The Biggest Problem In Estate Planning Is You

More than hundreds of estate plans and one-quarter of a billion dollars in assets later, I can clearly pinpoint what separates outstanding results from a well-constructed and executed estate plan from those that fail to protect legacies, assets and the transfer of wealth from one generation to the next.

In a nutshell: those plans that fail do so as a result of a failure in execution by the estate holder.

What typically happens when an estate plan fails comes after all tax strategies and plans have been designed and the appropriate legal documentation has been prepared. The estate holder gets overwhelmed with the complexity of the plan and the hundreds of pages of complex documents that they don’t understand. They think their personal or family situation may change, and they get scared that they will run out of money before they pass on, and they just never execute the plan.

The impacts from this “failure to launch” can be catastrophic if desired outcomes include tax minimization, transfer of wealth to the next generation, and the estate holder’s wishes for how they wish their legacy to continue. The truth of the matter is that this failure is not so much a product of improper planning or preparation as it is one of misconception and misperception on the part of the estate holder on what the true upsides of a well-designed and executed plan can deliver.

Bypassing Estate Planning Roadblocks

My take: there are four ways to overcome the roadblocks and achieve the twin goals of lifetime asset preservation and having an effective transfer of wealth to the next generation.

1. Understand your current assets and income and how they will take care of you for the remainder of your life.
    
2. Clearly identify the outcomes and the benefits of those outcomes you wish to achieve, particularly in terms of identifying (and understanding) risks you’re taking and the benefits you are gaining by acting early.
    
3. It is fine to trust your advisors to develop a plan that best meets your objectives, but hold them accountable for explaining the plan in a simple and easy to understand manner and then set up an ongoing review of how the plan is working during your lifetime to reinforce the quality of the decisions you have made. You’ll probably need positive feedback that the plan is working and goals are being accomplished.
    
4. Start estate planning with simple ideas that gain a clear benefit and do not risk long term negatives to a client's wealth and sense of well being. For example, consider the use of a GRAT (grantor retained annuity trust), which is usually structured so that if assets appreciate, like they are always projected to do the family wins and if asset values go down, the client retains everything. 

Tax and estate law is complicated and ever changing, and it’s up to your CPA to keep you informed and able to maximize tax savings or wealth transfer opportunities.

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