What Is Your Word Worth in Estate Planning?

Published on February 2, 2023.

PROBLEM: THE STAKES ARE TOO HIGH FOR "TRUST ME."

I often hear people say things like "my plan will take care of my family,” but I have no idea what they mean by that. In the past I have heard people say, “trust me,” and then unfortunately they prepared a do-it-yourself plan and could not keep their word so it cost their family in the end. The stakes are high when it comes to estate planning, and I think it is essential that we educate ourselves on the pros and cons. 

SOLUTION

In estate planning we spend a lot of time talking about valuing assets for both estate tax purposes and transition purposes. There are many questions that can come up when valuing actual assets, but one thing we don’t talk much about is how to value someone’s word. In a best-case scenario, all their words are documented, preferably in a comprehensive estate plan, so all assets are accounted for.

Without an effective estate plan, you are asking the courts and your family to assume what your intentions were, and unfortunately estates law does not account for assumptions. Your estate plan must be memorialized in writing to take effect.

What is your word worth when you say your plan “will take care of your family?” That opens a huge range of interpretation! Honestly, that could range from being a train wreck for you all the way to the other extreme of being a terrible outcome for your family.

I have had bad experiences with taking people’s word. I conclude that even though we want to trust people, some people are simply not true to their word. Some people have no conscience, but others do it without ill intent. Your parents probably mean well, but it’s hard to take anyone’s word without seeing the documents to back it up. Obviously, you cannot make them show you anything, but what has been your approach up to this point?

Here are a few suggestions:

1. Confirm your goals and express them in writing.

Hopefully you can realize a goal of avoiding tension with family members in the event of your sudden illness or death. Having the proper documents in place will bring your words to life.

2. Reduce tension.

Tell your family about your intentions. In the event of illness or sudden death, your family needs to know how to handle things and how you want your assets distributed to minimize unnecessary tension.

3. Note changing values.

Be mindful of asset values, and be sure that you have addressed that in your planning. It's important to have all of your information in one place, including an itemized inventory of your assets. These details should be readily available so that your loved ones are not left to search for the information. 

4. Conduct a Q&A.

Be sure that you can answer some basic questions regarding your estate. How will asset values be determined, who gets which assets, how distributions will be determined, etc. Uncertain answers now will almost certainly lead to problems later. 

5. Consider sample problems.

Consider cash flow as an example and identify how cash could be lost during the estate distribution process without an established planning.

6. Save your family stress.

Provide your family with important details regarding your plan. The people you have named in your plan to handle various aspects of your medical and financial life should be informed as well. You don't want your family to have to deal with uncertainty regarding the details of your plan while also dealing with your illness or death. 

How much is your word worth? Can your family trust it? I don’t know. Perhaps it should be more about transparency than trust. How many other multi-million-dollar businesses would get transferred based on the words “trust me?”

* Adapted from the Article "WHAT IS YOUR WORD WORTH IN ESTATE PLANNING? By Myron Friesen (12/13/2022)

Source: Successful Farming