Spring has sprung, and with it comes the perfect time for some spring cleaning. For me, that takes me outside to spruce up my yard (or as we call it in the Blum family, “Marvin’s Garden”). But spring is also the ideal time to do an estate plan clean-up.
Cheryl Winokur Munk offers some great tips in “The Biggest Mistakes People Make With Their Wills” (Wall Street Journal, Feb. 16, 2023). Here are some of her ideas, along with a few extra tips of my own:
1. Not having a Will: The statistics are shocking on the number of people who don’t have a Will, even among high-net-worth individuals. Among the many who overlook having a Will are young adults. If you or your kids are 18 or over and don’t have a Will, the state has one for you, and you won’t like it.
2. Procrastinating: Though it’s tempting to keep putting off estate planning, time is not our friend. The pandemic reminded us that we’re all mortal. Moreover, tax laws are likely to change, taking away some of the best tools in the estate planner’s toolbox. Note that the $12,920,000 exemption cuts in half at midnight December 31, 2025, so it’s a “use it or lose it” situation.
3. Leaving an Inheritance Outright Instead of in Trust: In addition to the risks of passing assets into unprepared hands, leaving an estate outright exposes it to creditors, divorce, and estate tax. A carefully crafted trust can protect the inheritance for future generations.
4. Overlooking Digital Assets: Take steps to make sure someone has your passwords and private keys so they can navigate your digital wallet when you’re gone.
5. Not Updating Regularly: Your assets change, as do the people in your life, so make sure to check whom you’ve named as beneficiaries, guardian for your kids, executor, and trustee. The Blum Firm’s rule-of-thumb is to update your Will at each presidential election.
6. Failure to Change Beneficiary Designations: Many forget that certain assets pass outside a Will, such as life insurance, retirement benefits, and pay-on-death bank accounts. Those “non-probate” assets pass to the person you’ve named on a Beneficiary Designation Form, regardless of what your Will says.
7. Not Drafting for Flexibility: Circumstances change, so don’t set things in stone. Make bequests with formulas or percentages instead of dollar amounts. Give beneficiaries a Special Power of Appointment and designate Special Trustees with power to amend.
8. Your Will Is a Public Document: Preserve privacy with a simple “Pourover Will” that leaves your assets to a Living Trust (which is a private document). Retitling assets into the Living Trust while you’re alive avoids probate.
9. Don’t Forget a Charitable Inheritance: Leave your family two inheritances—a trust to provide for their needs, as well as a charitable vehicle they can use to benefit causes meaningful to your family. In addition to carrying on your tradition of giving, such a charitable inheritance creates powerful family “glue.”
10. Leaving Your Heirs in a Cash Crunch: Engage in “squeeze & freeze” planning to reduce estate taxes and explore life insurance solutions to provide needed liquidity.
11. Don’t Ignore Family Dynamics: Face reality about your family and create a thoughtful plan that heads off resentment and conflicts. Engage in facilitated conversations to open up channels of communication and build trust. Otherwise, when G-1 dies, these simmering issues tend to erupt like a volcano.
12. You Need More than a Will: A Will only tells who inherits your assets. Add a Red File to provide other information such as assets, key contacts, and business succession instructions; an Ethical Will (or Legacy Letter) to speak your heart to your heirs; and a FAST Trust to fund family meetings, family enrichment, and travel to foster ongoing family connection.
Let’s enjoy spring and all the promise it offers us. Here’s hoping these tips from “Marvin’s Estate Planning Garden” will inspire you to do some important spring cleaning.
Marvin E. Blum
Caption: For Marvin Blum, spring cleaning means sprucing up “Marvin’s Garden,” but it’s also a great time to spruce up your estate plan and clean up any mistakes in your Will.