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Inconsistency a Hobgoblin for Estate Plans

Asset Protection, Estate PlanningNo Comments

yes and no e1389221463324 Inconsistency a Hobgoblin for Estate PlansElements of an estate plan that work at cross-purposes can wreak havoc on your assets, and estate plans that were created years ago but never updated may contain inconsistencies that could cost you and your heirs plenty.

From a recent Financial Planning article, here are some common inconsistencies that plague many estate plans:

Power of Attorney.  While designating an agent to protect your best interests for financial, legal and tax matters is a given with estate plans, many people hesitate to give their chosen agent immediate authority, instead opting for a springing power of attorney which kicks in once you become disabled.  However, confusion can reign when a disabled diagnosis is unclear and a third party has to be persuaded that a power of attorney is warranted.

Balance Sheet Planning.  Many estate plans are devised based on a person’s current balance sheet, but in fact it may be advisable to use financial projections instead.  If a person’s wealth is likely to grow, conducting financial projections may reveal additional opportunities to save on estate or gift taxes.

Gift Provisions.  A power of attorney often provides a designated agent with the ability to make certain gifts, like continuing the support of a family member.  If the estate plan also includes a living trust, these often include gift provisions as well.  It is important that these are coordinated.

Estate Tax Allocation.  For people facing a 40% federal estate tax, the tax allocation clause of their estate plan that determines which bequest will bear the cost of the estate tax can be a significant factor in determining who inherits what.  Your objectives for inheritance should be clearly thought out when considering this clause.

Multiple Trusts.  People whose estate plans include more than one trust need to determine if these trusts are efficient and serve their interests.  Trusts established at different times for different reasons could result in tax planning complications as well as greater administration costs.

To be sure your estate plan doesn’t include any of these or other costly inconsistencies, contact our Newport Beach law firm.