There’s a saying that failing to prepare is preparing to fail. For the wonder-eyed among us this might seem like an uptight approach to life, but in the realm of estate planning, it is sound advice. Establishing an estate plan is merely a first step; preparing for the pitfalls that could derail one’s financial goals is essential follow-up.
As you might guess, market volatility is high on the list of potential threats to effective estate planning. Indeed, a 2019 survey conducted by TD Wealth saw one quarter of respondents cite unpredictable markets as the biggest concern for those seeking to secure their estate. The driver here is lifetime gift giving. Many people institute an estate plan in the interest passing on a life’s work and worry that dips in the market will jeopardize this ambition. Playing the long-game is a sure defense. Short-term market fluctuations will not derail a well-balanced portfolio; thus, with patience, planners can be sure they will be able to provide lifetime gifts to loved ones without disrupting other important elements of a well-planned estate, such as having enough to retire comfortably.
A second cause for concern among estate planning experts is tax reform. The sweeping tax overhaul of 2017 provided increases in federal gift and estate tax exemption, but there’s no telling whether the opportunity provided by this reform will last. In order to protect against this and other uncertainties, about a third or estate planning experts recommend creating a trust to protect one’s assets. Another 21% counsel gifting any intended inheritance now, in order to make the most of the present high exemption. Whether this latter advice is best depends on if the planner is sure they retain enough assets to support other financial goals.
Finally, the single biggest risk to estate planning is family conflict, with nearly half of respondents to the earlier-cited TD Wealth survey identifying this as their largest concern. No amount of number crunching or market research will save you here. The best protection against family squabbles is clear communication. Designation of beneficiaries is the most-common source of conflict and the best way to circumvent this is through well-planned, regular, transparent conversation. However difficult talking may be, a silver lining is that good communication among families not only protects one’s estate, but also provides for deeper, more meaningful relationships. Reference our blog about talking to parents about their estate plan—having these conversations may be uncomfortable, but is essential to minimizing family conflict.
Even the wonder-eyed among us can get on board with planning if it means greater closeness among family. After all, there’s that other saying which states, “all you need is love”… and a plan to protect it.