Estate Plans Aren't Just About Avoiding Probate

Jackie Bedard
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Avoiding probate, reducing taxes, providing for heirs, and protecting a family business. These are the more popular reasons that people share when they start talking about why they want to establish an estate plan.

However, there are several other less-discussed reasons that might prompt you to hire an estate planning attorney. These reasons, while personally very important to the person seeking to create the plan, are rarely written down on a new-client intake questionnaire, or voluntarily mentioned during initial planning discussions.

Recently, WealthManagement.com published an article listing the site's top "other reasons" for estate planning. The article does a great job of outlining the sensitive issues behind why some clients are really creating an estate plan. Below we've described several of the issues cited.

Rewarding Certain Behaviors

At the most basic level, people want to protect and provide for loved ones, but sometimes they need a guarantee that a beneficiary will have "earned" his inheritance before any assets are disbursed.

Wills and trusts can be structured to include incentives for achieving milestones. Parents and grandparents often use estate plans to reinforce certain values and promote success among heirs. 

For example, it's not uncommon for a parent to require an adult child to graduate college with at least a certain grade point average before receiving any money outside of tuition and lodging. We've even seen parents require children to complete a personal finance and budgeting course before they can receive access to a full inheritance. 

An incentive trust should clearly define a grantor's objectives in the setting of goals that a beneficiary is being asked to achieve. Simply saying "must have good grades" or "must maintain a healthy lifestyle" is not definitive enough.

Addiction Treatment & Prevention

One of the more sensitive issues that people are reluctant to broach is having a beneficiary with a history of addiction. Getting a client comfortable enough to talk about it is a huge obstacle, but a frank discussion is the first step to helping a client design a plan that protects the entire family. 

We've helped many clients address this concern--whether it be for a beneficiary with a known addiction concern, or back-up provisions in case a beneficiary develops a an addiction in the future.

A trust can set up guidelines for how to pay for an afflicted beneficiary's living expenses (i.e., medical bills, rehabilitation costs, tuition, lodging and food), and it can also include incentives to reward positive steps toward recovery. 

These encouragements may come in the form of additional distributions being released if the child reaches or maintains certain benchmarks, such as holding a full-time job or attending counseling.

Inheritance Jacking

You've probably seen it or at least heard about it. Someone died and relatives quickly descended on the decedent's home to raid the assets. While it's definitely a crime, such behavior rarely goes prosecuted since almost no one reports it to authorities, because it's considered a "private family matter." Heirlooms and keepsakes disappear, and often the true intended recipient will never even know the theft occurred.

There are lots of typical justifications: "I was Dad's favorite;" "Aunt Sue owed me money;" "I was the closest to Grandma."

You can help prevent this sort of thievery by making their estate plan more transparent. 

You should inventory your assets and personal belongings (i.e., family photos, jewelry, guns, artwork, collections, etc.) and send copies to your estate planning attorney, your executor, and your trustee. In addition, you may wish consider informing beneficiaries of what they are intended to receive and have each one sign a letter of understanding. 

Open the Conversation

To provide the best protections and service that our clients and their families deserve, we strive to go beyond basic check boxes on a new client questionnaire.  Have you considered any risk factors or specific goals for your heirs? 

Think beyond the role of life insurance or the desire to avoid probate administration. What else could be happening in your beneficiary's personal life that would be a motivation for structuring a strong estate plan?

We hope this information is useful to you. If you want to read more about common estate planning issues, check out our free guide, Estate Planning Pitfalls: The 12 Most Common Threats to Your Estate and Your Family's Future. If you have a specific case or a question, please don't hesitate to call our office at 919-443-3035 or through our contact form.