How to Build Flexibility Into Your Estate Plan

How to Build Flexibility Into Your Estate Plan
Mike Valles

Passing your estate to your heirs is not a guaranteed thing in many cases. There is always a degree of uncertainty because people and unforeseen events can occur that could thwart your intentions—even when written in your estate-planning documents. It is especially true if your documents do not allow for any flexibility in the wording.

Flexibility in your estate plan enables your documents to work around many unforeseen situations. The documents need to be carefully worded so that your intentions are clear, as well as any contingencies you may want to put in place to protect your assets from being put into the hands of irresponsible people.

One thing that can upset your plans after you are gone is that the document does not meet with the latest legal changes in your state concerning your wills and estate planning documents. Another problem can arise when setting up a trust. Poorly worded documents may include loopholes that can be taken advantage of by creditors and others who may benefit from challenging them.

Add a Purpose Statement

A statement in your estate plan should express your desire and purpose when passing your assets to your heirs. ArgentFinancial says trusts and other instruments used to pass assets to your heirs can be altered because of different circumstances or when certain laws change. Even an irrevocable trust can be modified when circumstances change, but having a clear purpose statement will often help to limit or prevent those changes.
You can protect against these modifications by naming a trust protector. This individual is often the attorney creating your trust document or a family member. They need to have the authority to make minor changes, give advice to the trustee, or to replace a trustee.

Use If-Then Statements

An if-then statement lets you put conditions on the assets and who can receive them. You can use them to put in just about any condition you want, including reaching a certain age, after earning a college degree, when a child gets married, when grandchildren are born, when they prove they can keep a job, when buying a house, when they want to start a business, etc.
Special exceptions may also be added by using if-then statements, says KatznerLawGroup, such as when one of your children needs expensive medical treatments, goes through hard times financially, loses a loved one, etc. It is also possible to leave your home to your child under the condition that you and your spouse are gone.
By using if-then statements, you can add multiple conditions and cover a lot of contingencies if you think they are needed. They enable you to cover many possible situations that you cannot predict.

Spousal Right of Election

Most states have laws that prevent one spouse from disinheriting the other. The law is called the right of election, and it enables the spouse to claim between one-third to one-half of the estate—even if it contradicts the will. If you live in a community property state, the spouse owns one-half of the property.

Exceptions Given to the Plan Administrator

When creating a will and other estate-planning documents, you need to give some flexibility to the trustee or estate plan administrator. WeBuildYourTrust makes some suggestions as to when you want to give them some leeway concerning the timing of the distribution of the assets. They include situations where the beneficiary:
  • Is going through a divorce
  • Is going through bankruptcy
  • Is being sued by a creditor.

Other Necessary Estate-Planning Documents

Other documents also should be in place to ensure your estate intentions are fulfilled. As you grow older, your health may render you incapable of making sound health decisions. A healthcare power of attorney appoints someone you trust to make medical decisions for you. The document lets medical staff know what kind of treatments you want—or do not want.
A financial power of attorney gives power over your finances—or part of them—to someone you choose. They can be given authority to handle certain types of financial decisions or all of them. It is probably not a good idea to give this person both healthcare power of attorney and financial power of attorney.
A durable power of attorney (DPOA) continues to make decisions for the individual, even after they become incapacitated.

Enable the Creation of a New Trust

Another idea you can use to build flexibility into a trust, BabyBoomerBarrister suggests that you may permit the estate’s beneficiaries to create a new trust that would change the terms for their heirs and charities that have been named. It would also allow the assets in the trust to be transferred to the new one and customized according to their desires and needs.

Removing a Trustee

If a trustee is not distributing assets according to the trust documents, establish a way for the beneficiaries to change trustees. Provide the guidelines needed for the removal and replacement of the current trustee.

Create Alternates on All Documents

On every document that requires a named beneficiary, Executor, trustee, or those who will have powers of attorney, you need to add a contingent person. Without it, the court may appoint someone to manage those affairs that you do not want in that position. It is also possible that they no longer want the responsibility.

Preparing your estate-planning documents needs to be done with the help of an estate planning attorney. Because estate laws are always changing, as well as your family situations (marriage, divorce, new grandchildren, etc.), professional financial advice will help ensure your assets go to your named beneficiaries.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
Mike Valles has been a freelance writer for many years and focuses on personal finance articles. He writes articles and blog posts for companies and lenders of all sizes and seeks to provide quality information that is up-to-date and easy to understand.