Legal Column: Five things to know about estate planning
Local attorney Teresa J. Rhyne.
By Teresa J. Rhyne, Esq.
– Previously I authored three articles on the new Corporate Transparency Act (“CTA”) and there’s been an update on that law. So before I get to my five pieces of advice, let me note that on Friday, March 1, 2024, the United States District Court for the Northern District of Alabama ruled that the CTA is unconstitutional. The CTA required companies to report “beneficial ownership” information to the Financial Crimes Enforcement Network (“FinCEN”) division of the Department of Treasury. FinCEN appealed the ruling, and stated that while it would not enforce the law as to the specific plaintiffs in the Alabama case, they will enforce it as to the rest of us. That means the rest of the 30 million small and medium-sized business still need to file their beneficial ownership statements by year-end.
So, what are my five pieces of advice drawn from thirty-five years of practicing law?
1. Laws Change – Check in with your advisors on a regular basis. See above! Tax laws, property laws, contract laws, wills and trust laws, all change over time and it’s likely that some of the changes will apply to you. That’s why you need a team of advisors, and you need to check in with them from time to time to make sure the plans you’ve made, the business you run, the agreements you’ve made, all comply with current laws.
2. Circumstances Change – Review your legal documents. Just like the law, your personal circumstances will change over time. Partnership agreements, operating agreements, buy/sell agreements, trusts, powers of attorney, and other such documents should be reviewed periodically to ensure they still meet your needs.
Do you have a buy/sell agreement that allows surviving owners to buy-out a deceased owners interest for an amount that now seems ridiculously low? Do you have life insurance meant to support a spouse or fund a buy/sell agreement and is the death benefit still sufficient? Does your trust leave assets to your children outright, but you now see they won’t manage it well? Did you name a successor trustee who now couldn’t handle the job?
Legal documents are rarely “set it and forget it” documents. Review the documents under your current circumstances and check in with your advisors.
3. Don’t Wait Until You Have it All Figured Out Before You Seek Advice – Whether you’re forming a new business, selling your business, contemplating your estate planning, ready to retire, or breaking out in a rash – don’t try to figure it all out yourself before you see the expert. All too often I hear of people delaying their estate planning because their family is “complicated,” or they don’t know how to handle an immature beneficiary or some other issue. It’s the professional’s job to help “diagnose” and solve problems. A professional will have solutions you would not have thought of and should be able to offer you an array of options, as well as advising on tax consequences, best practices and, in the case of that rash, over-the-counter ointments. (That example is just so you see that you wouldn’t diagnose yourself before going to a doctor, so you shouldn’t have to solve all your legal issues before seeing an attorney. Please don’t take medical advice from this article.)
4. There is No Way to Guarantee No One Argues – I often hear clients say they want to make certain their children/surviving spouse/other beneficiaries don’t fight over their estate. The truth is that we can put the best, clearest, cleanest trust known to mankind in place and if somebody wants to fight it, they’ll fight it and tie it up in court. They may not win (they probably won’t!) but they can make life messy enough for others that there is eventually a settlement. As I tell my clients, we have red lights, but people still run them.
Short of giving away all your assets during your lifetime in exchange for a settlement and release document preventing future litigation, the best you can do is a thorough, well-drafted trust, and an explanation to your beneficiaries setting expectations well before your death. I realize sometimes it’s not possible or wise to inform the beneficiaries, but when you can, it might ward off future fights. I’ve seen too many instances where children or surviving spouses had very different ideas about how an estate would be divided. That usually results in arguments, if not litigation.
5. Details Matter – As the saying goes, the devil is in the details. The details of your trust itself are important—please review those periodically. But I’ve also seen carefully thought out and well-drafted estate plans go sideways, if not upside-down, because title to assets didn’t get changed, beneficiary designations aren’t coordinated with the estate planning documents, or, a personal favorite, “the guy at the bank told me my account didn’t need to be in the trust.” (If I could add a sixth bit of advice it would be “get medical advice from a doctor and legal advice from a lawyer.”) It’s tempting to breathe a sigh of relief once you sign estate planning or business formation documents and then shove the documents in a drawer and never look at them again, but don’t do that. There’s work to be done! You’ll need to manage your assets to make sure you’ve titled them in the way your attorney advised, properly filled out beneficiary designations as determined with your advisor, and have put future-acquired assets in the name of the trust. The same goes for business assets— if you have a corporation or Limited Liability Company, make certain your business assets are titled in the name of the business. Otherwise, you may be exposing yourself to liability unnecessarily.
Conclusion. Laws are constantly changing. Your circumstances also change. Build a team of advisors you trust and consult with them regularly. And hey, get that rash checked out by a doctor.
Note: This is not legal advice to you individually, and you should rely on your own family law and estate planning attorneys to advise you.
Teresa J. Rhyne is an attorney practicing in estate planning and trust administration in Riverside and Paso Robles, CA. She is also the #1 New York Times bestselling author of “The Dog Lived (and So Will I)” and “Poppy in The Wild.” You can reach her at Teresa@trlawgroup.net.
