Helping clients plan for life’s unexpected events—whether it’s welcoming a new family member, coming into an inheritance, or dealing with an illness—is at the heart of what estate planners do. As we recognize October as Breast Cancer Awareness month, it’s a great opportunity to remind ourselves how we can continue to plan for the curve balls that life throws us.
When discussing contingency plans, it’s common to default to relying on wills and powers of attorneys to help you plan for the inevitable—death and/or incapacity. However, besides health issues, there are a host of other unexpected events that attorneys can help their clients anticipate and plan for. Below are just a few examples.
Tax law changes
We’ve been told that there are two certainties in life—death and taxes. While it’s certain that they will happen, no one can anticipate the “when” and “how”. This is especially true for tax laws, which can change significantly as seen by the recent passage of the Tax Cuts and Jobs Act in 2018. While it’s imperative to periodically update your estate planning documents, there are also opportunities in the drafting process to design these documents to be adaptable to these changes. You can do so by including features like trust protectors, decanting powers, and discretionary distribution powers, which can help to maximize current tax opportunities, while minimizing the risks of the unexpected changes in tax laws.
Birth of a child/grandchild
A new addition to the family is often an unexpected and happy surprise. But, improper planning may unintentionally disinherit or otherwise inadequately plan for the new child/grandchild. Avoid these scenarios by being aware of the issues and risks related to joint tenancy and beneficiary designations. Additionally, unfunded trusts can be a huge risk factor. Since a trust only controls the assets it owns or receives, any asset not allocated into the trust may be subject to probate and may be divided between the spouses in the event of divorce proceedings.
Change in marital status
While getting married is typically a thoroughly planned out affair, divorce on the other hand is often unexpected. Despite a happy couple’s hesitation to talk about this topic, it’s prudent to include asset protection in their estate plans, both for themselves and their beneficiaries. To help clients preserve assets for divorcing beneficiaries, consider using beneficiary controlled trusts and discretionary distribution features. For clients looking to protect their own assets from divorce, Domestic Asset Protection Trusts can be a preferable alternative to prenuptial agreements.