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White Oaks Investment Management Blog

Estate Planning Challenges

[fa icon="calendar"] Apr 15, 2013 10:03:03 AM / by Robert Klosterman

Robert Klosterman

estate_planningFew people would put the topic of Estate Planning high on their list of fun things to do but virtually all would agree that its better to have a plan in place than not. Yet, at the same time, contemplating the “end” and the impact it will have on our loved ones when it occurs is about as much fun (apologies to our Dentist clients) as a having a root canal done. Still, we all have heard stories of estates that were not planned and the horrible outcomes that happen on a way too often basis.

Several issues must be considered when considering options. The items below are things we see way too often but should not be viewed as an all inclusive list.

No Wills or Trust in Place

People who say they don’t have a will are technically incorrect. Each state has Laws of Intestacy to govern outcomes when an individual did not make their personal wishes known through a will and/or trust. In the state of Minnesota when there is a spouse and two children the spouse is entitled to 1/3 and the children 2/3. Issues with who will take care of the children is also a court decision. With blended families the issues can get very complicated. Better to state your choices than to let the decision in the realm of the court system.

Beneficiaries Not Updated and Current

Life Insurance policies, retirement plans and other employee benefits often pass by beneficiary designation. A common belief is that the will or trust will trump the beneficiary designation on the policy or benefit plan. Nothing could be further from the truth. The beneficiary designation is considered a contract under the law and passes outside the will and/or probate system. Many would be shocked at some of the beneficiary designations we’ve discovered through the planning process. Examples include former boy/girl friends, previous spouses, relatives who long ago have passed on.

Trusts Have Been Established But Not Funded

One of the great planning tools available include the revocable living trust. Properly set up it can avoid probate, maintain family privacy, provide a vehicle for assistance in the event of disability and the need for assistance and create a vehicle when properties are owned in multiple states. Revocable Trusts often cost more than a simple will but are worth it if the need is present and properly funded. Properly funded in simple terms means that assets are titled in the name of the trust. In way too many cases this simply has not been done.

Overuse of Joint Tenancy

When assets are titled in Joint Tenancy with right of survivorship the assets passes to the joint tenant without probate cost. For smaller estates this might be appropriate but it also can subvert the design of the wills and or trusts and in effect nullify the planning done. Titling of assets is a significant portion of estate planning and the easiest and cheapest solution could end up be the most expensive in the long run.

Lack of Adequate Liquidity

For the record, as a fee-only wealth management firm we’re not big insurance fans and want to use life insurance when only absolutely necessary. Yet the families needs for income and the payment of estate settlement costs fall into the necessity category.

Everyone should seek personal input since the issues can go further than this piece can go due to its length. As part of the wealth and financial planning process the subject of estate planning is a vital component that should not be delayed and ignored. Fortunately the recent tax legislation gives a reasonable platform for developing a sound and effective plan.

White Oaks Wealth Advisors Inc can help you address your estate planning needs.

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Topics: Financial Planning

Robert Klosterman

Written by Robert Klosterman

Robert Klosterman, CFP® is CEO and Chief Investment Officer of White Oaks Investment Management, Inc. and its predecessor R.J. Klosterman & Co, Inc. Bob has been a Certified Financial Planner licensee since 1989. He has a clear vision for the future having worked in financial planning and investment management since 1975, and feels a strong need to provide people with expert investment management services. As a Certified Financial Planner and certificate holder for Family Wealth Advising, Bob’s expertise and guidance have helped to fuel the steady growth of the firm.

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