Forbes’ recent article entitled“7 Steps to Ensure a Successful Estate Plan” listed seven actions to take for a good estate plan:
- Educate and communicate. A big reason estate plans aren’t successful, is that the next generation isn’t ready and they waste or mismanage the assets. You can reduce those risks and put your estate in a trust to allows children limited access. In addition, you can ensure that the children have a basic knowledge of and are comfortable with wealth. Children also benefit from understanding their parents’ philosophy about managing, accumulating, spending and giving money.
- Anticipate family conflicts. Family conflicts can come to a head when one or both parents pass, and frequently the details of the estate plan itself cause or exacerbate family conflicts or resentments. Many people just think that “the kids will work it out,” or they create conflicts by committing classic mistakes, like having siblings with different personalities or philosophies jointly inherit property or a business.
- Plan before making gifts. In many cases, gift giving is a primary component of an estate plan, and gifts can be a good way for the next generation to become comfortable handling wealth. Rather than just automatically writing checks, the older generation should develop a strategy that will maximize the impact of their gifts. Cash gifts can be spent quickly, but property gifts are more apt to be kept and held for the future.
- Understand the basics of the plan. Few people understand the basics of their estate plans, so ask questions and get comfortable with what your estate planning attorney is saying and recommending.
- Organize, simplify, and prepare. A major reason it takes a lot of time and expense in settling an estate, is that the owner didn’t make it easy for the executor. The owner may have failed to make information easy to locate. An executor must understand the details of the estate.
- Have a business succession plan. Most business owners don’t have a real succession plan. This is the primary reason why few businesses survive the second generation of owners. The value of a small business rapidly declines, when the owner leaves with no succession plan in place. A succession plan designates the individual who’ll run the business and who will own it, as well as when the transitions will happen. If no one in your family wants to run the business, the succession plan should provide that the company is to be sold when you retire or die. A business must be managed and structured, so it’s ready for a sale or inheritance, which frequently entails improving accounting and other information systems.
- Fund living trusts. A frequent estate planning error is the failure to fund a revocable living trust. The trust is created to avoid probate and establish a process under which trust assets will be managed. However, a living trust has no impact, unless it’s given legal title to assets. Be sure to transfer legal ownership of assets to the trust.
One of the main goals of our law practice is to help families like your plan for safe, problem free, and successful transfer of assets to the next generation. Call our office today to schedule a time for us to review your estate plan and identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.
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Reference: Forbes (May 21, 2021) “7 Steps to Ensure a Successful Estate Plan”