The following is an interesting article written by Robert J. Green and published on 7/5/23 online at COUER d’ALENE /POST CALLS PRESS. My initial reaction to his estate planning question was, of course not, but read on for how he makes a case that maybe you CAN overthink it.
“It may seem obvious that when planning for what should happen after your death, more detail is better. Indeed, the problems I see with many estate plans have to do with ignoring some aspect of planning that should be addressed. However, the opposite problem is also possible. Let’s take a look …
A Last Will and Testament (which is designed to go through probate court) and a Living Trust (which is designed to avoid probate court) both give directions to the person you’ve left in charge of your estate (either your executor or your successor trustee) about how to distribute your assets after your death. When drafting those instructions, you can be as detailed or as general as you choose. For example, presuming you have four children and you want them to equally share your estate after your death, you might simply state that 100% of your estate will go to your four children in equal shares. Alternatively, you could state that your personal residence will go to your oldest son, your investment accounts will go to your oldest daughter, your investment real property will go to your youngest son, and your cash accounts will go to your youngest daughter.
Presuming that the value of each of the four asset types described in the above example are exactly equal, then both of these sets of instructions will result in an equal four-way distribution of your estate to your four children. However, it is almost never the case that you will own several asset types that are all exactly equal in value, one of each of which can be specified to be gifted to each of your children. Even if, at the time you compose your estate plan, you do have several asset types of equal (or roughly equal) value that you could assign to each of your children, it is highly unlikely that those assets will still be of equal value at the time of your death. Real estate and investment accounts fluctuate in value all the time. Your retirement account balances are likely to be lower post-retirement because you are required by the IRS to take out minimum regular distributions even if you don’t need the money. And the cash in your bank accounts – well all sorts of things will make those balances fluctuate over time.
This is just one example, but there are many ways in which changes in your circumstances or the value of your assets can impact your intended estate planning outcomes. So, what is the solution if your goal is to treat each of your beneficiaries equally?
There are several possible ways to ensure your wishes are achieved. If you are determined to keep specific assets designated to specific beneficiaries in your estate plan, then you will likely need to update your estate planning documents with your attorney on a regular basis (letting no more than 12-24 months go in between a review of your plan and the value of the assets of your estate. This may even necessitate regularly updated property valuations on non-liquid assets such as real estate. This approach is great for us attorneys, as we get to continue to charge fees to tinker on your estate plan every couple of years.
But, as the infomercial voice actor always says: “There must be a better way!”
Whether or not it is a better approach is a very individual decision, but there definitely is a simpler approach. You can simply state that each of your four children shall receive a 25% share of your entire estate. When this is done, we will draft the documents to give your executor or successor trustee the discretion to determine exactly how to achieve this equal share outcome.
The person you’ve left in charge might simply sell or liquidate all assets, pay the final bills and debts, and then write a check to each of the four children for the same amounts. Or, the person you’ve left in charge might assign certain assets to certain beneficiaries, and other assets to other beneficiaries, and may need to use cash or investments to equalize the gifts to each of them. There are many ways in which the general outcome of an equal distribution can be accomplished, and the person you’ve left in charge will have information that you cannot have when you write your instructions.
So, there is no right or wrong way to set up the distribution section of your estate plan, but you should know that there is likely to be a way that is better or worse for your particular circumstances.”
Now that you’ve read through his example, it clarifies how people can run into problems when doing their best to get their affairs in order for their loved ones. This is a perfect example of why you should always consult an experienced estate planning attorney who will guide you and help ensure what you really want to happen after you’re gone actually happens. Let’s talk about your situation and unique needs. I can help you update an existing estate plan or create one together. Call 513-513-399-7526 or visit my website https://davidlefton.com/