The Mess She Nearly Left: Estate Plan Review Averts Potential Heartache

Shortly after her divorce in 2002, Tracy¹ made a will to name a guardian for her 11-year-old son and set up a trust to provide for his future financial needs. "I wanted to make sure my son would be taken care of, my debts would be paid off and my money would go where it was supposed to go," Tracy explains.

Time to Update
In 2008, Tracy began a new job. In the process, she rolled over a 401(k) into an IRA and filled out life insurance and retirement beneficiary forms at her new place of employment. With her son now nearing adulthood, Tracy felt it was time to look over her existing plans.

Tracy met with estate planning attorney Johni Hays, and, together, they discussed her old will, her current assets and her future goals. While the 45-minute conversation was simple and relaxed, what they discovered will save Tracy’s son from future problems and offers Tracy true peace of mind.

Issues That Caused Concern

1. Tracy had her younger brother listed as trustee and guardian of her teenage son. She did not, however, have a backup listed if her brother did not survive her.
2. For executors of her will, Tracy listed her brother, who lives out of state, and her father. Because at least one executor must be in state, according to the state law where Tracy lived, Tracy needed a backup for her brother in case her father should predecease her.
3. Tracy had a financial power of attorney in place, but she lacked a power of attorney for health care and a living will to take care of future health care wishes.
4. Of greatest concern, Tracy had filled out her beneficiary forms incorrectly on her life insurance and retirement plan assets—the bulk of her estate. Instead of putting the trustee of her son’s trust as beneficiary, which would distribute payments to him at ages 25, 30 and 35, Tracy had listed her son as beneficiary. As a result, he could receive the full amount when he turned 18, a much younger age than Tracy wished for him to receive a large inheritance.

The Solutions
Hays was able to amend the will with a codicil and draft the other needed documents. To correct Tracy’s beneficiary designations, she requested change of beneficiary forms for her IRAs and her life insurance.

"Tracy’s case is the perfect example of how you need to coordinate your whole estate plan, and that includes more than just a will," Hays says. Tracy is thrilled she took the time to update her plans.

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¹Although this article is based on a real-life example, the name has been changed to protect privacy.