Unintended Consequences

We all know the one constant in life is change. This, in my humble opinion, is why estate planning is so easy to put off. We convince ourselves that doing a plan now is not worth the effort because it is likely that in a few years your life will have changed enough to have made your previous plans all but obsolete, or worse, the exact opposite of what you want at the time. It is nearly impossible to go about life and not hear about some horrible tragedy of errors that occurred to some poor soul or to those poor souls left behind to deal with an outdated estate plan. Back when I was a financial advisor we often encouraged clients to review their Estate Plan every few years and their Beneficiary Designations every year during an annual review because so much can happen and it is so easy to forget all of the things that might need tweaking.

Take for instance "Lisa" who purchased a life insurance policy as a young married parent, with the noble intention of protecting her spouse and children in her untimely demise. Fast forward 25 years, the kids are grown and out of college, the spouse is now an Ex-Spouse, and both have a new spouse. That dusty old life insurance policy hasn't been looked at in 15 years and a cancer diagnosis claims another life ahead of her time. The original beneficiary was the original spouse, which was never updated and who now stands to inherit the proceeds of that policy. Insult added to injury for the current surviving spouse with precious few options for a remedy.

Sometimes this can impact testamentary charitable plans as well. Let's suppose our hypothetical Lisa took the step to update that beneficiary designation when she got divorced and decided to leave it to her alma mater to create a scholarship, demonstrating gratitude for the support she received and the "Pay it Forward" approach she inherited from her parents. She names the school as the beneficiary but doesn't connect with the school to make sure her wishes are accurately documented. Federal Law changes result in limitations on how scholarships can be drafted and because she never communicated with the school about her intentions, the generosity of her gift has to be turned away because the school cannot abide by the restrictions she placed on the fund despite her best intentions.

In a different light altogether, let's take a look at how sharing misinformation has unintended consequences. I recently saw a criticism of the "Checkout Charity" that has become ubiquitous, "Round Up to Save the ______" , or "Donate $1, $2, or $5 to Support _____". A critic of this practice shared a meme that depicted this practice in a false light, leading people to feel like they were being cheated, or more accurately, that "Big Business" was manipulating them for financial gain. Sadly, some of these people vowed never to support charity via this method as a result of reading this misinformation. Presenting fiction as fact is so detrimental to the public good. In this case, an excellent way of raising millions of dollars of charitable gifts was undermined by fiction posing as fact.

For yourself, or your donors, or clients, regularly updating plans is necessary to avoid these and so many other negative outcomes. It can take a little time and attention to detail, but in the long run, we all work too hard to not ensure that the fruits of that labor are left to the people, places, and programs that reflect our respective intentions. If you know someone who might need to read this, please consider forwarding it to them with a personalized note. We never know when the hourglass of our life has sent its last grain of sand through to the other side. The very least we can do for those who will miss us when we are gone is to make sure not to burden them with unintended consequences.

Please accept my apologies for the somewhat melancholy tone of this edition. A related story is unfolding in this moment and inspired this article (though none of the story lines I used above mirror the case that I'm working through now). However, readers of this Newsletter are in positions to help others avoid this and so many other mistakes. Take the bold step and engage the topic, you might just save a complete stranger a whole bunch of stress!