Some Life Events Should Prompt a Visit to Your Estate Planning Attorney

The following is a list of events that warrant setting up an appointment with your estate planning attorney:

1. First Marriage – In most instances when a couple marries, they will want reciprocal wills that leave their estates to each other and nominate each to serve as executor of the other’s estate. If one spouse is wealthy, he/she may want to consult with their attorney regarding a prenuptial agreement (sometimes referred to as an antenuptial agreement).
2. Children – When children come into the picture, you will want to make sure your will addresses who should be guardian for your minor children if your spouse is unavailable. Also, if you have accumulated some assets and/or you own life insurance, you may want a contingent trust for the benefit of your children if your spouse fails to survive you.
3. Divorce – In the event that you divorce, you will want to change your estate planning documents, and make sure that you update all beneficiary designations. For an example of why you want to update your beneficiary designations, see our earlier post, discussing Kennedy v. Plan Administrator For DuPont Savings Plan.
4. Plans to Remarry – If you have been married before and plan to remarry, you may want to discuss the various issues raised by a blended family. A blended family makes estate planning more complicated and communication with your family may be very important. It may be advisable to create a prenuptial agreement.
5. Significant Changes in Your Assets – A change in the value of your assets, the type of assets, or titling of assets may lead to a change in your tax planning strategy and/or the disposition of assets.
6. Significant Changes in the Law – Over time, the laws affecting probate, estate planning and tax planning change. It is a good idea to periodically review your estate plan and personal information with your attorney in the event of such changes.

Life Insurance Review Part II – Minor Child as a Beneficiary

Another life insurance planning mistake is naming a minor child as a beneficiary.  This will almost certainly require that a guardianship be set up for the child through the probate court, incurring court costs and attorney fees.  The probate court would also determine who to appoint as the guardian.  The amount of the insurance proceeds would be public record and the court would have to approve all expenditures.  On top of that, the guardianship terminates and the assets are distributed outright to the child upon turning 18 years of age.  The solution is to create a contingent trust for minor children.

What's a Contingent Trust?

A contingent trust is a written agreement directing how a person's estate should be managed and distributed in the event of a certain occurrence. In most cases, a contingent trust is used to address the possibility that your spouse does not survive you and you have young children. You may shudder to think how your young children might use their inheritance. There are plenty of examples of a child inheriting property and quickly expending it on fast cars and a fast lifestyle. Also, if your child is a minor, it is likely that his inheritance would require a guardianship. This means that the Court would decide who to appoint as guardian and the whole matter would be public record. The guardianship would terminate at the age of majority (18 years) and the money released to the child. The contingent trust is used to not only select a trustee of your choosing, but to instruct when your children should receive their inheritance. Frequently, the trust provides for distributions at different ages. For example, you may decide to distribute 25% of the trust at age 30, 25% at age 35, and the remainder at age 40. The trustee would have discretion to distribute or expend money on your child's behalf.

Another Planning Tool Available in Ohio

Most people are aware that they can nominate a guardian for their minor children in the event that they are no longer available. This is typically done in a person’s will and may also appear in a separate document such as a power of attorney. Ohio law now provides that parents can also nominate a guardian for an adult incompetent child. Any parent who acts as a caregiver or otherwise assists an adult incompetent child may very well want to select a person or persons to continue in that role should that parent become unavailable.