By Bleckley Dobbs, Director of Financial Planning
Do you love your family? Do you REALLY love your family? If so, please don’t be like more than 60% of all Americans and fail to do any estate planning.
The list of rich, famous and just ordinary people who die intestate (without a will) is long, and the stories of what their survivors have to go through after their deaths are enough to scare the most seasoned horror film fanatic. But still they persist.
Why do so many people die (or become incapacitated) without completing a will or basic estate planning documents? Some clearly think they will live forever, or for at least another (fill in the blank) years. Most don’t want to contemplate their own mortality, or maybe they don’t want to decide to whom they should leave their assets, who should raise their children (hint: nobody will do it like you would), or who should take care of them if they are not able to care for themselves.
Given the manner in which the topic is usually presented, you’d think the primary reason to do estate planning is to save money on taxes, and to pay thousands in legal fees to create complicated trusts. But now that the federal estate tax exemption is over $5 million, estate taxes really affect very few people. In fact, only about 3,700 people (well less than one-half of one percent) who die in the U.S. this year will have a federally taxable estate.
The REAL reason for estate planning is to make it as easy as possible for those still living after your death or incapacity, those who are grieving and in turmoil, to carry on with their lives and do things you would have wanted them to do with the financial assets and personal legacy you have created.
A positive true story:
We have worked for years with a married couple with four children and eight grandchildren. The grandparents, with great prodding from us, updated their wills and their trust, and reviewed the beneficiaries of their retirement accounts. We also talked at length about what was most important to them. They both placed a very high value on education, and wanted part of their financial legacy to help pay for college for their grandchildren. But the grandmother, a college professor, also wanted to make sure her values and beliefs about education transferred to the next generation. During their annual intergenerational family vacation, they had a family meeting and the grandparents outlined a plan AND their expectations and hopes for the grandchildren.
Sadly, the grandmother died a short time later, but she left the legacy she intended to leave. It reflected her values and was put into action prior to her death. Unlike many people who leave behind a complicated financial mess, one that can breed resentment toward the deceased and division among survivors, she purposefully provided a meaningful legacy to her children and grandchildren. In many ways, her death instead became a unifying experience for her survivors.
A scary and frustrating true experience:
We have another wonderful client. She has an unmarried cousin with no children, and she and her mother are his only surviving relatives. Unfortunately, the cousin, who is in his 50s, recently had a terrible stroke that left him completely incapacitated. Worse, he had made no legal provisions for his personal care or for the handling of his affairs in the event of his disability.
His lack of a will at this point is not the catastrophe, because he hasn’t died. However, he didn’t have other crucial legal documents either, like a durable power of attorney, or healthcare power of attorney, that a thoughtful plan would normally include. The result is that he has become a ward of the court, and his aunt was then required to file for guardianship – a restrictive and burdensome process – in order to help oversee his financial affairs and personal care. Now, because of tight restrictions imposed by the court of jurisdiction and the fear of potential liability issues, the legal departments of many custodians make it extremely difficult, if not impossible, for her to manage his investments, cash flow and personal care needs in a way that anyone else would consider reasonable. Even with our attention, expertise and experience to help them, their situation is maddeningly inefficient and frustrating for all. It serves as a stark lesson in how not to do things.
Estate planning doesn’t have to be complicated or especially expensive. Everyone should have at least the basic estate planning documents – a will, durable power of attorney, healthcare power of attorney and directive to physicians – in place. Depending on your particular situation, an attorney may recommend other documents. It is also critical to make sure beneficiary designations on retirement accounts, insurance policies, etc., are up to date.
If you need to update your estate planning, or do it for the first time, we would be glad to help you. We can refer you to a smart, caring estate planning attorney, or we can help you in working with your own attorney. We specialize in exploring the qualitative questions you should be asking yourself to assist you in putting together, and ultimately leaving, the true legacy you wish to leave.
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