You have a trust. You have a will. You have a financial advisor who manages your investments. You probably feel like your affairs are in order.
Having a financial advisor and an estate attorney is not the same as having a plan. Most people who have both have documents created at separate times, by separate professionals, with no shared visibility into each other’s work. In most advisor relationships, the financial advisor has never read the trust document. The estate attorney has never seen the account statements. And the financial decisions made since those documents were signed may have quietly unraveled the plan.
There are four ways this plays out in practice. Each one is common. Each one is preventable. In every case, the cause is the same: two professionals working in separate silos, with no one watching the intersection.
Failure Mode #1: The Trust That Did Nothing
A revocable living trust is a well-established tool in estate planning. It lets your assets pass directly to your heirs without going through probate, saving time, legal fees, and the public record of what you owned. Done right, it’s cleaner and faster than a will alone.
There’s one catch: the trust only controls assets that have been transferred into it.
A trust document is a legal container. A container is only useful when something is put inside it. That means retitling your home into the trust’s name, transferring financial accounts to the trust, and updating ownership records on business interests and investment accounts. Without that step — called trust funding — the trust sits empty and legally inert.
Estate planning attorneys commonly report this as the most frequent failure they encounter: a client arrives with a trust document, sometimes years old, and almost nothing in it. They signed the papers, paid the attorney, received a binder, and assumed the job was done. It wasn’t. When they die, every asset in their name goes through probate anyway, which is exactly what the trust was designed to avoid. While a Pour Over Will is often included in an estate plan to fund the trust following a client’s death (in order to make sure the beneficiary distributions laid out in the trust are followed even if the client fails to fund the trust during their life), relying on this method would still require a probate.
The problem usually isn’t the attorney, who typically provides funding instructions. The problem is the handoff. The attorney’s job ends when the documents are signed. No one automatically follows up to confirm the client’s financial accounts were retitled. No one checks whether the home was deeded into the trust. No one verifies that the brokerage account at Fidelity now reads “John and Jane Smith, Trustees of the Smith Family Trust” instead of “John Smith.”
That handoff requires the estate attorney and the financial advisor to talk to each other, and that conversation rarely happens unless someone specifically arranges it.
Failure Mode #2: The Beneficiary Designation That Overrode Everything
Your will describes how you want your estate distributed. Your trust may do the same in more detail. But there’s a category of assets those documents don’t control at all: retirement accounts and life insurance.
IRAs, 401(k)s, 403(b)s, and life insurance policies pass by beneficiary designation: a separate form filed with the account custodian or insurance company. Whatever name is on that form controls at death, regardless of what your will says or what your trust says. If your will leaves everything to your children but your IRA beneficiary form still names your first spouse from a 1998 divorce, your ex-spouse gets the IRA. That is not hypothetical. In 2001, the U.S. Supreme Court ruled exactly this way in Egelhoff v. Egelhoff, confirming that a former spouse received life insurance proceeds because the beneficiary form was never updated after the divorce. While state law can impact this outcome depending on the state, this should never be relied upon and beneficiary designations should frequently be reviewed to ensure coordination with current estate planning goals.
Stale beneficiary designations are everywhere. Estate planning attorneys regularly encounter accounts that still name ex-spouses, deceased parents, or deceased siblings as primary beneficiaries. Some clients have never designated a beneficiary at all. The Arizona State Retirement System reports that 25% of its members (among Arizona public employees) fall into this category. When there’s no named beneficiary, the account typically defaults to the estate, which then goes through probate. That’s the exact outcome a beneficiary designation is supposed to prevent.
The deeper problem for clients with trusts is that IRAs must be handled with particular care. If you want your trust to serve as the IRA beneficiary (to maintain control over distributions, protect against creditors, or manage a beneficiary who isn’t ready for a large sum), the trust must be specifically drafted to qualify as an eligible beneficiary. That calculation changed with the SECURE Act.
What the SECURE Act Did to Trusts as IRA Beneficiaries
Before 2020, naming a trust as an IRA beneficiary could allow the trust’s beneficiaries to stretch distributions over their life expectancy, a meaningful tax advantage. The SECURE Act changed this in 2020, eliminating the “stretch” for most non-spouse beneficiaries and replacing it with a 10-year rule: inherited IRAs must generally be emptied by the end of the 10th year after the account owner’s death.
This created a hidden problem for trusts drafted before the SECURE Act. Many of these trusts were set up as “conduit trusts,” designed to pass IRA distributions directly through to the beneficiary each year. Under the old rules, this worked well. Under the 10-year rule, a conduit trust with no annual RMD requirement may force the entire IRA balance out in year 10, creating a single-year income tax event of potentially hundreds of thousands of dollars.
The alternative is an “accumulation trust,” which gives the trustee discretion to hold distributions within the trust rather than passing them directly to beneficiaries. This provides more flexibility in timing distributions over the 10 years. But trusts reach the top 37% income tax bracket at income above approximately $14,450 (2025), compared to individuals who don’t hit 37% until income exceeds $578,125. Holding large amounts inside the trust has its own tax cost. While there are advanced planning strategies that can potentially mitigate some of the income tax increase that can come with an accumulation trust, those require careful and purposeful coordination between client, financial advisor, and estate planner.
The central coordination gap: the financial advisor holds the IRA, and the estate attorney drafted the trust. Neither professional automatically checks whether they’re compatible. A trust drafted in 2015 may need to be reviewed for the 2020 SECURE Act changes, and no one may have flagged it.
Failure Mode #3: The Roth Conversion That Changed the Estate Plan
Roth conversions are among the more effective tax planning tools available in retirement. Converting money from a traditional IRA (taxable on withdrawal) to a Roth IRA (tax-free on withdrawal) during low-income years can materially reduce lifetime taxes, particularly for clients who expect higher tax rates later or who want to leave a tax-free inheritance.
Most financial advisors who recommend Roth conversions focus on the client’s tax situation. Fewer stop to ask what the conversion does to the estate plan.
A Roth conversion changes three things about the estate plan, even though no estate document is updated when the conversion happens.
The character of what heirs inherit. A traditional IRA carries embedded tax liability: the heir will owe income tax when they withdraw it. A Roth IRA does not. This shifts the after-tax value of the inheritance. If you have multiple beneficiaries with different tax situations, giving one a Roth and another a traditional IRA of the same balance may not produce equivalent inheritances.
How the trust-as-beneficiary math works. If a trust is named as the IRA beneficiary and you convert a traditional IRA to a Roth, the 10-year rule still applies, but the tax treatment changes. For conduit trusts, distributions from a Roth that pass through to beneficiaries come out tax-free. For accumulation trusts that hold assets internally, the trust still receives tax-free income, but the estate plan may need to be reviewed to confirm the provisions still reflect your intentions.
How the estate is divided. Say you have two children. Your estate plan says each receives half of your IRA. You convert $300,000 of a $600,000 traditional IRA to a Roth. Now you have two separate accounts with potentially different beneficiary designations and different tax characters. Which child gets which account can determine who owes more in taxes by tens of thousands of dollars.
None of these is an argument against Roth conversions. They’re often the right move. But the financial decision and the estate plan belong in the same conversation, because each affects the other. When a financial advisor runs a Roth conversion analysis and an estate attorney drafts distribution provisions separately, that conversation doesn’t happen by default.
Failure Mode #4: The Long-Term Care Decision That Missed the Medicaid Window
For clients who may eventually rely on Medicaid to cover long-term care costs, timing is everything. And it’s a timeline that financial advisors and estate attorneys each see only part of.
Medicaid covers nursing home care for people who meet income and asset eligibility requirements. But qualifying for Medicaid long-term care isn’t as simple as spending down assets when care is needed. Federal rules include a five-year lookback period: when someone applies for long-term care Medicaid, the state reviews all financial transactions from the 60 months before the application. Any transfer made for less than fair market value during that window can trigger a penalty period. The applicant becomes ineligible for Medicaid coverage, with no cap on how long that penalty runs.
The penalty period is calculated by dividing the value of transferred assets by the state’s average monthly nursing home cost. Transfer $300,000 in a state where nursing home care costs $7,500 per month, and the penalty period is 40 months of Medicaid ineligibility. The person still needs care. Medicaid won’t pay. Someone else has to.
A financial advisor who recommends long-term care insurance is making a sound move for many clients. LTC insurance shifts the financial risk of care costs to an insurer. An irrevocable Medicaid Asset Protection Trust (MAPT) is a different kind of tool: it involves transferring assets into an irrevocable trust, surrendering legal ownership, so those assets are not counted toward Medicaid eligibility. To work, the transfer must happen at least 5 years before the Medicaid application. That requires years of lead time.
If a financial advisor recommends LTC insurance without knowing that the estate attorney has been discussing a MAPT, the client may buy years of premiums for a policy they later don’t need. If the estate attorney recommends a MAPT without coordinating with the financial advisor on cash flow, the client may transfer assets they need for retirement income. And if neither professional raises the Medicaid timing question until the client is already in their 70s, the window may have narrowed considerably.
This is a planning decision that cannot be optimized from two separate offices. The Medicaid clock, the LTC insurance cost, the available assets, and the income plan belong in the same analysis.
What Coordination Actually Looks Like
The four failure modes above share a root cause: estate planning and financial planning are done separately, by professionals who don’t share information, often on different timelines. The client assumes the two plans work together. They usually don’t know enough to check.
Reviewing beneficiary designations every year doesn’t help if no one knows what the trust says. Updating the trust after a Roth conversion doesn’t help if no one flagged the conversion to the estate attorney. Coordination requires the financial plan and the estate plan to be built, reviewed, and maintained by people who can see both. A good question to ask any advisory team: “When was the last time my financial accounts and estate documents were reviewed side by side?”
At Lifeworks, this coordination is built into the membership. The financial planning team works alongside an in-house JD who has specialized in estate planning throughout his career. When a Roth conversion is on the table, the estate implications are part of the analysis. When beneficiary designations are reviewed, the trust provisions are pulled alongside the account statements. When the long-term care question comes up, the Medicaid clock is on the table along with the insurance options.
The basic estate plan (will and trust if appropriate) is included in the Lifeworks membership. For state-specific complexity or more involved cases, we work with a 50-state attorney network at competitive rates. Your financial planner and our estate planning specialist coordinate throughout, so the two documents are built to work together. The estate plan is reviewed annually as part of our quarterly cadence, meaning a significant life event (new grandchild, divorce, home sale, inheritance, change in health) gets incorporated before another year passes with stale documents.
Most people assume their advisors are talking to each other. Rarely do they ask directly. That assumption is often exactly what leaves the trust unfunded, the ex-spouse on the beneficiary form, and the Medicaid clock running out.
Key Takeaway
Having a trust and a will and a financial advisor is a start, not a finish. The documents exist. But whether they work together requires active coordination between two professional relationships that usually have no mechanism for talking to each other. Whether the trust has assets in it, whether beneficiary designations align with trust provisions, whether tax moves are consistent with the estate plan: none of these get checked unless someone is specifically responsible for checking them.
The four failure modes in this post are not unusual cases. They show up in estate after estate. The families affected thought their affairs were in order. The documentation said one thing; the assets did another.
If you’re not sure whether your estate plan and financial plan are working together, that’s a reasonable question to put directly to the people you pay to manage both. The answer should be specific: a concrete review of whether accounts are titled correctly, beneficiary designations match trust provisions, and recent financial decisions have been incorporated into an updated estate plan. Major life events (marriage, divorce, birth of a child or grandchild, death of a named beneficiary, sale of a home, significant inheritance) each warrant a review. So do significant tax moves.
If you’d like to talk through whether your financial and estate plans are coordinated, we’d be glad to talk.
Sources
Trust Funding and Implementation
- OC Elder Law. “Revocable Living Trusts: The Benefits You Can’t Ignore.” ocelderlaw.com.
- Pearson Bollman Law. “Is Your Trust Fully Funded?” pearsonbollmanlaw.com.
- Trust Law Partners. “Unfunded Trusts Cause Problems in Trust and Estate Litigation.” trustlawpartners.com.
- LegalZoom. “Estate Planning Statistics.” legalzoom.com.
Beneficiary Designations
- Arizona State Retirement System. “Choosing Beneficiaries.” azasrs.gov.
- The College Investor. “5 Beneficiary Designation Mistakes That Can Wreck Your Estate Plan.” thecollegeinvestor.com.
- BJF Law. “Ex-Spouse Does Not Mean Ex-Beneficiary.” bjflaw.com.
- Maryland Estate Planning Law. “How Beneficiary Designations Can Override Your Will.” mdestateplanninglaw.com.
SECURE Act, Inherited IRAs, and Trusts as Beneficiaries
- Kitces.com. “SECURE Act and the See-Through Conduit Trust: Stretch IRA Rules for 10-Year Non-Eligible Designated Beneficiaries.” kitces.com.
- Cote Law. “Conduit Trust vs. Accumulation Trust.” cote-law.com.
- Fidelity Investments. “IRAs Left to a Trust: Considerations for Inheritors.” fidelity.com.
- MMBB Financial Services. “How the SECURE Act 2.0 May Affect Inherited IRAs and Certain Trusts.” mmbb.org.
Medicaid Look-Back and Long-Term Care Planning
- American Council on Aging. “Medicaid’s Look-Back Period Explained.” medicaidplanningassistance.org.
- Medicaid Long Term Care. “Medicaid Eligibility: Understanding the Look-Back Period.” medicaidlongtermcare.org.
- SmartAsset. “How to Avoid the Medicaid 5-Year Look-Back.” smartasset.com.
- Elder Law Guidance. “Understanding the Medicaid 5-Year Look-Back Period: Essential Guidelines for Eligibility.” elderlawguidance.com.
Advisor and Estate Planner Collaboration
- National Association of Estate Planners & Councils. “The Value of Teaming: Working with Estate Planning Professionals.” naepc.org.
Lifeworks is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.