Real Life | Get started on feel-good estate planning

Real LifeMay 11, 2014 

You enjoy estate planning – preparing for incapacity, end of life, dying and bequeathing, right? What, am I kidding?

Let’s try to ease the task a little, and make it indeed interesting, innovative, uncomplicated, and even gratifying, whether you’re dealing with your own or someone else’s

We plan and structure our estates to assure that our affairs will be managed and our wishes honored, all with the least shrinkage, in the quickest time, in the most simple and effective manner, and with minimum conflict. Surely worth the effort, right?

The good news is that it’s all do-able in a feel-good way, and without having to master the enormous, intricate and daily-changing law, financial, tax, and legalese demons that our expert specialized professional helpers love.

“Okay, Gary, thanks, but (smugly) there already is a plan.” But if it’s out of date, incomplete or inadequate, you’re setting up for even worse disasters than having no plan at all could cause.

For example, how would you like to be entangled in an estate whose legal documents, including insurance policies, still direct assets to a former spouse, disinheriting the deserving current one and the subsequently born children?

Or, imagine the intestate (invalid or conflicting wills, or none at all) estate, mercilessly mandated by state law to distribute heirloom assets, such as the family home, among one’s creditors, or to a spouse’s estate.

The costs of fighting and correcting the blunders can decimate the estate’s already smaller-than-hoped-for value.

Or, you’re embroiled in an under-planned, under-funded, liquidity-starved estate, forced to sell cherished and needed family assets, and at distress-sale prices, to raise cash to pay expenses and taxes.

Or demented Dad failed to create a health care directive, so you’re into a gut-wrenching impasse with other family members about where he is to be cared for.

Wouldn’t it be so much better to get it all right and complete to start with – and to keep it so – so that the events and affairs will process smoothly and wisely, and legacies will pass on as intended? Let’s look at how to accomplish that.

“Square One” is no surprise: thinking, introspection, identifying and fully understanding the issues, followed by soul-searching and “marinating” the various options. The goal is well thought-out and well-tailored solutions.

I think it’s wise to seek wisdom from appropriate helpers whose understanding and judgment impress you, including the professional team and from the affected family members. Utilize the information assembled via your “discovery” and “doomsday manual” projects.

Then, after this soul-search, you’ll be set to make decisions and to begin building the plan. How-to’s, documentary tools, knowledge, ideas, resources and skilled professionals abound. We’ll examine some later on.

What issues should you consider? Here, to reiterate or to supplement the ones that you’ve thought of, are some suggestions:

• Who should be empowered and responsible to make and carry out financial, legal, business and tax decisions when necessary, and to manage for you, and with what limits and guidelines? Similarly, who should make health care decisions, including the awful “pull the plug” and do-not-resuscitate ones, when you can’t?

• What arrangements should there be to operate or to succeed to your businesses or professional enterprises? In which family home or institutional care facility should you spend your incapacitated late-life and end-stages?

• Who and how should you pursue entitlements (government and employment benefits) for you and for your eligible families? And who should take over your responsibilities for the care of others as you decline, and how?

• Your preferences about eventual funeralities also deserve respect. Consider pre-planning, pre-arranging and pre-paying.

• If the estate or its owner is fortunate enough to be exposed significantly to income, gift and future death taxes, which legitimate planning options for reducing or avoiding them are desirable – ownership re-arrangements, personal and/or charitable gifting with or without reserved incidents?

• What about gifting and donating just because you want to?

• And, along with providing the directives and instructions for managing all of these, one must also address the realities of how to fund them.

OK, once you’ve thought through all of future living, then advance to pondering the “at-death” stage.

Besides the obvious who-gets-what-and-when bequest issues and the funerals, we need to work out some other issues, too:

• How to provide the liquid funds to pay the astounding cost of dying and estate administration? How are obligations to be settled, and who is to be in charge of, and responsible for, managing it all and for pursuing entitlements?

• You must assure adequate income to the surviving family throughout the necessarily months-long estate administration period.

• Often it’s desirable to “reach back from the grave,” leaving instructions and guidelines for some of the assets and special-circumstances legatees.

For example, a mentally challenged child needs legally empowered financial stewardship. Who should that steward be?

Or, one legatee’s share needs protection from a spendthrift spouse or insulation from the “means test” for a government entitlement benefit.

Or, one needs to live in the family home for a while with the family’s condonance, and with compensating benefits for the others.

• Professional planners structure estates legitimately to avoid full probate, even simplified probate if possible, because of probate’s cost, delays, aggravation, bureaucratic hassles, and public exposure of one’s private business? Why not yours?

• Are the documents that you brought from back home valid in your at-death state of residence? Must they be changed to comply? Did you move from a “community property” state to a “common law” state?

“Gary, you’ve dumped a bunch of questions on me. I’ll decide my answers, but you haven’t told me how to make them happen.” You’re right, but let’s give you time for serious thinking. The “happening” will begin next time.

Stay tuned. Meanwhile, I welcome your comments and ideas.

GARY NEWMAN is an actively retired life underwriter and practitioner of related family and small business financial security disciplines. You can reach him at gary@gnewman.org.

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