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Happy Pi Day: The One Constant in Estate Planning is Change

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cutting into a pie

Pi (π) is the ratio of a circle’s circumference to its diameter. Pi is a constant number, meaning that for all circles of any size, Pi will be the same. (It’s also a great day to deliver pie to Gordon Fischer Law Firm…any kind will do!)

Like geometry, in estate planning there are many variables, and some constants, too. Ironically, one of the constants in estate planning is change. And as your life and circumstances changes, your estate plan needs to change too.

Change & Your Estate Plan

Let’s assume you’ve gone to an estate planning lawyer, and you have (at the very least) the six “must have” estate planning documents. That’s great, well done. (You can read all about these six documents here.).

But remember you also need to keep these documents updated and current.

Major Life Events

If you undergo a major life event, you may well want to (re)visit with your estate planning lawyer, to see if this life event requires changing your estate plan through different provisions, tools, and strategies.

What do I mean by a major life event? Some common such events include:

  • The birth or adoption of a child or grandchild
  • Marriage or divorce
  • Illness or disability of a spouse or beneficiary
  • Purchasing a home or other large asset
  • Moving to another state
  • Large increases or decreases in the value of assets, such as investments
  • If you or your spouse receives a large inheritance or gift
  • If any family member or other heir dies, becomes ill, or becomes disabled
  • Launch or closure of a business

This is just a short list of life events that should cause you to reconsider your estate plan; there are many others.

Changes in goals

It’s not just life changes, though. It may be that your overall goals for your estate plan have changed over time. You may want to change the amounts of inheritances. As your financial situation changes, you may want to increase or decrease, your charitable bequests.

6 Estate Planning Resolutions You Can Actually Keep

Laws are dynamic and changing

And, it’s not just changes in your own life you need to think about, either. Congress, the Iowa legislature, and the courts are constantly changing the laws. When the rules change, so too must your estate plan.

What the New Tax Law Means for Your Estate Plan

Meet the Donor Family

To illustrate when estate plans should be updated, let’s look at the Donor Family. Jill and Dave have been married for 25 years and have four grown children. They executed a common-sense estate plan a few years ago.

Since that time, the Donors have gone through many changes, as you would expect, and as all families have. Should Jill and Dave update their estate plan to reflect changes in their family’s circumstance? Consider the following:

Divorce

One of the Donor kids filed for a divorce from his wife. Jim and Carol need to update their estate plan since they decided they now want to exclude the ex-spouse as a beneficiary.

Beneficiaries, Executors, and Guardians, Oh My!

Changes in financial status

Jill’s uncle passed away and left her a great deal of money. The Donors need to determine how this inheritance will affect their current plan and future estate tax liability. The Donors may want to be more generous to their favorite charities. They may want to talk to their estate planning lawyer about charitable giving through a planned gift, such as a charitable gift annuity or charitable remainder trust.

YOU Are a Super Hero: Charitable Giving Through Estate Planning

Birth

Our example couple’s youngest child recently announced that she and her spouse are expecting their first child. Jill and Dave must update their estate plan to provide for the new grandchild.

Major changes in health

The Donor’s youngest child was in a serious car accident, which resulted in severe disability. He can no longer work and is receiving government disability benefits. The Donors will want to seriously consider setting up a special needs trust. This type of trust will allow a beneficiary to receive inheritances, without it being considered income by the government for qualification purposes.

Smart Estate Planning: Special Needs Trust

New real estate outside Iowa

Jill and Dave recently bought a vacation home in Arizona. The vacation home may well be affected by Arizona laws. In any case, the Donors’ estate plan should reflect this new asset.

vw bus in arizona

As you can see the Donor Family has many reasons to revisit their estate plan, and more than likely, so do you! In between bites of your favorite pie, review your current estate plan to make sure its current. (If you still need an estate plan, the best place to start is with my Estate Plan Questionnaire.) Additionally, I can always be found at gordon@gordonfischerlawfirm.com and 515-371-6077.

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The Howard Hughes Estate: A Cautionary Tale

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movie camera

I was scrolling through Netflix the other night and finally landed on The Aviator, which I haven’t seen in a while. The 2004 Scorsese film starring Leonardo DiCaprio tells the story of the eccentric aviation magnate and movie producer, Howard Hughes, who tragically battled OCD, paranoia, and chronic pain (from a near-death plane crash) and spent his later life as a hermit. That led me down a rabbit hole of internet research into the real Howard Hughes. As an estate planner, I naturally wondered what happened to his estate when he passed away in 1976. (Perhaps fittingly the aviator passed away in an airplane.)

Even if You’re Not a Billionaire, You Need an Estate Plan

Unfortunately, the tale of the Hughes estate is a cautionary one of what NOT to do.

Terrible, horrible, no good, very bad idea of NOT having a Will

Hughes—who was reputed to be one of the wealthiest men in the world—died intestate, meaning he died without a valid will. That can cause chaos, confusion, and cost ample time and money for regular folks. But, when your estate is worth billions like Hughes’ was, it causes a mass tangle of court proceedings. In the case of the Hughes estate, debate and disputes lasted a total of 34 years.

In the aftermath of his death, several documents were brought forth alleging to be the magnate’s will. All were deemed to be forgeries. A Nevada court determined Hughes died intestate, meaning the law determines how assets are distributed to heirs-at-law. However, Hughes died divorced (allegedly) and without any close relatives; he left no clear heir(s). This debacle of no will meant that many people came out of the woodwork claiming to be relatives.

5 Celebrities With Crazy Estate Plan Provisions

A Messy Web of Forgeries, Fraud, & Litigation

So, after years of attorneys, courts, and dubious claims, what actually transpired?

Eventually, $2.5 billion was split between 22 of Hughes legal cousins in 1983. (Undoubtedly he didn’t know some or even the majority of these people. It’s also been said he didn’t want his money to go to his distant relatives, but without an estate plan, his wishes were steamrolled by probate law.) In an interesting twist, a woman named Terry Moore came forth claiming she married Hughes on a boat in international in 1949 and that they were never divorced. She didn’t produce any proof of the marriage (like a marriage certificate), but the estate paid her a $400,000.

The Supreme Court even had to step in. They ruled in the messy dispersion of assets that the Howard Hughes Medical Institute owned Hughes Aircraft, which it then sold off in 1985 to General Motors for more than $5 billion. The Court also rejected lawsuits brought by Texas and California, claiming they were owed inheritance taxes, but the suits were eventually put to rest with settlements of $50 million and $150 million respectively in property and/or cash.

In 2010, more than three decades after Hughes passed, the last slice of Hughes pie (Summerlin residential development community near Las Vegas) was liquidated.

Think Estate Planning is Just for the Wealthy? Think Again!

Leave a Valuable Legacy

Undoubtedly, Hughes left his mark on 20th century American history. However, his legacy could have been cemented in the way he wanted (probably giving the bulk of his estate to the Howard Hughes Medical Institute and nothing to long lost cousins) if he would have had a proper estate plan created completed with valuable strategic tools like different trusts and charitable giving vehicles. While most of us will never have an estate valued even close to the likes of Hughes, we can be smart with what we do have and make certain what we choose is dispersed to whom we choose, when we choose. There’s no need for your assets to be tied up in red tape or be dispersed in a way that’s not fitting with your wishes.

5 Celebrities Who Died Without a Will

Contact me with your estate planning questions, or get started with my free, no-obligation Estate Plan Questionnaire, which will help you organize important information needed for the plan in one place.

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5 Scenarios for Estate Planning Revisions

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Estate planning revisions

You have an estate plan? High five! You are already better off than most of your fellow citizens. In fact, numerous surveys have shown that about half of adult Americans do not even have a basic will. So, kudos to you if you’ve already knocked out this major life decision and planning initiative. If you already have a will, there are at least five major scenarios in which you should revisit and make changes accordingly:

  1. Moving out-of-state or out-of-country. What makes a will legal and valid in Iowa is not the same in other states, like, say, Ohio or Rhode Island. Each state has its own set of laws governing wills, probate, and so on. Also, if you buy property in another state and/or set-up a secondary residence, this must be included in your estate plan.
  2. If something happens to one of your beneficiaries or fiduciaries. Life happens to everyone else in your plan, and sometimes this means beneficiary passes away or a fiduciary retires. Reviewing your plan’s key contact list at least annually, in addition to on an as-needed basis, will keep everything fresh and relevant.
  3. If your marriage status changes. Needless to say, you will want to update your estate plan in the case of a marriage or divorce. Most estate planners you’ll meet can attest to horror stories on behalf of their clients of what happens when an ex-spouse inherits a huge sum of money, merely because an estate plan wasn’t properly updated.
  4. If you have kids (or more kids). You’ll want to ensure that in case something happens to you that your children are going to be protected by a trusted guardian. And, also, presumably you’ll want to add the children as beneficiaries, etc.
  5. If your financial situation changes significantly. This includes inheriting money or complex assets. Perhaps your business accelerates astronomically. Maybe you have what professional advisors call “a liquidity event,” (e.g., you’re flush with cash). Your estate plan, and its distributions, will need to be revisited to accommodate such changes in fortune.

Back to School: Political Science- How Changes to Legislation Impact Your Estate Plan

This, however, is just the tip of the iceberg! While your estate plan never expires, many other situations involving shifts in personal/financial goals, changes in needs (such as deciding you need a trust instead of just a basic estate plan), and even changes to legislation can mean estate planning revisions.

Have questions? Need more information?

If you think you may need to revise your estate plan and would like a free consult feel free to reach out at any time! You can contact me by email at Gordon@gordonfischerlawfirm.com or give me a call at 515-371-6077.

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6 Simple Tips for Beneficiary Designations

woman doing photo at sky

You’ve almost certainly had to designate your beneficiaries on savings and checking accounts, life insurance plan, annuity, 401(k), pension, or IRA. All of these accounts are passed along at the time of death via beneficiary designation (sometimes referred to as payable on death (PODs) or transfer on death (TODs) accounts). It’s easy to forget, but beneficiary designations take precedence over whatever is written in your will. So, even if you have the six basic “must have” estate planning documents in place, you still need to address who is named as your beneficiaries.

I have a few simple tips for reviewing and protecting your important accounts:

  1. Be sure to name a primary beneficiary (or beneficiaries), using the appropriate beneficiary designation forms.
  2. Be sure to also name an alternate beneficiary in case the first beneficiary dies before you.
  3. Don’t name your estate as the beneficiary (not without lots of expert advice).
  4. Review the beneficiary forms once a year to make sure they still reflect your wishes.
  5. Update the beneficiary forms more often if there has been a change in your life circumstances, such as a birth, adoption, marriage, divorce, or death. For example, if you’ve gotten a divorce you may not want your ex-spouse to be the beneficiary of your life insurance.
  6. Each time you change the beneficiary designation form, send it to the organization that holds the account, and request they acknowledge receipt.

 

couple holding hands in green space

Checking your beneficiary designations is a smart estate planning step you can take today. But, of course, you’re going to need a solid estate plan to account for all of your assets that are not transferred via beneficiary designation. A great way to get your key estate plan documents started is by downloading my free, no-obligation Estate Plan Questionnaire. You can also contact me by phone (515-371-6077) or email with any questions or concerns.

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