The Estate Plan vs. The Actual Estate

Here's the uncomfortable truth: most families' estate plans have gaps they don't know about. Not because their attorneys made mistakes, but because estate planning involves two separate systems that need to stay coordinated.

First, there are the legal documents—your will, trust, powers of attorney, and healthcare directives. These establish your intentions and the legal framework for carrying them out.

Second, there are the asset titles and beneficiary designations—how your accounts, properties, and insurance policies are actually owned and who they name as beneficiaries.

Here's what most people don't realize: beneficiary designations override your will. If your will says everything goes equally to your three children, but your IRA from 2008 still names your ex-spouse as beneficiary, your ex-spouse gets the IRA. The will doesn't matter.

Common Ways Estate Plans Fall Out of Alignment

Over the years, we've seen dozens of ways well-intentioned estate plans become outdated or disconnected from reality:

• Old beneficiary designations. IRAs, 401(k)s, life insurance policies, and annuities all have beneficiary forms. Many people set these up decades ago and haven't reviewed them since. They may name ex-spouses, deceased relatives, or children who were minors at the time (and are now adults).

• Accounts that never got re-titled. When people create a revocable living trust, the trust only controls assets that have been transferred into it. Many families set up trusts but never re-titled their bank accounts, brokerage accounts, or real estate. Those assets pass outside the trust—often through probate.

• New assets that were never added. You bought a vacation home after the trust was created. You inherited an IRA from a parent. You rolled over an old 401(k) to a new custodian. Each of these events requires updating your estate plan—and many people forget.

• Named individuals who can no longer serve. Your documents probably name an executor, trustee, agents under power of attorney, and healthcare proxies. What happens if those people have died, become incapacitated, moved away, or simply aren't the right choice anymore?

• Changes in family circumstances. Marriages, divorces, births, deaths, estrangements, and children with special needs all affect estate planning. Your 2010 plan may not reflect your 2024 family.

• Outdated tax planning. Estate tax exemptions have changed dramatically over the past 15 years. Plans designed to avoid estate taxes when exemptions were $1 million may now be unnecessarily complex or even counterproductive with exemptions above $13 million.

The Beneficiary Designation Problem

Let's spend a moment on beneficiary designations because they're the most common source of estate plan failures.

For retirement accounts (IRAs, 401(k)s, 403(b)s, etc.), life insurance, and annuities, the beneficiary form controls—not your will or trust. These assets are "non-probate" assets. They transfer directly to the named beneficiary upon death.

This creates several risks:

• Unintended heirs. We've seen cases where ex-spouses, estranged children, or even deceased parents were still listed on accounts. The legal heir—according to the beneficiary form—may not be the intended heir at all.

• Minor children as beneficiaries. If minor children are listed as direct beneficiaries, a court-supervised guardianship may be required to manage the assets until they turn 18. Then they get everything outright—which may not be what you want.

• Missing contingent beneficiaries. Primary beneficiaries die. If there's no contingent beneficiary listed, the account may go to your estate—forcing it through probate and potentially losing the "stretch" benefits for inherited IRAs.

• Outdated trust provisions. Many people correctly name their trust as beneficiary of their IRA. But if the trust was drafted before the SECURE Act of 2019, it may not be designed to work with the new 10-year distribution rules. This can accelerate taxes unnecessarily.

What Changed in the Law?

If your estate plan was created before 2018, it was designed under different rules. Here are the major changes:

• Estate tax exemption increases (2018). The Tax Cuts and Jobs Act roughly doubled the estate tax exemption. For 2024, individuals can pass $13.61 million free of federal estate tax. Many older plans include complex "bypass trust" or "credit shelter trust" provisions that were designed for much lower exemptions. These provisions may now create unnecessary complexity, income tax inefficiency, or unintended consequences.

• SECURE Act (2019). This law eliminated the "stretch IRA" for most non-spouse beneficiaries. Previously, a child who inherited an IRA could take distributions over their lifetime. Now, most beneficiaries must empty inherited IRAs within 10 years. If your trust was designed to hold inherited IRA assets over a lifetime, it may no longer work as intended.

• SECURE Act 2.0 (2022). Further changes to required minimum distribution rules, Roth accounts, and other retirement planning provisions. These may affect how inherited accounts are distributed.

• State law changes. Many states have updated their trust codes, powers of attorney statutes, and healthcare directive requirements. Documents drafted under older versions of state law may need updating.

Important: The current high estate tax exemptions are scheduled to sunset at the end of 2025. Without Congressional action, exemptions could drop to roughly half their current levels. If your plan was designed for a low-exemption environment, this sunset might actually make it more relevant again. Planning in this area requires watching what Congress does.

The Power of Attorney Problem

Your will and trust handle what happens when you die. But what about while you're alive but incapacitated? That's what powers of attorney address—and they're often the most neglected documents in an estate plan.

A durable power of attorney for finances names someone to manage your money if you can't. A healthcare directive (or healthcare power of attorney) names someone to make medical decisions.

Questions to consider:

• Are the named agents still appropriate? Is the person you named 15 years ago still the right choice? Are they still alive? Still capable? Still trusted?

• Will your documents be accepted? Financial institutions have become increasingly cautious about accepting powers of attorney. Old documents—especially those more than 5-10 years old—are frequently rejected. Having more recent documents can avoid delays during a crisis.

• Do they include the right powers? State laws and institutional requirements have evolved. A power of attorney from 2008 may not include provisions for digital assets, for example, or specific language that modern financial institutions require.

• Do you have HIPAA authorizations? Even with a healthcare power of attorney, your agent may have trouble accessing your medical records without a separate HIPAA authorization form. Many older estate plans don't include these.

The Review Process

A proper estate plan review isn't just reading the documents—it's comparing them to your current reality. Here's what a comprehensive review involves:

• Gather your documents. This includes wills, trusts, powers of attorney, healthcare directives, and any amendments or restatements. If you can't find them, your attorney should have copies.

• Create an asset inventory. List all accounts and how they're titled. Note who's named as beneficiary on retirement accounts, life insurance, and annuities. Include real estate deeds.

• Compare intentions to reality. Does how assets are titled match what your documents say should happen? Are the beneficiary designations consistent with your estate plan? Are there gaps or conflicts?

• Review for family changes. Has your family situation changed since the documents were drafted? Marriages, divorces, births, deaths, or changed relationships?

• Consider tax law changes. Are your documents designed for tax laws that no longer apply? Could they be simplified given current exemptions?

• Update as needed. Work with your attorney to amend or restate documents, update beneficiary designations, and re-title assets as necessary.

How Often Should You Review?

As a general guideline, you should review your estate plan:

Every 3-5 years as a routine check-in

After major life events (marriage, divorce, birth, death, inheritance, or significant asset changes)

When laws change (especially estate and income tax laws affecting trusts and retirement accounts)

When you move to a new state (state laws governing trusts, powers of attorney, and probate vary significantly)

When your advisors change (a new team may identify gaps the previous team missed)

How We Help

Estate planning review isn't something we do once and forget about. It's an ongoing part of the financial planning process.

For our clients, we:

Maintain an inventory of estate documents and key provisions so we can spot conflicts with investment accounts and beneficiary designations.

Coordinate with your estate attorney to ensure the financial and legal sides stay aligned. We speak the same language and can identify issues before they become problems.

Review beneficiary designations across all accounts we manage—and flag any that appear outdated or inconsistent with your estate plan.

Monitor legal and tax changes that might affect your plan and proactively reach out when action may be needed.

Facilitate regular reviews to catch drift before it becomes a crisis.

The goal is simple: when the time comes—whether for incapacity or death—your wishes should be carried out smoothly, efficiently, and exactly as you intended.

If it's been a few years since you've looked at your estate plan, now is a good time to start. We'd be glad to help you assess where things stand and what, if anything, needs attention.