You finally did it! You met with an elder law attorney to “put your affairs in order”. Like most people, however, you have done nothing with your estate plan since meeting with your attorney other than to file your documents with the rest of your personal papers. As I tell any clients, your estate plan is an ongoing process, especially immediately following the execution of your estate planning documents. This article contains some of the more common oversights made after the drafting process is complete.
Assets that pass outside of your Will, such as life insurance, individual retirement accounts (“IRA”), and annuities, are disposed of by beneficiary designation. Often, beneficiary designations are overlooked. Where there is no beneficiary designation, your assets may not be disposed of in accordance with your wishes. This can cause significant tax consequences if the account lacking a beneficiary designation, for example, is an IRA.
Where an estate plan includes trusts or a dispositive scheme that is unequal, beneficiary designations should be customized by your attorney. We often customize beneficiary designations where there are minor or disabled beneficiaries and trusts are contemplated. For instance, let’s say your Will contains trusts for your children if they are under thirty years of age. If you don’t customize a beneficiary designation form to specify that that your life insurance or IRA should pass to the trust being created under your Will, the account will be distributed to minor children. In effect, they very purpose of your will has not been accomplished.
If you have customized beneficiary designation forms, you need to work with your financial institutions to place them on file.
Properly Safeguarding Your Documents
Your Will and other important documents should not be placed in a bank safe deposit box. When you die, your safe deposit box is often frozen by the bank. If someone needs to probate your Will, a court order must be obtained to open and examine the contents of the safe deposit box in the presence of a bank officer.
The preferred method of safeguarding your documents is to have your attorney maintain your original Will and any trust you may have created. For your remaining documents, or all of your documents, if the attorney is not involved, you should consider a lock box or safe in your house. Choose wisely who has access, and when access is needed, there will hopefully be no obstacles.
Delivery of Power of Attorney and Health Care Proxy
Delivery of your power of attorney (“POA”) to your financial institutions is imperative. If you have a prior power of attorney, consideration should be given to revoking such POA. In order to revoke a prior POA, you need to deliver the new POA to your prior agent and to any bank that holds the old POA.
In most instances, financial institutions have their own form of a POA. While not required by New York law, it is a good idea to complete your financial institution’s POA as well to avoid any unnecessary red tape.
Your health care proxy should become part of your medical files. Unlike your POA, copies of your health care proxy should suffice. Make sure your agent has a copy and knows your wishes as well.
Transferring Assets to Your Revocable Trust
If a revocable trust is part of your estate plan, you must attend to the transfer of certain assets to your revocable trust for your planning to work properly. Usually, your attorney will transfer any real property to your trust. You need to attend personally to the transfer of your brokerage and bank accounts.
The purpose of a revocable trust is to avoid probate. Unfortunately, many people prepare revocable trusts and never attend to the transfer of their assets. Or miss an account. In these situations, your Will must be probated to administer these assets after your death, making the time and money spent on your revocable trust meaningless.
Finally, having a discussion with your loved ones regarding your planning, especially your health care decisions, is imperative. It serves no purpose to keep your affairs a secret, leaving your loved ones to figure it out after your death. If your children are your fiduciaries, you should introduce them to your advisors. They should be empowered with knowledge so that their job is made easier.