Four Gaps That Can Break Your Estate Plan (Even If It’s ‘Done’)

Episode Summary:

You’ve done the hard work of creating your estate plan. But is it actually ready to work when you need it most? In this episode, Evon breaks down the four critical gaps that can make or break your estate plan's effectiveness — especially for busy optometrists and practice owners.

We’re diving into the implementation side of estate planning — those next steps after the documents are signed that so many overlook. Whether you’ve DIY’ed your estate plan or worked with an attorney, this episode will help you spot (and fix) potential breakdowns that could leave your family or practice exposed.

💡 In This Episode, You'll Learn:

• Why having signed documents may not be enough to protect your family or business
• The #1 mistake DIY estate planners make (and how to fix it)
• How to make sure your estate planning documents actually do what you want them to do
• Why outdated beneficiaries can completely derail your estate plan
• How to organize your digital life — from passwords to email — so your loved ones aren't locked out
• When to revisit and update your plan

🔗 Resources & Links:

• Click here to schedule a free intro call.
• Sign up for the Eyes On The Money newsletter and get the Estate Planning Checklist!
• The Optometry Money Podcast Ep 81: An Optometrist's Guide to Estate Planning

The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.

Transcript

Evon: 0:04

Hey everybody. Welcome to the Optometry Money podcast. We're helping ODs all over the country make better and better decisions around their money, their careers, and their practices. I am your host, Evon Mendrin, Certified Financial Planner and owner of Optometry Wealth Advisors an independent financial planning firm just for optometrists nationwide. And thank you so much for listening. Really appreciate your time and your attention today and on today's episode I wanna talk about a common gap in estate plan that I see with clients as we have estate planning conversations, which is implementation. That as you go through the time and the effort to get a well thought out estate plan documented, that should something happen to you, either your death or incapacity, things happen according to your wishes, but very often there are steps that need to be taken after that work. To make sure that what you intend to happen in that estate plan actually happens, and let's walk through an example as it would look for a family that my firm is serving. One of our conversations for every family, is estate planning, and we talk through education around what estate planning is. How different parts of the estate plan work. we'll diagram out the plan as it currently is, and then we'll talk about areas of improvement. And once we have that conversation, very often it makes sense to connect with an estate planning attorney in that client's state who can actually provide legal advice.'cause surprise, surprise, I'm, I'm not an attorney, and create the legal documents, especially if there's families that just haven't had the chance to work on it just yet, or a time has passed since their last estate planning documents were done. And they need to be either updated to, reflect current laws or simplified or just reflect the, the family situation of that family. So we meet with the attorney, we talk through the finances and the goals of the family. The attorney will ask questions, advise on the situation, and then draft documents, and we'll all review and make sure that the documents are according to what we had intended initially, and then the final documents will get done and signed and notarized. And then you have the core documents of your estate plan, and what are those core documents? Well, at the very least, you're gonna have a will, either for yourself or if you're married for you and your spouse. this is especially important if you have minor children, as you can name guardians in your will for those minor kids. In many states and situations, living trusts may make sense as the foundation of the estate plan. very often it's to avoid the probate court process, which Can be time consuming and potentially costly in certain states like California. potentially better management of the assets, including if you become incapacitated, because the trustee can just step in and to keep the process private as well as probate is a public process where the trust, what happens with the trust is not, it's a, it's a private affair. It's a private arrangement, a private document. Even in that case where you have a living trust, you will also have a will as well. And the goal of that will you all, you'll sometimes hear it called a pour over will, is to grab anything that was left out of the trust sort of accidentally. And pour it into the trust still has to go through that probate process, very often, but it'll at least grab what's left and pour it in. you'll also have powers of attorney, most likely, documents where you can name someone to step in and make financial and healthcare decisions If you can't, if you're incapacitated, you might see documents called advanced healthcare directives or living wills. As a part of that, often on the healthcare side, you're gonna see HIPAA authorization involved there too, which is gonna allow your, your agents to access health information for you. and then whatever documents are needed to carry out your wishes that the attorney deems necessary. And so you go through all that work, you get these documents done, they're signed and notarized and, and valid legal documents, but that's not the end of the process. And that's very often where people stop and assume that things are done. But that's, that's not the end of the process. There are follow-up actions. That you need to take to make sure that you don't just have a fancy pile of paperwork. there are implementation steps to make sure that what you intended to happen as part of that process in those documents will actually take place. And that's what we're gonna talk about today. And this isn't legal advice, the, the required disclosure here. I'm, I'm required to add in. I'm not an attorney. But this should be some education to help you have better conversations with your own attorney and financial Advisors, and to make sure things are working as intended. And we'll go through four things, four common areas of gaps that I tend to see. the first one that we'll mention is A, is really for those that are DIYing it yourself. I'm a huge fan and believer of using a good estate planning attorney to go through this process, but there are a lot of online offerings out there where they sort of just ask you a bunch of questions and they. Draft and create documents for you, D-I-Y approach and and. And then you just take those drafted documents. And so if that's you, if you DIYed it through an online, through, through a website, through some online service provider, make sure your documents are signed and notarized according to the requirements of your state laws, so that they are not just a big fancy expensive PDF, but they're actually active, valid legal documents. I've seen that, more times than you would expect. But just wanted to throw that out there if that's what you're doing, make sure that those are, properly executed, signed in if needed, notarized documents and if there needs to be a witness, then, then a witness as well. Number two, retitling assets, and this is especially relevant if you have a living trust involved in the plan. You wanna make sure that any assets that should be titled in the name of the trust while you're alive. Are actually titled in the name of the trust. You can kind of think of the living trust as a big box where if something happens to you, you've named exactly who steps in and controls the stuff in the box. For who Like who are the beneficiaries and what are the rules that that person needs to operate under In order to manage it according to your wishes, and you can put stuff in the box while you're alive by retitling assets, or you can put stuff in the box after your death by naming the trust as beneficiary. And so while you're alive, you wanna make sure that the things that should be titled in the name of the trust are actually titled in the name of the trust. Some examples of this are, real estate. So for example, primary residence. if the primary residence is intended to be controlled by the trust at your death. Your attorney should help you to change the deed of your house if that's what's intended. So you wanna lean on the attorney to do that. And if you don't remember, you can look at public records usually for your county. And you can see very often how your house is titled, and if it's just in your name, or you and your spouse's name, that's probably a good indication that it's not. And so primary residence and real estate's a good example of something that, may need to be retitled with the help of the attorney and re-deeded to be controlled by the trust. Taxable brokerage accounts. So another example of this. Very often you'll have an individual taxable brokerage account somewhere, or, a joint tenants accounts, especially if you're married. You may have a, an account that you own jointly with your spouse. And if those accounts are intended to be inside of and controlled by the trust, then you want to either have your custodian Convert the account to a trust account, or open a new trust account and transfer those assets into it. And very often as a part of that process, the, the custodian, they're gonna wanna see documentation of the trust. You don't have to send them the whole trust. Remember, that's your private document. they should accept a certification of trust document, which is a Shortened, document that gives them all the information they need and leaves out all the other private stuff. And so, that's something that you'll want to consider. Now, I will add, this isn't always what's best. So for example, in states that allow a. a type of joint titling between spouses called tenants by the entirety. There may be extra creditor protections to keeping it in that joint titling rather than moving it into a trust. another example is that in community property states like California or Texas, you may have separate property that, that you had before marriage, for example, or a separate property that you've inherited. That's not community property between the two of you. sometimes moving your separate property assets into the trust can commingle it, can mix it up and make it community property accidentally. Sometimes, although many trust documents allow assets to keep their character that they had going into it, so many trust documents are worded in order to to avoid that from happening accidentally. But, these are all things that you want to talk through with your attorney and, and to read what the trust document actually says. Or you may simply wanna retitle individual taxable investment accounts. Into joint tenant accounts so that at the death of one spouse, for example, it automatically passes to the surviving owner. so those taxable investment accounts are things you wanna take a look at. Retirement accounts are non retirement accounts. You cannot retitle into the name of the trust. you're gonna be handling that with beneficiaries, but those taxable accounts you wanna keep a close eye on. What about practice entities or other LLCs? So for example, if you have real estate, in other cases you may see that your attorney uses an assignment of assets. So. Where the, the practice entities or the real estate LLCs for, for example, are, are assigned now while you're alive into the trust or after death, which is something that the attorney should advise on. But sometimes there's an assignment, of interest in, a business entity or LLC. Sometimes there's potentially restructurings of the entities or restructuring of the ownership of, different real estate properties. So those are all things you wanna keep account of and, and talk with your attorney about. if you own an Optometry practice, make sure that your ownership interests, the buy/sell agreements and the operating agreements. And, and succession planning are all tied into your estate plan. this might include how the ownership passes at your death, what your legal documents, like those operating agreements say, funding strategies how would your, if you co-own it with another optometrist, how will that buyout happen at your death? How is it gonna be funded? Is it gonna be funded through life insurance? Is it gonna be funded through, through an installment plan or something like that? and then who's gonna step in and actually run that business? And so these are all things that you'd want to think of, in light of the, the overall estate planning care. So number two is gonna be a retitling or, or assigning assets. Take inventory of all your accounts and all the different assets and say, Hey, knowing what my documents say should happen, knowing what my desires are, my wishes, are there any accounts or assets that need to be retitled based on that? the third one is updating beneficiaries. And this is, this is an important one. Take a look at, review the life insurance policies that you have. the investment accounts that you have and retirement accounts, and see who are the beneficiaries and then ask yourself, are these up to date with my current estate planning needs? Are these up to date with my current family situation? these are things you wanna take a look at. And for all of these things, you can name a primary beneficiary or a group of primary beneficiaries. It could be people, it could be organizations, nonprofits, and a contingent group of beneficiaries, the primary are the first beneficiaries to step in in case something happens to you at your death. the contingents are, and sort of in that worst case scenario where the primary beneficiaries pass away before you, or if you all pass away at the same time, they, the contingent beneficiaries are that second line of beneficiaries. So you know that your assets are going to somewhere that you'd want them to go to. and so sometimes, just as an example, sometimes we're naming. A spouse is a primary and a living trust as a contingent beneficiary, or kids as contingent beneficiaries or something like that. So you'll want to take a look at both of'em and bringing back that living trust in the case of a living trust, if something should name the trust as beneficiary, make sure the trust is listed as a beneficiary where it's appropriate. for life insurance policies If the death benefits intended to be controlled by the trust. Make sure that the trust is involved there as a beneficiary. Taxable investment accounts, even joint accounts. If, if they're not in the trust itself for whatever reason, you still will name beneficiaries. And this can be a trust created at your debt. So, for example, a living trust is a trust that an attorney creates for you while you're alive. but even if you don't have a living trust during your lifetime, you can still create a trust at your death through your will this is called a testamentary trust, but you may see this in the language, in the, in the language of your will. this is helpful if you want your assets managed for very specific purposes. So, for example, if you have minor kids, and you want those assets to be managed in a certain way to certain ages for those minor kids, you, your attorney may still create one under that will, and so that testamentary trust named under your will. Can also be involved as a beneficiary. and the language to do this whenever you're naming a trust as a beneficiary is often super long. something like Jim and Pam Halpert Living Trust dated one one 2025, like it's something ridiculous like that. And beneficiary forms may have instructions on how exactly to word that. with examples too. So reference that if that's the case. and then attorneys often include instructions in their documents too, but if not, if you need help, chat with your financial advisor or, or chat with your attorney to figure out what to do there. So again, if your trust is intended to receive these assets at your death, you want to make sure that it's included appropriately, where needed as a beneficiary. and then retirement accounts. Retirement accounts are a special set of assets that need to be looked at. carefully and handled with care due to tax rules around how inherited accounts need to be handled by the heirs. The right way to handle retirement account beneficiaries depends entirely on who you want to inherit them. So some examples here, your spouse, spouses tend to be pretty simple because we can name each spouse as the primary beneficiary if that's what's intended. Like it can be very simple there. or another example is, let's say your estate plan creates a trust, and you have very specific ages where you want your kids to get access to the assets that they're gonna inherit. And very often this can be pretty substantial. So if you look at your life insurance beneficiaries, if you look at your, retirement accounts, if you look at the value of your practice, like if something happens to both parents very often, that dollar amount can be pretty substantial. and this is something that's especially something that consider when you have minor kids. so for example, you might say in your trust, Hey, I want my kids to get access to these dollars. A portion of it at 25, another portion at 30, and then the rest at 35 or whatever it may be. and you may want to name the trust as a beneficiary then of that retirement account. So those assets are managed for your kids based on those rules. that's one example of where that trust may be, be involved there. Or they may be old enough to where you're comfortable just naming them directly and, and the trust isn't involved at all for those particular retirement accounts. And for retirement accounts, there are very specific, overly unnecessarily complicated rules around how beneficiaries need to handle inherited retirement accounts. And whether they need to take withdrawals from the accounts, depending on who inherits it and what age the account owner was, when they passed away, and what year they passed away. So it can be different from a spouse versus your, your minor children, versus your minor grandchildren versus anyone else, versus a trust and how that trust is worthy, the type of trust it is. And so. Especially when minor kids are involved, you want to take some care, and careful thought and lean on good advice around naming beneficiaries for your retirement accounts. if it's supposed to go to charity. Another example of those retirement accounts, because the charity won't pay tax on them, but your heirs will, you may want to make sure that pre-tax retirement accounts are Prioritized, naming the charities as beneficiaries and leaving other more tax efficient assets to other people. And so that's again, another example of you wanna look at who do I intend to inherit these? What's the tax situation or outcome or required withdrawals if they do? And, and does that make sense based on your estate plan? You also want to review donor advice funds. health savings accounts and other things like 529 plans, because they all have their own unique nuances. So, for example, HSAs. If anyone other than your spouse inherits them, it immediately ceases to be an HSA and it's taxable to the heirs. So like that's, that's an interesting nuance that you wanna keep in mind when figuring out who that contingent beneficiary should be. A 529 plans are another example, 529 plans you're actually naming successor owners, because whoever the beneficiaries are, meaning whoever the. the 529 dollars are intended to be used for, they're gonna continue to be the beneficiaries of the account. So you're naming a successor owner, and sometimes you can name two lines of successor owners. So that's another one you wanna keep an eye on. And then lastly on this is, bank accounts and how you handle bank accounts And bank products depends on the type. So, for example, oh, savings accounts, you can often convert them to trust accounts. or you can open another trust savings accounts that's titled in the name of your trust, but checking accounts because you often have to change the account number with checking accounts or open a new account to, to put it under the ownership of the, of a trust. And you have all those bills that are probably like automatically coming out of the accounts that you probably have to redirect to a new account number. I've seen attorneys recommend that it's much simpler just naming. the trust or you know, your spouse, whoever it needs to be as a beneficiary on those checking accounts. And then titling of those bank accounts too. Like check, you know, are they joint accounts, are they individual accounts, and so forth. So beneficiaries are a really important one. that's one of the ones I see most missed is just accounts are not updated. beneficiaries just aren't updated even though, many times that whole process was done to get the, to get the estate planning documents done. The beneficiaries still need to be updated. and then number four, don't forget digital assets. make sure someone can access your financial tools. your financial websites, your password manager, or even things like crypto accounts if you need, and I would highly recommend using a password manager. One example is 1Password, but there are a bunch of other ones out there because, not only are they gonna help you be more secure on your passwords for all your really important websites, but they often have like a sort of estate or contingency planning feature to them, that someone else can get access to it at your death. And so. that will help that whole process there. think of, think of all your email and social media accounts too. think of online file storage, or vaults. You know, who has access to that if you were to pass away. We live in a really fascinating world now where you have to track all these digital assets and digital properties like alongside all of the real and, and financial ones. So, keep in mind all of that digital stuff in your life as well. these are some things to think through and, and we can't get through every possible thing that you wanna look at. But I think thinking through these four, four broad categories of things to keep an eye on, to implement as you change or update or get your estate planning done, I think this is gonna be helpful for you to have, again, good conversations with your estate planning attorney, good conversations with your own advisor. all in all, lean on the guidance of your attorney and your Advisors and make sure that everything's implemented as it should, and then keep an on it over time to keep up with any changes in your life. And our, you know, my role, our role as financial planners is to help bridge that gap between what's written on paper and how your accounts and assets are actually structured. So the legal plan actually does what it's supposed to do, and we're sort of like project managers here. Deeply embedded in the lives of our clients to make sure that all of this gets done and we can, interpret communication between attorney and client and, and make sure that what the client really desires as a part of their estate plan and their family life actually gets done. And then you can review. You go through all that. You go through that whole process, it's done. You can take a deep breath and then you review. And this should, this really shouldn't need to change every year, but things like beneficiaries, if you keep good records of them, are easy to review once a year just to make sure that they reflect any changes in your life or if you have any new accounts that those are updated too. and then you'll wanna pull out the whole estate plan every, I don't know, maybe three to five years, every few years or so, and just ask. Does this reflect your current wishes and the current financial and family situation? And some triggers then to review are the birth of a child, sale or acquisition, sale or purchase of a practice, the relocation to another state. So if you did all of your estate planning documents in one state based on that state's laws, and then you move to a new state, that's something you're gonna get, wanna get reviewed again in that new state. marriage, divorce, or remarriage, anything related to marriage is an instant trigger, to review this and then inheriting. So if you inherit assets, that's something you wanna take a look at too. Hopefully this is helpful for you as you go through your own estate planning. This is often something that is really important. but not often urgent for clients. It's not something that they are racing to do, but most of the time when I talk with clients and other optometrists about it, they know it's important. They just haven't done it yet because you're busy. You have, your family life, you have practice life, you have patients and everything else. And so hopefully this conversation helps you to, to get a better grasp of all this. And if you wanna talk with a professional, if you wanna talk with a financial Planner to help you to review all this stuff, to talk through all this stuff, to help you make sure that All of these really important things are actually implemented and decisions are made. reach out. We would love to have a conversation with you. I'll throw a link in the show notes and you can schedule a, and you can pick out a time and schedule and no commitment, no pressure introductory call. We can talk about what's on your mind financially, and we can share how we help optometrists all over the country navigate those same decisions and more. And if you're not quite ready to reach out, I'll also throw a link in the show note to sign up for our weekly newsletter, Where I write all about these things each and every week in addition to the podcast here. And if you do that, if you sign up. I'll give you access to a checklist where you'll be able to sort of keep inventory of all these decisions and make sure that it's getting done in your own estate planning. And again, really appreciate your time. We'll catch you on the next episode. In the meantime, take care.