Don’t Let Blunders Blindside You

Answer: You’ve worked hard to accumulate wealth and security while building a respectable estate legacy. Don’t let missteps prevent your wishes from being carried out leaving your family and legacy in the lurch. Here are a few lessons and cautionary tales of estate planning mistakes to keep in mind that offer a few important lessons. 

No plan in place

Prince Rogers Nelson did a lot of things right in his life, leaving an enduring musical legacy that spanned generations. Unfortunately, his financial legacy wasn’t as successful. The artist formerly known as Prince passed away in 2016 without an estate plan in place. Years of legal battles ensued.

Prince didn’t have a will, an executor, or a trust in place, which left his hundreds of millions of dollars, his music library, and his assets up in the air. In the void, multiple people competed to serve as the executor of the vast estate. With so many in the mix, the petition went to court, with siblings and half-siblings battling for control.

Obviously, naming someone is better than not naming anyone at all. It’s imperative to thoughtfully select your financial caregivers. These are the people and/or institutions with responsibility for overseeing your wishes (like a trustee or power of attorney) making it important to have the right person in each role. Carefully selecting these financial stewards could help you avoid the bungles and blunders that even celebrities fall prey to.

Smoke and mirrors

American Tobacco and Duke Power Company heiress Doris Duke left behind an estate worth $1.3 billion and a sizable sum to her charitable foundation. She named her butler as executor and trustee of the foundation. It wasn’t long before his spending was called into question, and he was removed by a probate judge, only to be reinstated by a higher court. A battle royale ensued and the parties settled on a board of trustees to manage the foundation.

Lessons learned 

The moral of the story? Thoroughly vet your chosen representative. Be extra careful whom you pick as an executor, trustee, or guardian. For a large trust or foundation, a corporate trustee or board may be ideal to manage financial and administrative tasks. Also, have a backup plan in case your chosen designee declines the responsibility or is unable to uphold his or her duties.

The dotted line

One gentleman went through all the motions with his attorney and financial planner, setting up a will and living trust, but he never signed them. Time got away from him, and sadly, so did his memory. As his Alzheimer’s advanced, his family stepped in to help but were dismayed to discover the invalid documents. Because there was no trust or power of attorney to dictate the man’s wishes, a guardianship was required to manage both his personal and financial affairs. The family was forced to go through a court to manage his finances, a cumbersome and expensive process, and his wishes for the final distribution of his assets didn’t occur.

The lesson here? Resolve to be proactive. Waiting puts you and your estate at the mercy of life’s great unknowns. We can’t guarantee tomorrow, as much as we’d like to, but we can do as much as possible to ensure that our loved ones are taken care of when we no longer are able to do it ourselves. Thinking about mortality may not be pleasant, but leaving a mess behind may be more unpleasant. If you need help getting started or fine-tuning an existing plan, ask for help. Once this task is resolved you’ll find a sense of peace and ease. As the saying goes, “Just Do It!” Stay focused and plan accordingly. 

Source: 05/19/2024 FactSet and IRS.