What are the Main Estate Planning Blunders to Avoid?

There are a few important blunders that can make an estate plan defective—most of these can be easily avoided by reviewing your estate plan periodically and keeping it up to date.

Investopedia’s article from a few years ago entitled “5 Ways to Mess Up Estate Planning” lists these common blunders:

Not Updating Your Beneficiaries. Big events like a marriage, divorce, birth, adoption and death can all have an effect on who will receive your assets. Be certain that those you want to inherit your property are clearly detailed as such on the proper forms. Whenever you have a life change, update your estate plan, as well as all your financial, retirement accounts and insurance policies.

Forgetting Important Legal Documents. Your will may be just fine, but it won’t exempt your assets from the probate process in most states, if the dollar value of your estate exceeds a certain amount. Some assets are inherently exempt from probate by law, like life insurance, retirement plans and annuities and any financial account that has a transfer on death (TOD) beneficiary listed. You should also make sure that you nominate the guardians of minor children in your will, in the event that something should happen to you and/or your spouse or partner.

Lousy Recordkeeping. There are few things that your family will like less than having to spend a huge amount of time and effort finding, organizing and hunting down all of your assets and belongings without any directions from you on where to look. Create a detailed letter of instruction that tells your executor or executrix where everything is found, along with the names and contact information of everyone with whom they’ll have to work, like your banker, broker, insurance agent, financial planner, etc.. You should also list all of the financial websites you use with your login info, so that your accounts can be conveniently accessed.

Bad Communication. Telling your loved ones that you’ll do one thing with your money or possessions and then failing to make provisions in your plan for that to happen is a sure way to create hard feelings, broken relationships and perhaps litigation. It’s a good idea to compose a letter of explanation that sets out your intentions or tells them why you changed your mind about something. This could help in providing closure or peace of mind (despite the fact that it has no legal authority).

No Estate Plan. While this is about the most obvious mistake in the list, it’s also one of the most common. There are many tales of famous people who lost virtually all of their estates to court fees and legal costs, because they failed to plan.

These are just a few of the common estate planning errors that commonly happen. Make sure they don’t happen to you: talk to a qualified estate planning attorney.

Reference: Investopedia (Sep. 30, 2018) “5 Ways to Mess Up Estate Planning”

How Big or Small Will Your Retirement Paycheck Be?

You’ve spent years saving for retirement, and maybe you’ve gotten that down to a science. That’s called the “accumulation” side of retirement. However, what happens when you actually, finally, retire? That’s known as the “deaccumulation” phase, when you start taking withdrawals from the accounts which you so carefully managed all these years. However, says CNBC, here’s what comes next: “You probably don’t know how much your retirement paycheck will be. New technology is working to change that.”

Unless you are a trained professional, like a financial advisor or a CPA, chances are good that you have no idea how to transform a lifetime of savings into a steady, tax-efficient income stream. A study for the Alliance for Lifetime Income asked pre-retirees, if they have done the math to figure out how much money they’ll need for retirement. About 66% say they haven’t done the calculations. Just 38% of households can count on having a pension or an annuity to provide a steady stream of cash.

In response to this common question, one company has launched a feature that was created to help you create a steady paycheck in retirement. The company, Kindur, was founded by a woman whose career included nearly two-decades in asset management at J.P. Morgan. She was inspired by her own experience helping her father decide how to draw down his assets. After devoting hours to Social Security books, she realized that technology could solve this problem. Throughout her career, she saw how financial institutions used technology to present and manage complex information. The goal of her company was to take this complexity out of retirement income planning.

Kindur, however, is not alone in this space. The founder of Social Security Solutions and Income Strategy found himself wishing there was a way to coordinate retirement income some ten years ago. He teamed up with the investment strategy chair at Baylor University, for what he thought would be a short project. In the end, it took years to sort through all the rules of Social Security. However, a platform was created to help people figure out claiming strategies. His second company analyzes   the accounts from which they should withdraw and when.

Another company, Income Strategy, provides users with help to figure out how to withdraw money and provides the option of how that transaction will be executed.

The future will likely hold more of these kinds of platforms, as the next generation becomes more comfortable with allowing AI (Artificial Intelligence) to manage their money and their withdrawals. For now, most people are still more comfortable with a person providing financial guidance, although that guidance is often helped by AI. Together, AI and an experienced professional make the best advisors.

As you plan for the future, remember to include the estate planning component. There have are many online legal drafting platforms, but so far, they have fallen short.

Reference: CNBC (April 7, 2019) “You probably don’t know how much your retirement paycheck will be. New technology is working to change that.”