by insurance agents often shows the lack of diligence or understanding of basic legal beneficiary terms.

* There is a time to leave a large IRA to your trust. But, first of all, it is a special conduit trust designed for that one single purpose under IRS code and private letter rulings. More times than not, large IRA funds are left to a trust in “malpractice”, by mistake when no real reason exists to do so. The average family trust with no provisions to hold these funds can cost thousands of dollars in legal or accounting fees after your death to try to “qualify” the funds and keep them from immediate taxation. All of this can be avoided if a professional firm assists you in filling out all beneficiary forms properly and according to the legal documents and estate plan. Our firm offers professional beneficiary consulting if you feel a review is now in order.

After visiting the bank and the insurance agent(s), the final stop off is at the broker’s office. Some will get it all right. Most will not. Be careful if your broker or assistant tries to talk you out of all that paperwork to re-register your brokerage account in lieu of just pulling out a beneficiary form (payable upon death form) and asking you to sign that instead. Or, if a new trust was created by your lawyer or professional certified legal document preparer, they will register the account correctly in trust, but use the wrong trust date, such as the last amendment instead of the original trust date.

Very importantly, brokers (and assistants) can often list the trust as the primary beneficiary of the qualified funds (IRA) accounts. They do so, not fully understanding that professional lawyers practicing high end inherited IRA estate planning would never elect a large IRA to go directly into the family trust. Especially if a bypass trust wasn’t even created for receipt of the funds! Not getting it right, or understanding that few trusts can handle a large IRA, means “trouble in River City” down the road. Sadly, the trouble surfaces AFTER the client dies and can no longer complain. A recent case I consulted on, proves the legal expense of improper beneficary reviews (or lack of) can cost plenty after the client is gone. Good money going to waste all because someone didn’t follow through and do their job.

So, the question comes back – What would be a better way? Well, the answer in my firm was realized in 1991. It’s so simple, yet few law firms or certified document preparer firms do it. It’s called a detailed inventory of ALL assets. It has to be done at death. Why not start early? One by one, you should list all real estate owned. And all of your bank accounts with account numbers. Vehicle ID numbers secured for automobiles, boats, trailers, motorcycles or motorhomes also makes it harder to ignore a high value item that could trigger probate.

Also, a complete qualified plan (IRA’s) inventory is a huge area of malpractice if not done by someone. If you, the client, does a detailed inventory, no one can blame you for  dropping that ball!  Everything of any real value belongs in your pre-death inventory. But when it comes to beneficial assets, dont’ forget the life insurance policies that have a death benefit (all do, unless you live to 100 – then you may just have a cash value)

No inventory would be complete without a listing of debts or liabilities too. This can help settle an estate during the estate settlement process, especially if money was borrowed to a child or grandchild and expected to be repaid.  Along with the inventory of assets and liabilities, the designated owner is important too in your inventory. When a living trust legal document is prepared, a separate “Schedule A” is printed to list assets that should be placed in trust. Or, in the case of beneficial assets, a listing of whether the trust shall serve as primary, secondary, or tertiary beneficiary. Or not at all as I have already discussed. 

Since few trusts I review contain the actual asset listing I am talking about, the malpracice continues. The Schedule “A” every lawyer gives out with a atrust is often blank. They expected you, the client, to fill it out. And, you the client, thought “everything was done”. Legal Malpractice?  You be the judge. Meanwhile, do your own inventory just to be careful. And, do it BEFORE you go see your lawyer/Certified Legal Document advisor just in case they still don’t realize how important beneficiary reviews really are. Many families have MORE money in life insurance death benefits and IRA death benefits than they do in other assets, especially with home values falling way down the past few years. Ignoring them is a big mistake by all parties concerned.

Even if your estate advisor is doing a lower cost Last Will & Testament (perhaps to save money up front) with a few other documents such as Power of Attorney instruments, the inventory is still necessary. Because, on it YOU list your beneficial type assets such as life insurance, IRA’s, and any business arrangements that have a beneficiary election in the contract. Give them all the information about you and your estate, and mistakes will be curtailed or eliminated later.

My premise, in closing, is this: Complete estate planning can not be performed if a full inventory is not present. Just like mandatory probate requirements demand your heirs create one, estate advisors should get the hint sooner than later. The work is necessary and the inventory is the missing link to successful crossover work with your other financial advisors. A final appointment with your lawyer or estate advisor (such as with a certified document preparer like our AZCLDP corporate firm) to review ALL of your assets must be performed to consider any modern estate plan “finished”.A final check-up to be sure things are correct. Even if your estate plan is completed (or so you think), take a look to see if you got an inventory. If not, we can assist you if you like to put one together to go back and discuss with your current financial team of advisors.

In closing, just because you trust your banker, your insurance agent, or your broker — to do everything in your best interest, it doesn’t mean they will get it right. And, if you are the lawyer performing the estate plan, or review, the banker, the insurance agent, or the broker, don’t expose yourself to errors & omissions thinking someone else will help the client. With your client’s permission, ask to discuss each high value asset to be sure it is titled correctly or the beneficary form is in accordance with the legal advisors estate plan.  A small cost for such joint review now is nothing compared to the legal costs I have observed lately in way too many client cases ending up with baseballs all over the out field!

Just write that inventory down or print it up and circulate it to your trusted financial advisors so the estate plan can be all it can be. Just like the cancer drive brown envelopes we used to circulate and make donations in, start one with your own asset list and shoot it over to your lawyer first. (or certified document preparer) Ask for it back in 30 days after the first date of circulation. You the client, will have to be the final judge on what is right and wrong in those beneficiary elections. But, by giving your financial advisors complete “vision”, any current mistakes can be discovered BEFORE you die, not after you are gone. And, that would be a good thing.

Now, enjoy Jackson Browne’s “Lawyers in Love”

 

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