Three estate planning ideas to protect your clients and their wealth

By Justin Champlain

You may have a will, a retirement plan, and a pretty good idea of where you want to spend your next vacation. But have you thought about what happens to everything you’ve built if you’re no longer here to make the decisions?

For retirees and pre-retirees, estate planning is about much more than simply deciding who gets what. A comprehensive plan can help protect your assets, reduce family conflict, and ensure your wishes are carried out. Common estate planning documents may include a revocable or irrevocable trust, will, health care proxy, and power of attorney.

After years of reviewing estate plans and having conversations with clients and attorneys, I’m often surprised by how many plans are essentially “cookie cutter.” A basic estate plan can easily cost thousands of dollars, yet many families never take the next step to address the unique circumstances surrounding their wealth and family.

Here are three considerations I believe deserve particular attention.

1. What happens if your child gets divorced?

When an adult child gets engaged or married, we naturally hope they have a long and happy future together. Unfortunately, marriages do not always work out. One concern I hear frequently from families is: “What happens to the inheritance we leave our child if they later go through a divorce?”

Without thoughtful planning, inherited assets can potentially become entangled in a divorce, depending on how those assets are titled, managed, and treated during the marriage and the laws of the state involved.

What was intended to benefit your child and perhaps eventually your grandchildren could become part of a much more complicated situation. Consider the possibility that assets you spent decades accumulating could ultimately help support a new family structure involving people you never knew.

If this is a concern, discuss it with your estate planning attorney. There are strategies, including appropriately structured trusts, that may provide additional protection and control over inherited assets.

2. Is leaving the family home really a “gift”?

Many parents assume leaving a vacation home, rental property, or family residence to children is a straightforward gift. In reality, real estate can create significant complications when beneficiaries have different financial circumstances, goals, or geographic locations.

I recently worked with a family where two brothers inherited a property from their father in a Boston suburb. One brother lived nearby, had recently retired, and wanted to keep the property and rent it for additional retirement income. The other lived out of state and wanted to sell it, pay down debts, and add the proceeds to his savings and retirement accounts.

Neither brother was necessarily wrong. They simply had very different goals. The problem was that their parents’ estate plan did not provide clear directions for what should happen with the property.

What was intended to be a valuable inheritance ultimately contributed to significant disagreements between the brothers and strained their relationship so much that they stopped celebrating holidays together.

If you own multiple properties or expect multiple beneficiaries to inherit real estate, think beyond simply naming who receives the property. Should it be sold? Should one child have the right to purchase the other's interest? Who pays the expenses? Who makes decisions? What happens if one beneficiary wants out?

These questions can be uncomfortable, but answering them while everyone is alive and getting along is far easier than leaving your children to resolve them after you're gone.

3. Do your spendthrift provisions still make sense?

Spendthrift provisions are another area that deserves periodic review. A common approach is to distribute an inheritance in stages, for example, one-third at age 30, another third at 35, and the remaining balance at 40. When the documents are drafted, those ages may seem perfectly reasonable.

But life changes and so do people. I recently met with a couple whose estate plan allowed one beneficiary to receive one-third of their inheritance at age 30. The beneficiary was already 31, and the parents acknowledged that his financial maturity was not quite there yet.

The inheritance could have amounted to well over seven figures, along with multiple pieces of real estate. The issue wasn't necessarily that the original plan was poorly drafted. It was that the family's circumstances had changed while the plan had not.

If it has been five, ten, or more years since you reviewed your estate plan, it may be time to dust it off. Your children may be older, relationships may have changed, your assets may look completely different, and the provisions that once made sense may no longer reflect your wishes.

In closing, estate planning should evolve with your life. A good estate plan isn't something you create, put in a drawer, and forget about. For families who have accumulated significant wealth, the details matter. The goal isn't simply to transfer your assets.

It's to make thoughtful decisions about how, when, and under what circumstances those assets are transferred. Taking the time to make sure your estate plan reflects your family's unique circumstances may be one of the most important planning decisions you make in retirement.

Justin is a Certified Financial Planner CFP® and Enrolled Agent (EA) and is the owner and financial planner of Champlain Financial Planning. Justin lives in Merrimac, Massachusetts, with his wife, son, dog, and horses.