by Sean Sparkman
Pathfinders Wealth
If you are like most people, you are probably hoping your children will say nice things about you after
you’re gone.
You imagine them gathered around the table, raising a glass and toasting your wisdom, generosity
and remarkable financial foresight. Maybe they’ll even name a grandkid after you or start a scholarship in your name.
What you don’t want to happen at the family gathering is chaos, stress, and questions such as:
What was dad (or mom) thinking?
Why is the ex-spouse a beneficiary? (oops!)
Does anyone have a list of Dad’s social media, email, and account passwords are?
They say we have to pay HOW MUCH in taxes?
What was he even thinking, putting Cousin Larry in charge of everything?
Most of us tend to think estate planning is mostly about rich people, complicated trusts and side-stepping estate taxes. And, yes, those things do matter. However, for most families, the bigger
issue is considerably more mundane. However, you don’t need to be ultra-wealthy to screw up your estate plan. You just need a little bit of money, some people you love, and enough outdated paperwork and loose ends to make everybody miserable.
The good news is that a little planning today can dramatically improve the odds that your kids and grandkids will
someday praise you instead of curse you.
A Sobering Realization: The Estate Plan You Made Years Ago May Belong to a Different Family
One of the easiest estate-planning mistakes to make is also one of the most understandable. You finally get around to making a will or trust with the help of your attorney or financial planner. You sign everything, make copies, and put the documents somewhere safe. Then you mentally check ESTATE PLAN off the to-do list. The only problem is that life doesn’t slow down when the when your lawyer’s pen hits the paper. In real life, people get married or divorced. Their children grow into adults and grandkids arrive. Family members may die or become incapacitated. Houses and other assets are bought and sold. Businesses come and go. People in your family may move to different states or countries. More often than not, financial circumstances and laws can change dramatically in just a short span of time. For these and other reasons, an estate plan should not be viewed as a monument carved into granite or a “set and forget” type of action. You should think of estate planning more as a loose framework or type of financial GPS. Every so often, you need to ensure your plan will still take your family where you intended wanted them to go.
Many estate planning law firms acknowledge this prevalent issue: a plan designed around the family situations, assets and laws of a few years ago may not accomplish what it needs to do today. For example, for years, planners talked about the possibility that the elevated federal estate-tax exemption would drop dramatically after 2025. That did not happen. Under
current law, the federal basic exclusion amount is $15 million per individual in 2026. That means federal estate tax is, for the moment at least, not the primary estate-planning concern for most American families. But, don’t confuse “I probably won’t owe federal estate tax with ” I don’t need an estate plan,” Without an estate plan your family can still inherit an absolutely magnificent mess without owing Uncle Sam a dime of federal estate tax.
One way to gain praise. Check and update your beneficiary designations regularly
Imagine spending thousands of dollars creating an exquisitely detailed estate plan. The attorney
drafts the trust and gets everything signed. Your family knows what you want to happen when you
pass away. Everything is well-organized with multiple copies and filed safely. So far, so good…
Then you die and your heirs discover that an old beneficiary designation points somewhere
completely different that they thought it would. You should be aware that certain assets, including retirement accounts and life insurance can, and often do,
transfer according to their beneficiary designations rather than instructions contained in your will. That’s why outdated or conflicting beneficiary designations can undermine an otherwise carefully constructed estate plan and cause tension among loved ones.
Surprisingly, beneficiary forms are remarkably easy to forget. Maybe you filled one out 20 years ago when you started a new job or purchased a policy. Perhaps your contingent beneficiary died or you no longer have a relationship with that person. Perhaps you named your spouse but never added a backup or you were widowed or divorced.
Maybe one child was supposed to receive something differently because another child received other assets. There are a multitude of possible scenarios that arise when you overlook updating beneficiary forms.
The point is not that any particular beneficiary arrangement is right or wrong. It’s that your 1998 situation probably looks nothing like your 2026 situation. Your estate attorney can help determine how beneficiaries should be structured legally. Your financial advisor can help you identify the financial accounts that need reviewing and coordinate those accounts with the larger plan. I like to think of estate planning as a team sport involving specialists who work together to ensure you have a plan that will do what you want it to do after you’re gone.
Why your kids might curse you: You left them with an unpleasant surprise.
Retirement planning and estate planning often collide head-on. For many retirees, one of their largest assets is a traditional IRA or 401(k). That’s great, but should not forget what kind of money is inside those accounts. Generally speaking, traditional retirement money has not yet been subjected to ordinary income tax. The government doesn’t write off those taxes and somebody will eventually have to pay them.
Making it worse is that rules for inherited retirement accounts changed substantially under the SECURE Act. Under current IRS rules, many non-spouse beneficiaries must empty an inherited retirement account by the end of the 10th year following the original owner’s death. There are important exceptions for certain eligible designated beneficiaries, and the rules concerning distributions during that 10-year period can depend on the circumstances.
Now imagine your 52-year-old daughter inherits a sizable traditional IRA. She is doing well, as is her spouse. Both are in their peak earning years. Then along comes Dad’s IRA and what seems to be a fantastic inheritance might very well create an income-tax planning challenge for her. That’s why retirement tax planning shouldn’t always stop with:
“How can I minimize my taxes this year?” Sometimes the more worthwhile question is “Who do I ultimately want paying these taxes , and WHEN?”
Avoiding these types of situations is why discussions about Roth conversions, strategic withdrawals, charitable giving and
beneficiary planning should part of the estate-planning conversation. Does this mean that everyone should rush out and convert an IRA to a Roth? No, because s Roth conversion creates current taxable income and can have other financial consequences that must be taken into consideration. What it does mean is that you should think of your retirement-income strategy and your legacy strategy as two sides of the same coin and coordinate strategies with your retirement income advisor, CPA and estate attorney.
You won’t get praise by leaving an empty safe.
This surprisingly common mistake can be both expensive and painfully ironic. Let’s say you create a revocable living trust. You sign it. You put it in a beautiful binder.
You tell the relevant people in your life about it. You feel a sense of security “ I don’t have to worry. I now have a trust.”
All of that is excellent and you are ahead of most people. But… did the appropriate assets actually get transferred or coordinated with it? Creating a trust document and properly funding or maintaining the trust are not necessarily the same thing. Failing to follow through on funding after a trust is created can defeat some of the very purposes for which it was established.
Think of it like buying a magnificent, technologically advanced safe. You choose the most secure location in the house, bolt the safe to the floor, and come up with a combination that no safe cracker would ever be able to figure out. But instead of putting the jewelry and coins into the safe, you leave them sitting on the kitchen counter.
Your safe serves absolutely no purpose.
Estate attorneys can advise you on how your trust should be funded and help you discover which assets belong there, which do not, how those assets should be
titled, and how beneficiary-designated assets should coordinate with it. Funding your trust can be tricky and you should never take it for granted or, worse still, forget to do it altogether. Believe it or not, many people do forget and it creates nightmares for their heirs.
Cursing you because your unstable older brother was chosen as executor, just because he’s the oldest.
When deciding who will handle their affairs after they die, some people resort to using a less than highly sophisticated process . They simply cross their fingers and name the oldest child as executor, or the one who lives closest, or the one who bought them a cruise for their anniversary. They might choose their executor to honor their brother or sister, or because they fear that person will get angry if they don’t choose them. None of these reasons are necessarily the right reasons to choose an executor.
The person handling your affairs is probably going to have to deal with financial institutions, property, tax documents, attorneys, deadlines, creditors and beneficiaries. And, as we all know, someone who you believed was calm, levelheaded, and fair can become remarkably unreasonable, even tyrannical, when inheritance money is involved. The person you love and trust the most isn’t necessarily the person best equipped for the job. If you want your final wishes executed properly, you executor must be someone dependable,organized, able to make tough decisions, and perhaps most importantly, they must be available. The last thing you need is someone who disappears for three months because dealing with paperwork isn’t really their thing. Sometimes a family member will fill the bill and sometimes your circumstances call for another solution.
The critical thing to remember is to choose deliberately rather than ceremonially.
Your family is praising you because you planned for the possibility that you don’t die. (?)
It may sound odd in an estate-planning article, but one of the most important parts of an estate plan
may be needed while you are still alive. Suppose you are hospitalized or otherwise unable to handle your own affairs.
If that happens, do you know:
- Who will pay your bills?
- Who can deal with financial institutions?
- Who makes healthcare decisions if you cannot?
- Who manages trust assets?
- Who has the authority to do any of those things? Estate planning isn’t merely death planning. Incapacity planning – including appropriate powers of attorney, healthcare documents and trust provisions is an essential part of the process. This is an area where the value is not necessarily measured in dollars. Your children may already be frightened and worried about you.The last thing they need is an additional crisis because nobody knows who has authority to handle your affairs. A thoughtful incapacity plan lets your family spend more time being your family and less time figuring out the bureaucracy.
Curses! You left your loved ones a digital archaeological expedition
Your grandparents probably did not have this estate-planning problem. Unfortunately, you do. Think about how much of your financial and personal life now exists behind a password.
There’s your email accounts,online banking, investment and brokerage accounts, employment portals, cryptocurrency and precious metals storage, Social Security, Medicare, cloud storage, photos, documents, subscriptions, and social media. Not to mention the devices themselves, laptops, phones, desk top computers, sometimes even your automobile has passwords.
Now imagine the chaos of your loved ones desperately trying to reconstruct all of that after you pass. “Hey! Does anybody know where Mom kept her password list?” “Where is that PIN number?” “I need to get into Dad’s GMAIL account.” Of course, that does not mean you want to write your passwords on a sheet of paper and label it PASSWORDS. Or tape them under your keyboard. It means creating an organized, secure method through which the appropriate people can identify your important accounts, documents and professional contacts when the time comes. Some people add all that information to a thumb drive, then put that drive in a secure place (don’t forge to tell someone it’s there) or give it to a trusted friend or relative.
Your estate attorney can advise you about appropriate legal access and authorization for digital assets. Your financial advisor can help make sure somebody can at least identify the financial
pieces of the puzzle. The last thing grieving loved ones want to do is spend days searching for the keys to unlock your life’s mysteries. Make it easier on them by organizing things in advance.
Praises: You told someone your plans.
Here’s my least technical and perhaps most valuable idea: Talk to your family.
I don’t mean you need to necessarily need to announce everyone’s inheritances over Thanksgiving dinner. In fact, depending upon your family, you might consider keeping sharp objects away from the table. But, as you likely realize, big surprises often create resentment. Suppose one child receives the family business while another receives investment assets. One child becomes trustee while another doesn’t. One of your heirs receives the house while another gets something completely different. You probably have perfectly understandable reasons for doing things this way.
Unfortunately, after you are dead, you aren’t available to explain those reasons. That is how an estate plan that made perfect sense to Mom and Dad can look like favoritism to the
rest of the family. This is where a thoughtful conversation during your lifetime can prevent years of hurt feelings and family drama after you’re gone.
Again, the appropriate level of disclosure depends entirely upon the family. Just realize there is a huge difference between maintaining your privacy and leaving everyone completely in the dark.
Above all else, realize that your kids don’t want or expect a “perfect” estate. They just want a manageable one. The goal is not to overwhelm the people you love, but to make a challenging time a little bit easier. Wherever you are financially, however small you may think your estate is, you have a choice. You can either leave behind an estate that is organized, coordinated and relatively straightforward. Or, you can leave behind a mess that causes siblings to declare war on one another and guarantees family drama for years to come.
I’m hoping you choose the former and that, every few years and certainly after major changes in your life, you will dust off the estate plan, talk with your attorney and financial advisor, update your beneficiaries, and check out the tax consequences of your legacy strategy. Make sure the trust still coordinates with the assets you actually own. Review your incapacity documents. Be sure the people you have placed in charge are still the people you want in charge. Organize the information someone will eventually need. And maybe have some difficult conversations you’ve been putting off.
Someday your children probably will sit around talking about you. And while you cannot control everything they are going to think and say, with thoughtful planning, you can improve the odds that somebody raises a glass and says: “You know what? Mom and Dad really thought this through.” Rather than, “What the heck were they thinking?
And when it comes to estate planning, that's not a bad legacy at all.
For educational and entertainment purposes only.
This material is provided for general educational purposes and is not intended as individualized tax or legal advice. Estate-
planning and tax rules vary according to individual circumstances and applicable state law. Consult qualified legal and tax
professionals regarding your situation.
Make an appointment now! It costs nothing and and can greatly increase your peace of mind.
