Why is it that Whitney Houston, Michael Jackson, Etta James, Martin Luther King, Jr., and so many other well-known and well-to-do celebrities fail to do proper estate planning? Imagine your family going through the confusion, publicity, and never-ending onslaught of predators trying to get at your hard earned assets. Bobbi Kristina would have been well served by the privacy and protection of a living trust established and funded by her mother or her mother’s estate.
Famous people’s mistakes make headlines, but CIS’ message to you is this: you don’t have to be rich, famous, or old to benefit greatly from estate planning. Lawyers and accountants will have you focus primarily on plans that empower your executor, trustees, and guardians, define your legacy terms and reduce taxes. When our clients get sick or die, CIS is there to help the survivors implement the plans that are in place. In our estate planning efforts (before the crisis hits), CIS will focus more on the practical implementation of those plans for our clients. We want to make sure your estate plans are clear, durable and flexible enough to continue to work as you age and need more help from others. And we’ll focus on your survivors who will be living with their loss while navigating new financial complexities.
What if you become incapacitated? What if you were no longer able to make decisions for yourself? Would your loved ones be able to direct a medical team to act according to your wishes? Your CIS advisor will help you understand how you might financially survive incapacity. We’ll walk you through or simulate the situation to discuss the difficulties that your appointed guardian will need to face. We’ll make sure your selected power-of-attorney is set up for success to act on your behalf beyond the healthcare directive. They need to be able to do your banking, bill paying and financial management and we want to make sure they are able to understand and fulfill the responsibility.
What if you died? What if you and your spouse died in a common accident? Who would be the guardians of your children, if needed? Should the guardian also manage the money for the children? Who will be responsible for the family finances once you are gone? Would your assets be distributed according to your wishes? Would they be “at risk” in the hands of an heir? How will you help your heirs and family members to know what to do, to avoid feeling lost, confused, in disagreement, fighting and becoming enemies destroying your legacy and your family?
For most of us, the thought of considering our own mortality or incapacity is something we’d like to avoid. Realize that planning means being in control – of medical care, finances and children – to name a few. Not having a plan means the State or courts will determine these things for you – often resulting in decisions you would never have made yourself. Creating an estate plan can mean facing up to unpleasant possibilities. But by planning in advance, updating that plan along the way, and communicating your wishes and intentions to those involved, you will have peace of mind that your specific needs and wishes for your family and your assets will be fulfilled.
If you’ve only executed a simple will, you won’t be fully prepared for incapacity, inheritance planning, special needs beneficiaries, and asset protection opportunities. Good preparation can save you time and money. Before sitting down with a qualified Estate Planning attorney, your CIS advisor will work with you to address many of the following matters:
• As part of our financial planning process, we assist our clients in gathering all financial information (bank, investment, insurance, etc.) and itemize assets and liabilities (home, investments, cars, mortgage, loans, etc.). Tally what is held in your name, jointly, in retirement plans, etc.
• Will a surviving spouse have “enough” money? Be able to manage it? What if there is more than enough? CIS believes everyone should have this one figured out and we’ll help you make a determination and a plan to make it happen.
• Think about your family now and as it will grow and change (children, grandchildren, spouses, special needs, perhaps special nieces or nephews). Consider a trust to protect the assets that you leave to your children and surviving spouse. Your CIS advisor can help you think through the various approaches to leaving money to heirs that will protect the assets for the benefits that you intend. We recently encouraged a client who was planning to get engaged to leave assets left by her grandparents in a trust to protect them from possible future creditors or divorce even though the trust allowed for her to remove assets.
• How would you like your assets to be distributed? My parents have nine children. Two of my siblings have passed away; one was married with four children. They have 21 grandchildren, four great-grandchildren and counting; some with special needs. They always tried to treat us equally but what does that mean for my deceased sister’s husband who is part of the family and my niece who needs different care for life? These are tricky questions that we’ve helped them deal with through thoughtful planning and ongoing conversation.
• Will your executor need a plan of dividing personal and tangible assets that minimizes contention amongst heirs and fosters the family legacy? Who gets mom’s jewelry or the family portrait? We had a client decide at the last minute, not to sign a trust he had drawn up for the purpose of giving away the vacation home to the kids in a tax advantaged approach. There was concern that disputes over using the home especially over holidays and summer weekends would lead to family in-fighting. So instead, they later sold the property. They found that giving away cash, although less tax efficient, was much cleaner and simpler and better for the heirs than the tax motivated plan to put the vacation home in trust. Are you a lawyer, CPA, or physician or are you in another high risk profession where personal asset protection planning needs to be contemplated while living? CIS can help you evaluate your options for titling property. One of our physician clients recently put all of the family assets in a trust for his spouse for creditor protection. Should she predecease the Dr., he’ll have a problem accessing the assets without defeating the protection. This lead to a solution of purchasing life insurance on the spouse which is now also available to help meet their overall legacy and philanthropic goals.
• What are your wishes for your health care if you can’t make your own decisions? Who will make your healthcare decisions? This too is tricky to be left to chance. These are the most difficult decisions anyone might need to make for a loved one and they come at the most difficult time. Do you choose one person or more? Will they be strong enough to stand up to the hospital and doctors to honor your wishes? We want to talk about this with our clients. Many of us have lived through it and can share the benefits of our experience. Who should have power-of-attorney over your affairs if you are incapacitated? We want to discuss your choices here to help assess their ability to effectively take over your finances. Of course, we’ll be here to help them but we do want them to get to know us beforehand so we can be available immediately as needed.
• Consider family and non-family members when determining guardians for minor children, executors, and trustees; consider what is important to you, establish criteria and priorities to determine who might be best for each role. Consider whether it would be wise to appoint a guardian who does not control the money held for your children. For those of us who have our own children, we realize the difficulty of choosing a guardian. Beyond that, CIS can be valuable in helping set up the funding for raising the children in your absence. We’ll help you sort through issues such as those created when your guardian has children of their own and might have different ideas about college, cars, marriages, etc. We’ll help you determine if you can allow for the guardian to be paid or to share resources with their own children and a myriad of other dynamics created. Our children are grown now so my wife and I don’t need guardians in our wills but one of our guardians did pass away before our kids were grown. Ongoing or regular discussions with your CIS advisor can lead to greater awareness of your family and financial dynamics so we can alert you if we see other related issues or changes that would be recommended.
To be continued in our next issue…….
In part two of our Spring 2012 edition of Planning Matters, we’ll discuss a whole host of potential contingencies that your estate plan should contemplate. We’ll detail the little things that really matter and provide an action plan you can use.