You Should Not Plan Your Estate Around Specific Assets

Posted by Harvey L. CoxJun 11, 20210 Comments

I discourage clients from planning their estates around specific assets. There may be a compelling reason to do it in rare instances, but in most cases, it can result in unintended consequences. 

Example: John is a widower with three grown children. He wants to treat his children equally. In his will, John divides his assets equally to his children. Several years before he died, John made some changes that dramatically affected his estate.

The first change he made was to transfer one-half of his home to his oldest son. Next, John added his daughter as the beneficiary of his savings account. Finally, he named his youngest son as the sole beneficiary on his life insurance policy. These changes in his home, savings account, and life insurance were substantially equal in value, so John thought he solved the problem of making sure his children were treated equally at his death.

Before John died, however, he sold his home and put the sale proceeds in the savings account. He also let his life insurance lapse. At John's death, the savings account passed to his daughter, who is the beneficiary of the account. But there was no life insurance for the youngest son to collect and no home for the oldest to inherit. By trying to equalize the value to his children and planning around specific assets, John unintentionally disinherited two of his children. The problem with John's estate is easily avoidable with a Living Trust. 

For more information on how to avoid mistakes in your estate planning, join me on my next estate planning webinar.  You can register here.