Don’t Short-Circuit Your Estate Plan

If a person has made a will, a power of attorney, an advance health care directive, or a trust, the person may think that those documents create a dependable estate plan. Unfortunately, many people do not realize that an estate plan includes every kind of asset ownership, every source of income, every kind of debt, and every kind of advance health care directive that a person may have or create. All too often, people create and change asset ownership or beneficiary designations without considering the effects of those changes on their estate plans. Just a few ownership or beneficiary changes can short-circuit an estate plan and defeat the estate plan’s objectives.

It is very common for someone to add a family member to a checking account or certificate of deposit. An account owner often adds a family member to an account so that the family member can help manage the account if the account owner dies or becomes disabled. If the account owner has made a will and power of attorney, it is not necessary to add anyone else to accounts because the estate plan already provides protections against the account owner’s death or disability. Additionally, the addition of someone to an account can cause the ownership of the account to pass to the additional person even if the will says that several people will share ownership of the account upon the account owner’s death. Thus, adding someone to an account can undermine or short-circuit an estate plan.

Many people establish revocable (sometimes called “living”) trusts as central parts of their estate plans. In most cases, a revocable trust plan will include a deed to transfer the person’s real estate to the trust so that the trust can control the real estate during the person’s life and after the person’s death. If the person takes out or refinances a mortgage loan, an ignorant or misguided lender may require the person to transfer the real estate out of the trust before approving the loan. If the person follows the lender’s requirements without telling the estate planning attorney about the transaction, the real estate may remain outside of the trust and defeat the purpose of creating the trust in the first place. It is easy for the estate planning attorney to help transfer the real estate back to the trust after the lending transaction, but the client must tell the attorney about the matter before that can happen.

We prepare many estate plans for married couples to protect assets in case one spouse requires nursing home care in the future. Those estate plans depend very heavily on specific asset ownership details. The plans include specially designed wills, deeds, and account ownership and beneficiary arrangements. If our clients sell or purchase real estate, or change financial institutions without involving us in those changes, the changes can wipe out important estate plan details and render the estate plans ineffective. Those undermining changes can also disqualify a disabled spouse for critically important Medicaid benefits.

If you have paid a lawyer to make an estate plan, you owe it to yourself to keep your lawyer in the loop. It makes no sense to spend good money on a high-quality estate plan, and then dismantle the estate plan through asset ownership and beneficiary changes without your estate planning lawyer’s advice and direction.

Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers and Jeff is a Fellow of the American College of Trust and Estate Counsel. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator and was the 2014-15 President of the Indiana State Bar Association.

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