I’m happy to welcome a guest to the blog today; someone you likely already know from past blogs as well our webinar series: Lynn M. Gaumer, J.D., our Senior Gift Planning Consultant. After ten years at Stelter, Lynn has been a partner in an incredible number of estate plans. She has great insight into the planned giving donor’s mindset.
Lynn has seen a lot of successful estate plans…and also seen many planning pitfalls.
Nathan: Hi Lynn! thanks for joining me. Let’s talk about common mistakes in estate planning.
Q: What estate planning mistakes do you see most often?
Lynn: This subject is important. It is estimated that more than two-thirds of Americans (68%) do not have a will. For those of us involved in estate planning, we need to understand what drives people to create an estate plan—or not to create one—so that we can offer assistance.
The problem areas tend to fall into four themes:
- Failing to plan. The #1 mistake I see is failing to plan at all. Individuals need to prepare for the possibility of incapacity (see mistake #4) and make a thoughtful plan for their assets after their lifetime. It is especially important for those with large estates, minor and/or special needs children, real estate in multiple states or business interests.
- Failing to coordinate beneficiary designations. Having a will or trust is only part of the picture. A will only formalizes your wishes for assets left in your individual name. Assets, such as life insurance or retirement plans, pass outside of an individual’s will via a beneficiary designation. It is important to periodically review these designations so they mesh with your overall estate plan.
- Failing to review asset titles. Asset titling refers to the way in which you own an asset—such as in your individual name, jointly with someone else or in a trust or entity. Asset titling is an important part of estate planning. Assets titled in joint tenancy pass outside an individual’s will and to the surviving joint tenant. A person’s will could say that everything goes to the children equally, but if a bank account, for example, is held in joint tenancy with just one child, it would pass only to that child. The result is that the children receive unequal shares when the intention was to divide all assets equally.
- Failing to plan for disability or medical emergency. According to the Alzheimer’s Association, 6.2 million Americans 65 and older are living with Alzheimer’s disease. Older generations (as well all competent adults) need to prepare for incapacity and create durable powers of attorney and advance directives or living wills.
Q: Why do these types of mistakes happen?
Lynn: There are many reasons people may make these mistakes. The ones that I hear most often are that the individual:
- doesn’t think they have a large enough estate
- doesn’t like to think about incapacity or death
- didn’t set aside time
- doesn’t know how to start the process and/or doesn’t have an estate planning attorney
Q: How can planned giving officers best help donors avoid these issues?
Lynn: Take care of your own estate plan first, so you can serve as a true resource for your donors. You will then be able to discuss with your donor your personal experience, from finding a local estate planning attorney to the questions that need to be answered along the way.
If you already have an estate plan, review your documents to determine if you need an update.
If you are among the majority of Americans who haven’t yet started the estate planning process, now is the perfect time to set up a meeting with an attorney to discuss your wishes. Your family members and heirs will be glad you did.
Q: What should planned giving officers do if they don’t know the answer to a donor’s estate planning question?
Lynn: Refer donors to their professional advisors. If they are not working with one, recommend that they find one. Referrals from family and friends are always a good place to start. If they look to you for a referral, I recommend that you provide the names of several professional advisors. I like to give a diverse list of at least 3-5 individuals—men, women, older, younger and from different backgrounds.
If your donor lives outside your local area, you can often find estate planning professionals on either The American College of Trust and Estate Counsel (ACTEC) or the National Association of Estate Planners & Councils (NAEPC) websites.
Q: Do you have any additional ways the planned giving industry can help donors?
Lynn: Don’t overlook the younger generation. I, like many donors, am no longer a parent of a minor. When we celebrated my daughter’s 18th birthday, we taught her that along with gaining numerous rights, this milestone comes with new legal responsibilities. Her father and I are no longer legally considered her representatives for medical or financial decisions. The law now enables—and requires—her to choose the person or people she trusts to make such decisions for her.
We discussed the implications of this change and encouraged her to meet with an estate planning attorney to craft these critical legal documents. One of the best gifts a parent can give a child as they grow into adulthood is guidance on planning for the unexpected. Young adults need to know about these important documents, as do all competent adults of any age.
Nathan: You’re absolutely right Lynn. My oldest is just 14 years old now, so I have a few years, but my wife and I will definitely be talking to him about this in the years to come. Thanks for spending time with us today!
Lynn: My pleasure.
Have You Helped a Donor Avoid a Misstep?
Have you seen similar will planning mistakes? What’s been your experience with donors who’ve reached out to you for advice—do they feel overwhelmed or optimistic? Share your insights in the comments below.