LEGAL TIP OF THE WEEK

PROPER ADVANCE PLANNING MAY ELIMINATE FUTURE COSTLY PROBLEMS

Rule No. One – plan carefully before you execute any estate planning documents.  On February 23, 2011, the Massachusetts Court of Appeals held that after a plaintiff executed an irrevocable trust he could not later seek to revoke it on the grounds of a mistake in the document.  The fact that the plaintiff may not have known all of the terms of the trust he executed does not qualify as a mistake.  (MacLeod v. McManus)

Rule No. Two – misunderstanding of current state and federal estate tax laws can cause a myriad of problems.  Many individuals assume that if their estate is under $5 million they no longer need to plan.  However, the law is scheduled to revert back to only $1 million in 2013.  Furthermore, many states have their own estate and/or inheritance tax laws and have decoupled from the federal estate tax and allow for an exemption of $1 million or less.

Rule No. Three – Listening to advisors who recommend just “giving it all away” is not advisable.   While this may seem like a simple and cheap solution, there are numerous pitfalls with such planning, such as: loss of control, no protection for heirs in the event of future divorce, litigation, bankruptcy or incompetency.   

Advanced planning, utilizing properly drafted estate preservation/asset protection documents can eliminate the foregoing problems and many others.