By law, certain estate planning documents must be signed using proper formalities. Sometimes, however, you can require additional procedures that a beneficiary must follow to exercise their rights within your estate planning documents.

A number of reasons exist for doing this, ranging from ensuring proper notice is given to relevant parties such as your trustee, to limiting the time frame in which the beneficiary can exercise their rights, or to avoiding the possibility that someone might fraudulently exercise a beneficiary's power.

Powers of Appointment

One area where you may provide specific instructions or formalities is with respect to "powers of appointment". A power of appointment is a right that is granted to another person to direct the disposition of property.

For example, if I give you a power of appointment over my property, then I'm giving you the right to decide who will receive my property and how they are going to receive it. Often a beneficiary of a trust may have a power of appointment over the trust assets, which is effective at the time of the beneficiary's death (provided that the proper formalities are followed). In essense, this allows you to give whatever remains in the trust to others, subject to the restrictions contained in the trust document.

Common Formalities

A few typical formalities come up with respect exercising powers of appointment (or an exercise of another power):

1. The trust might require a person to exercise the power in his or her Will or a codicil to his or her Will.
2. The trust may require the document in which a person exercises his or her power to be notarized.
3. The trust might require the document in which a person exercises his or her power to be given to the trustee before his or her death.

This issue does not crop up all the time, but it's important to be aware of proper formalities if you are someone with such a power so that you can effectively exercise it.

The laws in California have specific requirements when it comes to signing estate planning documents. Some require witnesses, whereas others require notarization or other formalities.

For example, certain types of Wills need to be signed by the Testator (creator of the Will) and the signature must be witnessed by at least 2 other people, all of whom should sign the Will. If a document needs to be recorded at the Recorder's Office, then the document must be notarized. 

Purpose

These laws are enacted for your protection. They help ensure that you understand the seriousness of your actions. The formalities may also have the effect of preventing others from forging your name and/or giving notice to the public as to the ownership of your assets, such as with recording of deeds at the Recorder's Office. 

Out-of-State Estate Planning Documents

For people moving to California that already have an existing estate plan, a concern is whether those documents are effective under California law. As a general rule, if the documents followed the formalities of the state where you are moving from, then it should be valid under California law. For a specific statute involving a Will, see California Probate Code Section 6113.

Sometimes the obstacles to transferring property for estate planning purposes are outside of your control. The restrictions may be due to your marital status or status as a registered domestic partner, or the type of asset, such as an interest in a trust for which you may be beneficiary (i.e., a trust that was not created by you, but for your benefit).

However, restrictions may also be self-imposed, such as by agreements that you have with others not to transfer your property. A major hurdle in transferring property occurs when the transferring person loses the capacity to make the transfer.

Finally, even if you have the legal ability to make the transfer, you may nonetheless, wish to retain absolute control over property.

Lack of Legal Capability

A risk faced by some individuals is the possibility that someone will challenge the estate planning documents after you pass away. This often comes in the form of a challenge to the Will or other estate planning document that you've created.

You may have heard of this terminology before, but the challenges can range from the following:

1. Failure to follow the formalities required when signing the estate planning documents. 
2. Lack of capacity, mental or otherwise, to sign the estate planning documents.
3. The assertion that there was fraud, duress, or undue influence.

Risk Minimization

If you are clearly competent, and your lawyer is not in a position where there's a conflict of interest, others are not unduly influencing the decision-making or otherwise inappropriately pressuring you to make a decision, and the proper formalities of signing your estate planning documents are followed, the risk of someone challenging your estate plan is relatively low. 

Although estate planning may present challenges even after the documents are prepared and signed, the risk of having your transfer fail can be minimized by introducing an independent lawyer to draft the documents. He or she can be on the lookout for potential future causes of challenges to your estate plan and can help you to navigate away from them.

Estate planning, for most, has as its primary objective, the transfer of one's assets. On the surface, this appears simple, but a number of factors ranging from client fears, related costs, forgetting best practices when it comes to handling ones existing and newly acquired assets, as well as outsiders who seek to take advantage can all pose obstacles in the estate planning process.

Emotions

Estate planning can often feel like going to the doctor to do your annual check-up. Many people fear facing the inevitable and putting off the tasks required to do an estate plan is often the path of least resistance.

Fortunately, if you've contacted an estate planning lawyer, you at least recognize it's importance and are making a very good first step. A large portion of clients are motivated by family members such as a spouse or child to ensure that an appropriate plan has been put in place to protect them.

Others, particularly those of high net worth, are motivated by possible tax savings to be had as a result of estate planning; however, the present costs and potential loss of control as a result of those techniques often outweigh a client's willingness to pursue them.

It's also not uncommon to find the rare breed of clients who take a deep and sometimes all-consuming interest in estate planning.

Costs

A simple, yet very common hurdle, is simply the cost of doing estate planning. Many clients are scared away by the initial investment associated with setting up a basic estate plan. However, if the estate planning lawyer has done a good job, the cost of establishing a plan and maintaining it, should only amount to a fraction of the cost associated with not having an estate plan in place. Not to mention the additional stress that can be lifted from your family members as a result of your advanced planning, which can be priceless.

Maintenance

Even the best estate planning requires regular review. Actions such as purchasing additional assets like life insurance, the creation of new accounts, or purchasing of real estate are all situations that should be revealed to your estate planning lawyer.

Failure to regularly review your estate plan and assets, may cause you not to receive the full benefits of the plan that you established. Often, something as simple as acquiring new assets directly in the name of the trust can save you considerable sums and help avoid unintended consequences such as probate at the time of your death.

Unscrupulous Third Parties

A difficulty, particularly for the elderly, are individuals who take advantage of clients' weakened emotional, mental or physical states to extract their wealth. Although it can be difficult to detect and opportunities are limited, at least part of an estate planning lawyer's observations will include an assessment of whether a client is being unduly influenced or forced to make an estate plan that is contrary to what he or she would request had they not been pressured.

As you can see, a number of factors are at play that make estate planning challenging for clients. That's why having an actual firm or lawyer that you have a relationship with can be crucial since they will be "plugged in" to your life and have semi-regular communication with you.