Article on Creating a Red File for Estate Planning
Marvin E. Blum recently published an Article entitled, Filling in the Gaps: Create a “Red File” for Clients to Cover Issues Beyond Traditional Estate Planning, Tr. & Est. 68 (Feb. 2017). Provided below is an abstract of the Article:
Most estate planners will agree that one of the most formidable obstacles to the planning process is the general reluctance of clients to discuss their own mortality. There’s one significant motivating factor, however, that drives clients to confront their mortality and plan for their incapacity and death: control. Clients want to ensure that on incapacity, they’re cared for as they wish and on death, their assets pass exactly how they would like. While crafting an estate plan, both planners and clients tend to focus on the effective and tax-efficient distribution of the client’s assets. It’s all too common for a client to walk away with a perfectly crafted portfolio of estate-planning documents that expertly disseminates the client’s property but fails to provide the control so desperately desired. How is it possible for a perfect plan to be so imperfect? The answer lies outside of the formal estate-planning documents and accordingly often goes overlooked by planners and clients alike, but the answer, itself, is simple. By adding a “red file” to the traditional batch of estate-planning documents, clients increase their level of control in two key areas: (1) incapacity, and (2) administration of the estate at death.
As part of the planning process, estate planners should encourage clients to create a red file and guide them on how to do it. Essentially, a red file is a notebook or other centralized source of information that will not only aid an executor in navigating the waters of estate administration, but also will make very clear the wishes of a client in the event he becomes incapacitated in the future.
While only clients can actually establish the red file, estate planners should provide their clients with a framework of guidelines for what it should contain. There’s no specific formula for what makes a red file effective, but clients should know that the more information they include, the more helpful it will be to those managing their assets or making care decisions on their behalf.