When Estate Planning Goes Wrong
Years ago, I spoke with another advisor and asked how everything was going. He said he was in the midst of a challenging time because one of his clients in his early 50’s had died unexpectedly. The good news was that this client had life insurance. The bad news was that his ex-wife from over 10 years ago was still listed as the beneficiary, and his current wife wasn’t too happy about things. The advisor told me that he didn’t facilitate the purchase of the original policy so hadn’t thought to review policies currently in force to ensure the beneficiaries were accurate.
The above is an example of exactly why the focus of our fall meetings was on estate plans and beneficiary reviews. We always want to ensure everything is in alignment with your wishes, and we’ve made more than a few updates. None as drastic as the one noted above, but we’ve still made changes.
Here’s another sad estate planning story that also involved life insurance. I was on a webinar where the presenter shared a story of how an elderly couple had moved to Florida. The wife died, and their grown children decided they would move their father back up to the North East to be closer to family. The children made all of the necessary changes to facilitate the move: bank accounts, mailing addresses, etc. About 18 months later their father passed away. As they were going through their father’s things, they found a $500,000 permanent life insurance policy. They were elated because this wasn’t expected and would greatly help them pay for their respective children’s college expenses. When they contacted the insurance company, they were informed that the policy had lapsed and was worthless. When they investigated what had happened, they learned that the policy was being automatically paid out of their father’s bank account in Florida, but when they moved their father, they were not aware of this policy and their father’s mental condition wasn’t in a place where he would know to tell them. Despite their father paying for this policy for several decades, the missed payments caused the policy to lapse and be worthless.
Another story I heard was regarding a 38-year-old that was on life support. This individual had started on an estate plan and had a will and a trust, but they were unsigned and therefore the court would need to intervene. Questions remained regarding who would get guardianship of the minor children and what actions could they take because they were on life support?
These are just three stories of many where estate planning has gone wrong. In my first blog on estate planning, I shared examples of famous people who died without an estate plan as well: Aretha Franklin, Sonny Bono, Chadwick Boseman (played the Black Panther), Prince, Jimi Hendrix, Bob Marley, and even Abraham Lincoln.
Although Jimmy Hendrix died in 1970, the battle over his estate raged on for more than 30 years for one simple reason: Hendrix left no will regarding the distribution of his estate. To complicate matters, the estates of musicians and other artists often continue to generate money long after their deaths.1
All of this begs the question — How important is it to you that your family knows exactly what to do if you aren’t here tomorrow?
If it’s really important to you there are a number of things to consider.
• Estate Plan — Sometimes it’s not just having an estate plan but as simple as ensuring that your loved ones know where it is located in your home, or better yet, providing them with a copy of it.
• Important Documents — Included with your estate plan should be important documents such as life insurance policies, deeds, tax returns, birth certificates, marriage license, military discharge papers, frequent flyer and frequent hotel guest programs, credit card points, etc.
• Emergency Contact — You should have a list of your professional advisers such as your financial adviser, accountant, physician, and attorney etc.
By having all these documents organized, it will ensure that in the midst of these trying times your family has everything they need.
Hopefully I have been able to convey why planning for the end stages of your life is so important. I understand why many want to avoid the thought of their passing, but to ensure you have the best possible impact for your family, you will want to ensure you address these things.
Thank you for taking the time to read this blog, and I hope you found the information useful. If you have any questions about early retirement or planning in general, please feel free to schedule a meeting.
1 - https://www.legalzoom.com/articles/10-famous-people-who-died-without-a-will
