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Risks of Not Having an Estate Plan – Risk Management

13 Jun

Risks of Not Having an Estate Plan – Risk Management

Risks of Not Having an Estate Plan – Risk Management

When engaging with a new financial planning client, it is important to evaluate thoroughly their financial circumstances. Primarily to be familiarized with their goals, behavior and attitudes as well as various dynamics that exist for them and their situation. Future recommendations will help navigate to the best options for them to make decisions based on those unique fact patterns. A key component of this is assessing and demonstrating any current or potential future risks that should be anticipated. Most people, when confronted with risk, probably consider financial, health, legal liability as the major risks to consider. But as we age and accumulate wealth things become more complex.

When considering family dynamics and circumstances there are often some glaring areas of risk. Some are unnecessary risks that could easily be mitigated with some proper estate planning. Lawerence Richman states, “planning is the minimization of risk.” And in estate planning, risk comes in many forms: valuation risk, unintended gift or estate tax risks, ineffective property transfer risk, the risk that legislative changes to the estate or gift tax laws can make planning obsolete and even the risk that a decedent’s family will want to alter the decedent’s estate plan posthumously.” Many of these referenced risks by Lawrence are risk exposures that a family should be made aware of and assisted with how to eliminate, transfer, or reduce as best as possible.

As parents age and need more involvement or assistance are they resistant to share information regarding their financial matters? What kind of financial, relational and physical demand does that impose on the other family members? Those demands could occur untimely and put a strain on the family members accomplishing their own financial goals. At the minimum having to administer a parent’s estate through a probate process could cause unnecessary burdens and stress. The family dynamics of children from different ages, marriages and at a variety of maturity levels draws out concerns of direct bequest versus developing an estate plan that helps take care of the children, but protect assets from spendthrift behavior. These are particular issues that any estate might face. The reality is there is great solutions. Engaging in proper estate planning uncovers the risks and then provides appropriate solutions that can be considered to implement. Doing something is better than nothing. Most often estate planning is delayed until a life event makes it front and center. My recommendation is to be proactive and get it done asap. Obviously with the aid of a lawyer the collaboration would bring much value to the relationship and help accomplish those objectives. If you have any questions or need guidance with your estate plan don’t hesitate to contact us.

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Richman, L. I. (2008). Estate & succession planning corner. Journal of Passthrough Entities, 11(3), 9-10+. Retrieved from http://search.proquest.com/docview/203977428?accountid=458