Key Points:

• Many people never title their assets to follow their plan
• Laws change often, so your plan documents should, too
• Your plan can work if you make a commitment to it’s routine maintenance

We began this series with the observation that “Most estate plans don’t work!” However, if you approach estate planning with the right understanding and commitment, your plan can work.

For most people, their plan will work if they are able to stay in control of their estate, provide for their own care in case of disability, then give what they have—which includes intangible wealth like values, wisdom, faith and heritage—to whom they choose in the way they want.

Simply put, your plan does not work unless it accomplishes all of your goals. Last month we explained that most people have very little idea how much their planning could accomplish, and they limit their goals to what they know about. The plan could have done much more, if only they had known what was possible.

Let’s look at the second major cause of failure: funding and maintenance.

Fill ’er up

How silly it would be to buy a new grain truck, but never load it with grain. Yet many people buy an estate plan and then drive it around empty for the rest of their life.

Dick thinks his estate planning is complete because he had his attorney draw up a document—will, trust, etc.—that says where his estate is to go at death. Even if Dick’s plan is based on a complete understanding of what is possible and written accordingly, this isn’t the end, or even the beginning of the end. Still paraphrasing Churchill, preparing the documents is at best the “end of the beginning” of estate planning.

Legal documents only control the assets aligned with them. A living trust, for example, only controls the assets that are formally owned in the trust. Dick will need to deed his farm into the trust. His bank accounts, vehicle titles, machinery, personal effects, and corporate stock, partnership interests or LLC interests must be transferred into the trust. Only then will his trust “haul” the estate where Dick’s trust says the estate should go. If he doesn’t change everything over to the trust name (or in the case of retirement accounts and life insurance designate his trust as the beneficiary) his estate will not follow his plan.

Once Dick’s trust is completely funded, he still cannot rest easy! Every new asset he acquires (different land, vehicles, life insurance, etc.) must be titled correctly—loaded into his trust so it will go where Dick wants it to go.

What if you use a will instead of a trust? Assets in joint tenancy or with individual beneficiaries will not follow your will, so you still need to appropriately re-title them.

Routine maintenance

Would you expect your new grain truck to stay in tip-top shape if you don’t give it routine maintenance? Similarly, an estate plan is a sophisticated legal machine requiring regular attention.

Laws are constantly changing. It is almost a cliche to say “sweeping tax reform”—since major tax revisions now occur about every year or two. Laws affecting the transfer of assets at death (probate, trust, beneficiary designations, etc.) keep evolving. If your goals include protection of the estate from beneficiaries’ divorces or liabilities (like lawsuits) all those laws must be considered. Since your beneficiaries may be in other states, you must be aware of the laws in their states as well as your own.

Many attorneys charge by the hour for every call or consultation. This builds a natural barrier between you and your attorney’s advice. You don’t want to call, even when you acquire new assets or you have a change in the family situation. The attorney won’t contact you without being asked. So the typical plan lands on the shelf and is put out-of-mind for many years.

The solution

A few attorneys now offer maintenance services for a small annual retainer fee, like an extended warranty on your truck. For example, they will take your calls and advise you how to title new assets, then review the titles for correctness. Every year or two they will provide you with updated legal documents, addressing changes in the laws and changes in your family or your wishes. They might bring new ideas and opportunities to you to enhance your plan.

This routine maintenance keeps your plan running smoothly and helps avoid the need for a major overhaul—saving you money in the long run.

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Article authored by Curt W. Ferguson and originally published in the Prairie Farmer magazine, May 2007 issue