Can Planning Have Unintended Consequences?

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Poor estate planning can have unintended consequences.

“The road to hell is paved with good intentions.”

Although the author of this quote is unknown, the words ring true in a number of circumstances.

Estate planning is one.

According to a recent The News-Enterprise article titled “Advice for avoiding unintended issues in estate planning,” most people do not want to leave a mess for their loved ones when they die.

Unintended consequences can happen in estate planning.
Failing to work with an experienced estate planning attorney can have unintended consequences.

Unfortunately, many people do.

The most common way people set in motion unintended consequences is by failing to set up a valid last will and testament or fully-funded revocable living trust.

Even if they have inked estate planning legal documents, people may fail to consider the impact of the language used to distribute the inheritance.

For example, leaving everything to the surviving spouse can have unintended consequences when it comes to blended families.

Although stepchildren may have cordial relationships with their step-parent while their parent is alive, these dynamics may disappear after the parent’s death.

Often leaving everything to the surviving spouse means the decedent’s children will be disinherited entirely.

If the blended family is truly close, this may not happen.

Even so, it is best not to gamble with your children’s future.

Blended family parents can set up revocable living trusts to avoid these unintended consequences.

An experienced estate planning attorney can create a trust to allow for flexibility while both spouses are alive but protect part of the estate for the children after the first spouse’s death.

With this option, the surviving spouse can access marital assets but only update beneficiaries for their portion of the estate.

When married couples name different “remainder” beneficiaries in their last will or fully-funded revocable living trusts but choose to have one another as the “primary” direct beneficiary, there can be unintended consequences of disinheritance.

The risk?

Only the “remainder” beneficiaries of the surviving spouse will eventually inherit.

Another option would be for the couple to discuss their wishes for the estate as a whole and then provide fractional shares for all beneficiaries.

Failing to create a last will or fully-funded revocable living trust can lead to disinheriting the person you would select as a beneficiary.

It is common for people to assume their spouse will inherit all of their assets if they die without a plan in place.

Unfortunately, this is not accurate in all instances.

States have different intestate laws governing what happens to assets when a person dies without a will.

Children or other family members can also be entitled to a portion of the estate.

For close families, this can be good.

For families with estranged relationships or loved ones who make poor choices, leaving no last will or fully-funded revocable living trust may mean the wrong people inherit your estate.

Another way poor planning leads to unintended consequences is failing to account for an heir becoming disabled.

By leaving an outright inheritance to loved ones with special needs, you may disqualify them from “means-tested” government benefits.

The inheritance may also be directed to the government to reimburse costs.

Because poor estate planning can have devastating unintended consequences, working with an experienced estate planning attorney is essential.

Reference: The News-Enterprise (March 25, 2023) “Advice for avoiding unintended issues in estate planning”

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