Estate Planning and Farming

A farmer would realize that if he planted no seeds, no crops would grow. He would also know that if he failed to water his crops, they would grow poorly. What is the parallel to estate planning?

Many people have never created a Will or a Trust. These folks are like farmers who failed to plant seeds. Still other people have created Wills and/or Trusts years ago and then never looked at, updated, or tried to understand the documents they signed. These folks are like farmers who failed to water the seeds that they planted.

The penalties for neglecting an estate plan can be substantial. What if your ex-spouse or ex-girlfriend is the beneficiary on your IRA, annuity, retirement plan or life insurance policy? What if you removed an asset from your trust for re-financing and failed to put it back.

If your trust was designed to save estate taxes because the amount that you could die with and not have to pay estate taxes was $600,000 when you signed your trust, should your estate plan be changed in light of the fact that this amount has been increased to $5,000,000? How should you analyze your estate plan in light of the fact that the amount you could die with and not have to pay estate taxes could go down to $1,000,000 for people dying in 2013 and thereafter?

Some people have not appointed a proxy health care decision maker through a durable power of attorney for health care. Some people have done so, but using an old form that they signed many years ago. There are updated forms that deal with a federal privacy law called HIPAA, but does your current health care power of attorney comply with this law?

When I ask a client “Who is the beneficiary of your IRA, retirement plan and/or life insurance policy?” he typically is not sure. I ask the client to get me a copy of his old (existing) beneficiary designation form that he has filed with the relevant employer/broker/insurance company and to get a blank change of beneficiary form. In that way, when I meet with the client, a revised form can be completed and submitted if the old one does not reflect the client’s current wishes.

Trusts appoint successor trustees (managers) to take over when the client (or the surviving spouse) dies, resigns or becomes incapacitated. Sometimes the people who the client has appointed many years ago are no longer the people the client wants, or they may have died or become too ill to take on the job. Sometimes the client did not initially wish to appoint his children as successor trustees because they were too young, but now the children are older and they would now make  good choices to be successor trustees.

If a client wished to take care of his estate plan the way a good farmer takes care of his farm, he would meet with his attorney and other advisors to consider all of the above factors plus anything else that he deems relevant so that changes can be made before the client dies or becomes incapacitated.


About randyspiro

I am a super lawyer in California with dual specialization in Estate Planning and Taxation.
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