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Well-Intentioned Estate Plans Often End in Failure: 3 Problems to Avoid

I recently went to The 2012 Trust & Estates Symposium and listened to a presentation on "Zero Tax Planning" presented by attorney Tim Voorhees, JD, MBA.  The presentation focused on specific estate planning tools/techniques - but more importantly he emphasized that an optimized plan should look at aspects of client objectives that go beyond taxes.  The takeaway from the presentation is that the success of a good estate plan depends on several factors and that we as wealth advisors can help.

Why Zero Tax Planning?

The estate tax issue is a very important one for affluent families since estates that are not currently subject to estate taxes may turn out to be next year when the current law "sunsets" (the tax exemption is set to drop from $5.1M back to $1M).  No one is sure what congress will do with the law - if anything - before year end.  Although reducing taxes is important, because of this uncertainty, a good estate plan should be able to synergistically combine your philanthropic and legacy goals with tax-saving techniques.

Estate Optimization

Mr. Voorhees has seen a lot of well-intentioned estate plans end in failure during his career.  The problems often stem from these factors:

  1. Lack of coordinated efforts among advisors - A well integrated estate plan should consider the personal values of clients, their family goals, income taxes, estate taxes, transfer taxes, and financial goals.  The decision making process may require input from financial advisors, attorneys, CPAs, insurance agents, etc.  Each professional may focus on only one or few areas and overlook other factors. Therefore having one advisor as the main coordinator is key.
  2. Maximizing tax savings is not the only goal - People often overlook the question of what they want to achieve with their wealth after they pass away.  Passing down family values is just as important as preserving family wealth, so the family will not go from "shirt sleeve to shirt sleeve in three generations".
  3. Lax execution of the plan - Clients frequently drag their feet before implementing their plans.  The reason could be cost, time commitment, lack of understanding the benefits of the plan, or insufficient communication among family members.

What Can We Do to Help?

We are wealth advisors who not only understand the nature of your various assets but also the dynamics within your family.  We spend a lot of time getting to know you and understand your goals.  During the estate planning process, it is our top priority to assume the position of team coordinator and ensure your needs and goals are reflected in an optimized estate plan.  We also help reduce complexity by helping you weed through the overwhelming number of estate planning options available today.  During the implementation stage, we ensure good communication and follow-up so the plan is executed properly.