IN FOCUS: Estate Planning

The top estate planning traps

Jun 10, 2015
Estate planning can be fraught with potential landmines for clients.

But advisors are there to help clients avoid getting burned.

Advisor Karin Grablin with SRQ Wealth Management in Florida, offered some common mistakes to avoid in a column to the Bradenton Herald:

1. No contingent beneficiaries on retirement accounts
Most people think their beneficiary will outlive them. But what if that isn’t the case? It’s imperative to name at minimum one contingent beneficiary, who will inherit the primary account should the beneficiary die before the client.

It’s also important advisors educate the client on the difference between "per stirpes" and "pro rata" designations. The former refers to if one of your beneficiaries dies before the client, that beneficiary's surviving family inherits their share equally. But with "pro rata," the account is divided between only surviving named beneficiaries.

2. No bequest of unique personal property
Clients should specify in writing ahead of time who will receive special heirlooms from stamp collections to jewelry to sports memorabilia.

3. Not planning for Dad's new romance
Within 25 moths of a wife’s death, 61 per cent of widowers have a new romantic relationship compared to 19 per cent of widows. Advisors need to work with an attorney or draft a very detailed will to make sure the kids eventually inherit.

4. Lack of planning for incapacity
While an estate plan is drawn up for after death, a client can be incapacitated before they shuffle off this mortal coil. A trustee can manage most assets, but advisors should make sure clients have updated power of attorney and health directives.

5. Not planning for aging parents
Many argue baby boomers feel entitled and advisors have to make sure they don't count on an inheritance as their retirement plan. Retirees are living better and longer and could leave little for their kids to inherit. The shoe could actually be on the other foot as kids may have to support parents that live longer than expected.

6. Not selecting the right person for the job
You may love your brother to bits, but if he’s been bankrupt five times he’s probably not the best person to represent a client financially. Advisors need to speak with clients to make sure the people they name are up to the job as executors of wills, trusts, powers of attorney, health care directives, etc.

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