Ground Control to Major Tom - Addressing Single Points of Failure in Your Planning
If you’re like me you loved seeing the amazing photos sent to us from the so far highly successful Webb Telescope. But did you know that the telescope had 344 single points of failure? The definition of a single point of failure is “a component in a device, or a point in a network, that, if it were to fail would cause the entire device or network to fail.” If any one of those single points of failure had in fact failed the mission would have been lost.
In his great book, The Psychology of Money, author Morgan Housel explained it this way: “A good rule of thumb for a lot of things in life is that everything that can break will eventually break. So if many things rely on one thing working, and that thing breaks, you are counting the days to catastrophe. That’s a single point of failure.”
Single points of failure are normally reduced or eliminated by adding redundancy. Redundancy is defined as “the duplication of critical components or functions of a system with the intention of increasing reliability of the system, usually in the form of a backup or fail-safe, or to improve actual system performance.”
In estate planning or business succession planning it is important to identify th single points of failure in your plan and seek to create redundancy. This means building into the plan multiple paths to address potential estate taxes. This means having a pour over will in the event an asset isn’t held in the trust. This means having successor trustees and agents. This means having a path to complete the transfer of your business if you become mentally incapacitated or die prematurely. This list can go on and on.
Unfortunately, many plans are banking on everything turning out a certain way. Maybe that is everyone dying in the right order. Maybe that is everyone will get along. Maybe that is assuming laws won’t change. Maybe that is assuming you won’t need to go into a nursing home. While your assumption may turn out to be correct in most cases, it most assuredly won’t in every case. A truly sound estate plan or succession plan will eliminate as much as possible any single points of failure. Does yours?
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.