Is any estate plan better than no estate plan?
dan • August 23, 2022
It is not unusual for the estate planning process to bring up difficult questions that people would rather avoid thinking about. Questions about what should happen when kids do not get along with one another. Or what should be done when one kid is clearly more capable than the other. Or whether an equal distribution is fair when one kid needs more help. Or when one kid has provided more end-of-life help than the other.
Every once in awhile, a client will suggest effectively tabling these difficult questions and just getting something in place for now. Then they will get back to it at some unspecified time. The theory is that any plan is better than no plan. But is that true?
The short answer is no, a bad estate plan can absolutely make things worse than if there had not been a plan. The sad reality is that every contested and difficult probate in which we have been involved has had a will underlying it, most of them drafted by lawyers. The problems have rarely been the result of technical deficiencies. The will in question was drafted and executed correctly. The problem is the content of the plan.
What makes a plan bad? There are several common threads that we see.
Every once in awhile, a client will suggest effectively tabling these difficult questions and just getting something in place for now. Then they will get back to it at some unspecified time. The theory is that any plan is better than no plan. But is that true?
The short answer is no, a bad estate plan can absolutely make things worse than if there had not been a plan. The sad reality is that every contested and difficult probate in which we have been involved has had a will underlying it, most of them drafted by lawyers. The problems have rarely been the result of technical deficiencies. The will in question was drafted and executed correctly. The problem is the content of the plan.
What makes a plan bad? There are several common threads that we see.
out of date plan
People badly underestimate how fast time passes, how much about their life changes over short periods of time, and how often laws relevant to estate planning change. You might think that all your estate plan does is divide assets equally between kids and that nothing has changed about that since you last thought about it. But even if you think your plan is that straightforward, consider the following questions. Ten years ago:
Even in the unlikely event that your answer to the above questions is that nothing has really changed in your personal life, the laws have changed dramatically. Ten years ago, there was no estate tax (congratulations Steinbrenner family on your tax free transfer of the Yankees!), but people were planning around the expectation that a relatively low estate tax threshold was going to be resurrected in 2013. As it turns out, although the estate tax did come back in 2013, it was only for estates that exceed $5 million in value. And for the first time, married couples could combine their exemption amounts, meaning they could give away a combined $10 million, estate tax free. 10 years before that, when that threshold was only $600,000 and couples could not combine, estates commonly owed estate tax. Going forward, only a small percentage would.
Then in 2017, that amount was doubled. With adjustments for inflation, the amount single people can give away in 2022 in $12.06 million. Married couples can give away $24.12 million, estate tax free. At the moment, almost no one has an estate tax problem.
Yet, we are still encountering plans that have complex planning to avoid an estate tax that the planner does not need to avoid anymore. Sometimes, this is just inconvenient. In some circumstances, these outdated plans are creating problems that go far beyond inconvenience. Some plans, for example, have inadvertently disinherited the surviving spouse by sending money directly to kids (or, worse yet, stepkids) to try to avoid a tax that is no longer due!
- Were you living in the same place you are now?
- Did you spend your time with the same people with whom you spend your time now?
- Did you use the same banks and financial institutions, and have all the same accounts, for financial management?
- Were your and your kids’ marital statuses the same?
- Did you have all the same family members, or have their been births or deaths since then?
- Do your kids have the same financial capabilities and challenges that they used to have?
Even in the unlikely event that your answer to the above questions is that nothing has really changed in your personal life, the laws have changed dramatically. Ten years ago, there was no estate tax (congratulations Steinbrenner family on your tax free transfer of the Yankees!), but people were planning around the expectation that a relatively low estate tax threshold was going to be resurrected in 2013. As it turns out, although the estate tax did come back in 2013, it was only for estates that exceed $5 million in value. And for the first time, married couples could combine their exemption amounts, meaning they could give away a combined $10 million, estate tax free. 10 years before that, when that threshold was only $600,000 and couples could not combine, estates commonly owed estate tax. Going forward, only a small percentage would.
Then in 2017, that amount was doubled. With adjustments for inflation, the amount single people can give away in 2022 in $12.06 million. Married couples can give away $24.12 million, estate tax free. At the moment, almost no one has an estate tax problem.
Yet, we are still encountering plans that have complex planning to avoid an estate tax that the planner does not need to avoid anymore. Sometimes, this is just inconvenient. In some circumstances, these outdated plans are creating problems that go far beyond inconvenience. Some plans, for example, have inadvertently disinherited the surviving spouse by sending money directly to kids (or, worse yet, stepkids) to try to avoid a tax that is no longer due!
wrong person in charge
People also badly underestimate the complexities involved with administering even a modest estate. The administration of most estates involves a mix of probate law, trust law, real estate law, tax law, and family law. On top of all those legal complexities are the human complexities of jealousy, greed, grief, and impatience. Liquidating and slicing up your own estate would probably be a challenging thing to do. Imagine trying to step in and liquidate someone else’s.
Because people underestimate the complexity of the job, they typically just appoint a close family member to do it. But just because someone is close to you does not mean they have the ability to handle the issues described above, deal with difficult family members, and stay organized. My advice to clients who we are assisting with planning is to focus on selecting the right people for the various jobs that need to be filled. That tends to be more important than the exact instructions you give them (although those are also critically important). A person with the right skills will probably do fine, even with less than perfect instructions. A person who lacks the necessary skills will struggle, even with highly detailed instructions.
Because people underestimate the complexity of the job, they typically just appoint a close family member to do it. But just because someone is close to you does not mean they have the ability to handle the issues described above, deal with difficult family members, and stay organized. My advice to clients who we are assisting with planning is to focus on selecting the right people for the various jobs that need to be filled. That tends to be more important than the exact instructions you give them (although those are also critically important). A person with the right skills will probably do fine, even with less than perfect instructions. A person who lacks the necessary skills will struggle, even with highly detailed instructions.
lack of liquidity
You might think that a smaller estate is easier to administer than a bigger estate. This is not necessarily true. The hardest estates to administer are ones that don’t contain a lot of cash, which can be a prolem in any estate, big or small. We have seen estates where the only asset of any significance is a modest home. The problem is that the personal representative can pay the estate's bills with a modest home. He or she can’t split the home into pieces if multiple beneficiaries want it. Even with a will that specifies who should get what, you have little room to maneuver if any dispute or unexpected need for funds arises.
These challenges can surface in bigger estates too. Even when there are millions of dollars of assets, it is not necessarily helpful if those millions of dollars are tied up in commercial real estate or a closely held business.
These challenges can surface in bigger estates too. Even when there are millions of dollars of assets, it is not necessarily helpful if those millions of dollars are tied up in commercial real estate or a closely held business.
family that disagrees with the plan
You may think your plan is great. The plan, however, is not for you. And if the people who are affected by it don’t agree with it, that can still cause problems. You may think that children of a decedent could only get upset about an unequal distribution. But even if an instructions to divide things equally can cause problems. The first problem is that it is not always easy to equally divide things, especially when the assets include substantial personal property or other difficult to value assets, such as business interests or unique real estate.
The second problem is that the children may not view their siblings as worthy of receiving equal distributions. We most often see this come up in situations where one child was living with, and assisting, elderly parents prior to their deaths. That child frequently feels as though they are owed more for the service they provided. They also often feel as though they sacrificed their own careers and happiness to do that. Whether that sounds reasonable to you, the other children never agree. They view the sibling who was living with the parents as having received free housing and support for years, and actually think that they should receive less!
Don’t assume that your children can’t fight over an equal distribution.
The second problem is that the children may not view their siblings as worthy of receiving equal distributions. We most often see this come up in situations where one child was living with, and assisting, elderly parents prior to their deaths. That child frequently feels as though they are owed more for the service they provided. They also often feel as though they sacrificed their own careers and happiness to do that. Whether that sounds reasonable to you, the other children never agree. They view the sibling who was living with the parents as having received free housing and support for years, and actually think that they should receive less!
Don’t assume that your children can’t fight over an equal distribution.
You don't just need a plan. you need a good plan.
The moral of the story is that putting a plan in place is not necessarily helpful if the plan doesn’t honestly account for your family. In fact, it can make things worse. Before you start tinkering with your plan, it is critical that you understand what various jobs need to be filled, what those people will need to do, and your options you have concerning how to instruct them. If you never been through an estate administration, planning for one can end up giving you a false sense of security. If you have decided to "just get something in place for now," proceed with caution.
What next?
If you think it might be time to think through your estate plan, you can:

- Give us a call at 720-821-7604 to schedule a "Discovery Session" at which we can determine whether our firm would be a good fit for your needs. Or fill out our contact form to have us call you.
- Visit our estate planning page to learn more about how proactively thinking through your estate plan can protect you and your family, minimize hassle, lower the chance of family discord, and minimize or eliminate taxes.
- Learn more by reading our blog or watching our videos .
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