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Can I Prevent a Will Contest After I’m Gone?
Good Planning Avoids Will Contests

Can I Prevent a Will Contest After I’m Gone?

When the details of a will are announced, “bad blood” can continue to boil between estranged family members, who won’t even speak to one another. Good planning can avoid a will contest.

Wealth Advisor’s recent article, “How to Protect Your Will From Legal Challenges,” explains that unfortunately, a similar scene can also play out in real life, if you fail to make proper provisions.

However, with some planning, you can avoid these kinds of will contests and disputes—or at least minimize the risk of your will being contested by your loved ones.

Before you (and your spouse, if married) consider your will and your comprehensive estate plan, discuss estate matters with close family members who likely will be impacted. Give them a rough outline of your plans for the disposition of your assets and other important topics. These types of conversations can eliminate potential problems and better prepare your heirs. It will also avoid a dramatic “shocker,” like those seen on the big and small screen.

While there are no guarantees, review these ways to bulletproof your will from a will contest or legal challenge:

A no-contest clause. This is also known as an “in terrorem clause.” It says that if anyone named in your will challenges it, he or she is excluded from your estate.

Witnesses. Use witnesses who know you well, like close friends or business associates because they can state convincingly that you were of sound mind when you made out the will. You should also select witnesses in good health, preferably younger than you are, and easily located. You can also add extra witnesses for more protection.

A physician’s note. A doctor’s note about your health status is recommended, if you’re extremely ill or elderly. This can declare that you have the requisite mental capacity to make estate planning decisions, which can be useful in addressing legal challenges. Get the physician’s note near to the time that the will is signed.

In addition, you can protect your will from a will contest, by recording it. State laws may have something to say about this, so speak with your estate planning attorney.

Learn here the importance of having a will.

Reference: Wealth Advisor (August 12, 2019) “How to Protect Your Will From Legal Challenges”

Are You Considering the Impact of Your Estate Plan on your Heirs?
Consider How Heirs Will Handle Inheritances

Are You Considering the Impact of Your Estate Plan on your Heirs?

When thinking about an estate plan, the top priority is usually devising strategies on how to transfer assets to heirs. It’s rare that a person really considers the consequences for the beneficiaries.

Kiplinger’s recent article asks, “Are You Forcing Unintended Consequences on Your Heirs?” An estate plan should bring about a positive outcome. However, you may be surprised to learn how easy it is to impose an unintended negative outcome on your family.

Some retirees have an estate plan that says, in essence, “What I’ve put together is enough. It’s my children’s problem to address it, when they get it. Regardless, they’ll be better off, so I’m not gonna worry.” Although that may be true, a better approach is to create intentional outcomes that advance the mental and emotional value of their wealth. This requires you to do something that can be uncomfortable—that’s talking about your wealth with your family. Many issues arise from a lack of communication and a lack of understanding of your heirs’ financial situations. Here are some examples of how you may be forcing unintended consequences on your family, when your assets transition with your estate.

Passing Unequal IRA Tax Liability to Your Heirs. When you pass on assets in a traditional IRA, you also pass the taxes and Required Minimum Distributions (RMDs) of that account. Unless your children all pay tax at the exact same rate because they are all in roughly the same income tax bracket, each of their inheritances will have a different tax liability. As a result, the amount they actually receive, after-tax, will also be different. Be sure to look into the effects of an equal split of the assets in your estate plan.

Inheriting a Vacation Home. If you own a vacation home, it’s likely you hope that your children will be able to enjoy it as a part of your legacy. Parents may directly pass a property to their children or set up a Qualified Personal Residence Trust (QPRT). However, talk to your children to see if they share the same intent for their future. A vacation home can become a burden for your children, if none of them or only one wants it.

Selling Illiquid Asset at Bargain Prices. These are assets that are hard to value and hard to sell, like real estate, collectibles and other alternative investments. If they decide to sell the illiquid asset, know that it may be at an auction or at a fire sale price, leaving your family with less money. Instead, think about selling these assets, while you can make sure that the fair market value is attained.

Life Insurance Proceeds Set in a Trust. You may have a life insurance policy in an Irrevocable Life Insurance Trust (ILIT), which was set up to retain the proceeds of the policy out of your estate to avoid estate taxes. Many people did this long ago, when the federal estate tax exemption was $600,000 and have failed to look over the terms of the trust since then. However, now in 2019, the federal exemption is $11.4 million per person. For many, this means the need to own the insurance policy in the trust may be unnecessary.

Protecting Wealth in Trusts That Don’t Fit with Plans. Many people use revocable trusts as a method to protect their family from probate. However, when you die, the trust becomes irrevocable, and the distribution of the funds is dependent upon the terms of the trust, which may create unnecessary restrictions on accessing the funds. Therefore, it’s crucial to make certain that your need for the trust is supported by its terms to address your family’s circumstances.

An effective estate plan transfers your assets to your heirs, and it also aligns the personal, emotional, and financial situations of all those involved. Remember to think about what the heirs receive.

When meeting with a qualified estate planning attorney, be certain to talk about any restrictions that you’re intentionally or unintentionally imparting on your heirs.

Find out how heirs can mismanage an inheritance.

Reference: Kiplinger (June 13, 2019) “Are You Forcing Unintended Consequences on Your Heirs?”

How Do I Title My Property Correctly for My Estate Plan?
How You Title Assets Is Important Part of Estate Plan

How Do I Title My Property Correctly for My Estate Plan?

The way by which you title your real and personal property and who you name as your beneficiaries is just as important in your estate planning as your will or trust, says The Black Hills Pioneer’s recent article, “Titling of property is just as important as your Will or Trust.”

There are some kinds of property that, depending on how they are titled or who’s the named beneficiary, will flow outside your will or trust.

For instance, if you designate a beneficiary to your life insurance policy or on your retirement account, that money goes directly to the named beneficiary at your death—not in accordance with your will or trust (provided you haven’t named your estate or trust as the beneficiary).

In addition, you could designate another person as payable on death (POD) designee or transfer on death (TOD) designee on your investment account or your bank account. These types of accounts also transfer automatically to the named designee and not with any regard to your will or trust (unless you named your estate or trust as the beneficiary).

Any jointly owned real estate will typically flow to the surviving joint owner, not pursuant to your will or trust. However, the fact that two people own one piece of real estate doesn’t mean the property will flow automatically to the survivor. It depends on how the property is titled. For example, in South Dakota, language needs to be included in the deed conveying that real estate to both individuals as “joint tenants with rights of survivorship.”

You can, therefore, see how critical it is that you discuss these issues with your estate planning attorney. In addition to questions about wills and trusts, you should also be discussing the titling of your property and the beneficiaries you’ve named on your life insurance and retirement accounts, along with any POD and TOD designees you’ve named on your investment accounts or bank accounts.

If you don’t, you create problems for you family and loved ones.

Learn about common asset protection mistakes when titling property and assets.

Reference: Black Hills Pioneer (August 5, 2019) “Titling of property is just as important as your Will or Trust”