Getting Out of Your Own Way: Are You Unknowingly Circumventing Your Estate Plan?

If you’re like many wealthy people, you probably walked out of your attorney’s office after signing off on your estate plan thinking, “Glad that’s over.” The truth is, estate planning is never really over. Your estate plan always requires ongoing monitoring and review—partly because your circumstances are constantly changing, but also because you may have accidentally undermined your plan without even knowing it.


Case in point: Since completing your estate plan, have you bought or moved any assets? Have you opened, combined or moved any financial accounts? Have you taken out any new insurance policies, or changed policies or carriers? If so, you may have unintentionally overridden your own plans. That is because certain types of asset titling and beneficiary designations legally supersede estate-planning documents such as wills and trusts. That means the assets in those accounts will pass directly to the joint owners or beneficiaries you indicated on your account opening documents, regardless of what you specified elsewhere.

One Mistake Can Cause Multiple Problems

The results could be unfortunate. For example, if an asset is titled to a natural person instead of a trust you have established, you could lose important benefits like professional oversight and tax efficiency. In addition, the asset will no longer be protected from the beneficiary’s or joint owner’s creditors. Or, if you named your own estate as the beneficiary of an insurance policy, your estate could end up paying needless extra taxes. The bottom line is that any mistake in titling accounts and designating beneficiaries could have a serious impact on your estate plan, undermining your work and resulting in your assets not being distributed in accordance with your wishes.

The only way to avoid this risk is to ensure that your wealth manager conducts an ongoing and comprehensive review of the titling of your assets and beneficiary designations. The goal is to ensure that the assets are either properly aligned with the estate plan or that they flow through the estate planning documents, so that your will, trusts and other documents remain in control.

This kind of estate planning is not a one-time event or a one-person operation. It requires close, ongoing coordination among your wealth manager, attorney and tax advisor. They also need to include you as part of the team, too, through education on the issues that can help you make more informed decisions.