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Does your estate plan need some ‘rain’?

Estate Plan Edge: Three changes can occur over time that will undermine your plan’s “yield,” including changes in the legal environment, changes to your life and changes in experience.

Curt Ferguson

July 2, 2024

4 Min Read
A cornfield with rolled leaves
ROLLED: Like a cornfield that needs rain, your estate plan can experience a drought that keeps it from being effective — including changes in the law, life and experience. Holly Spangler

I just finished mowing my yard. Actually, I just finished showering after mowing my yard. It was an incredibly dusty task today. The grass is suffering from heat and lack of rain. Just a couple of weeks ago, the conditions were the opposite: It was muddy when I began mowing, and before I finished, rain was beginning to fall again.

How quickly the conditions change! It is just a yard, not terribly consequential. But looking around, the heat and dryness will soon create significant consequences. I suspect some farmers are starting to pray for rain. The soil may have been perfect when they planted, and the moisture about right for germination. But in a very short period of time, some maintenance rain will be needed. Without it, at best, yields will suffer; at worst, the crop will die.

Like this year’s crop, many estate plans get off to a great start. But then for lack of “maintenance rain,” they produce less than the optimal results — maybe even a total failure.

A primary purpose of your estate plan is to spell out to whom and under what conditions your estate will pass at some point in the future, typically upon death. You also plan for how your estate will be managed during any period of disability. The plan is written today, with your optimal results in mind, based on everything you know about your estate, family and goals as of today, and relying on everything your attorney knows about your estate, family, goals and the law as of today. But the plan is to address future events. The time that passes between writing the plan and the life events it is to address — disability and death — creates an inherent risk of “poor yields” or “crop failure.”

Three types of changes occur over time that will undermine your plan’s yield. Your plan faces changes in the legal environment, changes to your life and changes in experience.

1. Legal environment. Say you signed a will or trust a few years ago, and one of your objectives was optimal income tax savings for your heirs. You plan to leave your farm to a successor. When your successor inherits the farm in an heir’s trust, a plan written today would allow him or to operate it with lower income taxes than the best will or trust any attorney would have written for you a few years ago.

Tax law applicable to retirement accounts has changed dramatically. If you have an IRA and want heirs to be able to defer taxes as long as possible, your living trust will have different terms today than the best you could have had in 2019.

The law is constantly changing. Legal strategies are discovered or developed over time. For optimal results, you and your attorney should take advantage of every opportunity.

2. Personal life. Then there is life. An heir might lose their way. The child or grandchild who was going to be your farming successor decided to walk away. The planned gift for college education is no longer appropriate, since those heirs have graduated. An in-law becomes an outlaw. These changes must be addressed. The more thoughtful and specific your original plan is, the more carefully it should be monitored and updated.

Your assets change. The No. 1 reason most estate plans fail is because at death the assets are not all titled as they must be to follow your plan. Sadly, the standard approach of attorneys after they help prepare your living trust is to write you a formal warning letter: “For the rest of your life, be sure to title everything — real estate, bank accounts, equipment, business entities, etc. — in your living trust.” Cynical lawyers write this to protect themselves, knowing you probably won’t title your assets correctly and that your family will be upset when the plan doesn’t work.

Don’t accept such a letter! Appropriate maintenance includes having your attorney help you make sure every asset you acquire is titled as it needs to be.

3. Experience. As life goes on, you learn more about your family. Your attorney observes his planning methods over time to see how things play out, for better or worse. The wisdom you and your attorney gain should be integrated into your updated plan on a regular basis. Even the attorney-client relationship can evolve over time based on such experience.

You can’t control the weather, but you can control the “rain” your estate plan needs to produce optimal results.

Read more about:

Estate Planning

About the Author(s)

Curt Ferguson

Curt Ferguson is an attorney who owns The Estate Planning Center in Salem, Ill. Learn more at thefarmersestateplanningattorneys.com.

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