Beyond the Basics: Estate Planning Mistakes Part 2

Beyond the Basics: Estate Planning Mistakes Part 2
Real life examples of what not to do.
By Michael T. Koenig, CFP®, J.M.

Jeff owned a custom motorcycle shop with his best friend. Their insurance agent had proposed a Buy Sell agreement, but the life insurance cost too much due to Jeff’s medical history. Jeff died leaving the two surviving daughters with no basis for claiming Jeff’s half of the business. The jointly held business accounts, inventory, tools and receivables automatically passed to the surviving business owner; and despite our legal plea to the probate court, the daughters received nothing.

My advice: It's no surprise that a commission-paid insurance agent didn't follow through with the buy/sell recommendation when the policy sale evaporated. Life insurance is not required for a Buy-Sell agreement - which could have provided buy-out payments for Jeff’s daughters.  Seek advice from an experienced, fee-paid estate advisor or corporate attorney.  

David was honored to serve as his brother’s Executor; unaware, however, that the estate was subject to full probate and thereafter held in a testamentary trust over which David was responsible for providing principal and income to his 3 nieces and nephews for the remainder of their lifetimes.

My advice: Know what you’re signing up for. If you are appointed in a legal document, ask for copies and take steps to understand the role so that you can be fully prepared.

Allen didn’t miss a beat when Grandma died. He headed straight to the bank where he quickly learned that Grandma’s estate documents didn’t authorize him to just show up and collect her money.  His authority under her Financial Power of Attorney became invalid upon Grandma’s death.  His appointment as Successor Trustee meant nothing because the account was held in her individual name; and although Allen was sole beneficiary, the bank required an original death certificate. And Allen’s nomination as Executor of her Last Will & Testament wasn’t valid until a probate court formally appointed him as such.  Allen’s frustration ultimately peaked when he called my office demanding Grandma’s brokerage account information and found out how state and federal privacy laws preclude us from even confirming that his grandmother was a client without a legal document conveying authority to him.

My advice: As an executor or as a beneficiary, recognize the complexities of estate administration and the necessary timeline of events.

Author: Michael T. Koenig, CFP®, J.M., the Founding Partner of FirsTrust, LLC, candidly shares his experience as a financial advisor to advocate truth and transparency for financial service consumers.  His education and experience includes a bachelor’s degree in psychology from the University of Maryland, a master’s certificate in finance from George Washington University, a Juris Master of Law degree from Florida State University College of Law, the CFP® Certified Financial Planner™ professional designation, and over 35 years of experience as a professional financial advisor.