Thursday, June 7, 2012

Forbes Article Highlights Key Estate Planning Mistakes

Rob Clarfeld, a CPA and Certified Financial Planner who writes periodically for Forbes, recently highlighted seven major estate planning errors.  In my view, he couldn't be more on point.   Number two on his list is the ever-increasing use of "do it yourself" estate planning through LegalZoom and similar websites.  As he says, doing your own estate planning "is a recipe for disaster."

Clarfeld also underscores the importance of ensuring that your beneficiary designations and asset titling must be consistent with your estate plan; far too often the client's planning documents (e.g., wills and trusts) provide for a particular result, but the assets are titled incorrectly (e.g., often jointly titled with another owner), and the beneficiary designations listed on the clients retirement accounts, annuities and life insurance are inconsistent with the client's planning goals.

Clarfeld's final "major" error -- "Leaving assets outright to Adult Children" -- parrots what I have been advocating for the past 13 years; namely, that one of the best gifts we can provide to our adult children is to leave their inheritance in trust.  These lifetime trusts need not at all be restrictive or otherwise prevent the children from having use and access of the inheritance.  To the contrary, a child's trust can be designed as a "beneficiary controlled trust" that allows the child to serve as his or own trustee having access to the trust assets.  If, however, the child were to someday go through a divorce or have creditors knocking at their door, the trust assets -- assuming the trust is properly structured and maintained -- would be deemed off-limits to those "creditors and predators."

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