What is the Rule of Three, and why do I need to consider this in constructing my estate plan?
Even though we call it a "Rule," I think it's more of a strong suggestion.
The rule of three means that you consider at least three alternative options in both the distribution of your estate and the choice of your fiduciary. You want to consider each alternate scenario and who would be the appropriate person to serve in that situation.
Take as an example a married couple with three adult children. The first plan would most likely be that the surviving spouse receives all of the estate assets and is the named personal representative. But what happens if the spouse also dies in a common accident? Then it would be best if you had a second plan to implement. In this case, perhaps an adult child could be nominated to serve, with the surviving children now being the estate's beneficiaries. A third plan might be that the adult children still receive the same benefit, but a different person is nominated to serve in case the first adult child cannot physically perform the duties.
The rule of three is just the process of thinking through multiple contingencies and having a plan that will work whatever the situation.
Your Last Will and Testament can have more than three possible scenarios considered, but I think that three is a minimum. The Rule of Three also applies in preparation of a multilayered approach on who you name to serve as fiduciary in your incapacity documents.
You never know what the situation will be at the time of need, and my experience is that if people think through these questions, their estate plan will be more robust.
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