There’s one certainty in life—we are all going to die, at some point. You might be the type of person who shudders to think of this and avoids all discussions related to mortality. If so, you probably aren’t going to like this post. It’s about estate planning. More specifically, it’s about understanding that flexibility is important for a plan to be solid. So, even if it is not one of your favorite topics, you might want to keep reading, anyway, especially if you are going to execute an estate plan sometime soon.
Ensuring that your estate plan is flexible, means enabling changes and updates, as needed. A plan that has not been executed with flexibility might lead to legal complications. For example, what if you name a specific person to act as executor of your estate and you both die in a car accident, together? If you did not include a contingency that named a second person to serve as executor in the event that the primary person becomes incapacitated or dies, then what? Ensuring flexibility in an estate plan helps avoid potential problems.
A contingency is a valuable estate planning tool
As mentioned in the previous section, it’s a good idea to name a second person as executor. This creates flexibility, if the first person is not able to carry out the duties of your estate. However, a contingency can extend beyond the duties of executor. For instance, you can list a charity to receive your assets if you have no living relatives at the time of your death. You can also designate a beneficiary with authority to make changes to your estate plan after you die. Such changes might include changing a trustee on a trust that you incorporated into your plan.
Flexibility ensures that a fiduciary of your choosing will fulfill the role
If the person you designated with fiduciary authority to carry out your wishes is no longer able or refuses to fulfill the duty, the court will appoint someone else. This is another reason to include a contingency in your plan to create flexibility. Naming one or more people to step in and fulfill the role ensures that your fiduciary will be someone you trust and chose yourself. It also ensures that someone you do not trust or would not want to fulfill the role will not be appointed to do so. This post, from our archives, discusses what can happen when an estate owner dies with no plan in place.
Designate an irrevocable Trust Protector for added flexibility
Incorporating a revocable trust into an estate plan means that changes can be made to the trust, provided the estate owner is still alive and of sound mind. Many people don’t realize that all revocable trusts become irrevocable upon the estate owner’s death. Irrevocable trusts cannot be changed under typical circumstances. However, if an estate owner wishes to add flexibility to his or her plan, there is an option to do so with regard to irrevocable trusts.
You can appoint a ”Trust Protector,” who has authority to make certain changes to an irrevocable trust after you die. Imagine that you had left an inheritance for your 3 grandchildren. Before you had a chance to update your revocable trust, a new grandchild is born shortly before you die. You did not update your revocable trust, which, at the time of your death, becomes irrevocable. You, of course, would have wanted the newly born grandchild to be included as a beneficiary to the trust. If you designate a Trust Protector as part of your estate plan, this situation would be resolvable. The Protector would have the authority to add the new grandchild’s name as a beneficiary to the irrevocable trust.
Estate planning doesn’t have to be complex
You can keep an estate plan basic and simple, yet still add flexibility. Not having any plan in place at all, means that a probate court judge will decide what happens to your assets when you die. Even if you have a family heirloom, such as a piece of jewelry or artwork, etc., the court will determine what happens to it if you did not execute a last will and testament or place it in a trust before you died. The estate planning process enables you to retain control over your own estate. You do not have to have amassed great wealth in life for it to be useful. If you want to learn more about it, this article provides a basic overview.