Do You Treat Your Estate Plan Like a Commodity?

Many people think of estate planning as something to check off a list. Need a will? Check. Financial power of attorney? Check. Health care directives? Check. Living Trust? Check. In other words, as long as you’ve got the right planning document, you are covered, right?

Not exactly. Would it cause a problem if after you become incapacitated and your agent (sometimes referred to as power of attorney) took the power of attorney document to your credit union, who read it and responded, “The power of attorney mentions banks, but it doesn’t mention credit unions, I’m sorry.”? Would it be a problem if you, as your father’s agent, want to move his IRA from a financial planner who wasn’t managing the money well to your preferred planner, and you learn that by doing so, you will no longer be the IRA’s sole beneficiary but instead be equal beneficiaries with your stepmother because your father’s power of attorney doesn’t include the power for his agent to choose IRA beneficiaries? (Both of these situations happened to clients of mine who had an estate plan prepared before I met them.)

Would it be a problem if your agent brought your power of attorney to the bank, but the bank refused to accept it saying they don’t accept powers of attorney more than two years old? And if your daughter was seriously depressed but because her health care power of attorney did not include a mental health power of attorney, you had to take her to court to make her go into the type of facility that could protect her from herself, would that be a problem?

The question isn’t whether you have the right or even valid documents, but whether your planning will work the way you want it to when you need it to.

Truth be told, few people will know if their plan is missing something that could come back to bite them. Here are four tips to minimize your risk:

  1. Choose an attorney who focuses on estate planning, not an attorney who practices in several other areas. Good estate planning attorneys attend a lot of important estate planning continuing education, and attorneys who practice in other areas simply don’t have the time or resources to devote to improving their estate planning knowledge.
  1. Choose an attorney who is thorough and don’t seek the shortest, simplest plan. If your plan has a power you never need, then you merely have a longer document. If your plan is missing a power you need, then nothing else will matter.
  1. Don’t choose your attorney by cost, choose based on value. Simple and cheap upfront often means expensive and complicated later. All attorneys and all estate plans are not created equal, and attorneys who tailor each plan to each client tend to be more expensive. It’s fair to ask an estate planning attorney what makes their services more valuable. If they have a good answer and you feel comfortable with them, hire them.
  1. Don’t fall into the trap of assuming that the first three rules only apply to the mega-wealthy. Some of the examples above happened to people who were seeking government assistance precisely because they had limited resources.