My father died when I was age 18. He had created a multi-million-dollar business that was, unfortunately, bankrupt within ten years after his death. While my parents had done significant (and far-sighted) asset protection planning, there were many parts of their estate plan that were deficient.
Individual’s tendency to compartmentalize their planning is the single biggest reason why I built a multi-disciplinary approach for our clients. I wanted to make sure that what happened to my parents and our family did not happen to others.
We are passionate about being able to articulately discuss various planning issues with breadth and depth. And, if there is one single area of planning that consistently is lacking – it is in the area of estate planning and having the necessary documents in place to achieve their desired outcome. Again and again – sophisticated or not – clients lack even basic documents.
For example, a highly successful business owner in Virginia recently engaged us to do a full “Critical Actions Roadmap™” … our proprietary planning process whereby we review for comment and recommendations the following areas:
- Estate planning documents
- Investments
- Insurance
- Retirement
- Philanthropy & legacy
He provided his estate planning documents – at least, what he had. After reviewing them with Brian (our in-house attorney) we concluded the following:
- Their documents were well-written by a highly skilled attorney (unfortunately, we rarely find this)
- The couple had separate Living Trusts which were mirror images of each other, instead of having a single Living Trust covering both of them
- The Living Trusts currently call for distribution of their assets to the respective children when they reach various ages
- As opposed to keeping the assets in a special trust that protects the assets against creditors
- Also, this special trust protects the assets from divorce – and can do so for multiple generations
- The couple had out-of-date Healthcare Powers of Attorney which no longer reflected their current circumstances
- There were missing other important information and documents
Why do People Procrastinate?
Frankly, we see many sophisticated business owners and professionals who have not even prepared any estate documents. Sadly, they are not alone. According to a 2017 Caring.com survey, only 42% of U.S. adults have prepared their estate documents. Even more alarming, only 36% of adults with children under age 18 have “end-of-life planning” in place.
Do you know what the #1 reason excuse people gave for not preparing their estate documents? They “just haven’t gotten around to it.” This excuse was provided by nearly half (47%) of the Caring.com survey respondents!
While this is a shockingly high percentage, it illustrates the reality that many people are uncomfortable thinking about their own deaths. Fear makes them procrastinate and put it off for a more “convenient time” (which never seems to come) or makes them deny their mortality. After all … “some people die – others get older – but then there is you and me!”
Why is having estate documents so important? If you die without having a Will drafted, for example, your assets will be distributed through a court process called “probate.” This is defined as “The legal process by which the assets of a deceased are properly distributed (if he or she made a will) to the beneficiaries or heirs through an executor named in the will, or (if he or she died without a will) according to the local law by a court appointed administrator.” (See www.businessdictionary.com).
Probate takes place in state court, and not uncommonly results in assets going to unintended beneficiaries. Further, if you value privacy, you should avoid probate proceedings as they are open to the public. In addition, the entire probate process takes a good deal of time and is expensive to complete. If you have minor children, the probate court will name a Guardian to take care of them if you have not already done so; the person chosen may not be whom you would have chosen and may not even be an appropriate caretaker for your children.
What a mess! Faced with all that, most would feel better about avoiding the procrastination and excuses by taking on the estate planning process, mapping out a legacy that benefits and protects loved ones and provides financial support to causes that matter most to them.
When Should Someone, Especially, Have Estate Documents in Place?
There are a number of important reasons for having advance planning, including:
- Instances where there are multiple marriages
- Children from different relationships
- Children with special needs or a disability
- An ongoing business with assets
- Estates worth more than the Federal estate tax exemption ($22.8/$11.4 million if married/single in 2019)
- Complex wishes regarding distribution to beneficiaries
- Philanthropic intentions for distributions after you are gone
What Estate Planning Documents Do You Need to Have Prepared?
Although there are many different types of estate planning documents, the most common are as follows:
- Last Will and Testament—this document outlines your final wishes and how you would like your assets distributed
- If you also have a Living Trust, which is discussed below, the type of Will you should consider having is called a “Pour-Over Will” because it will “pour” some, or all, of your assets into the Living Trust
- Living Trust—if you live in and own real estate in California, it is imperative that you have a trust in place to eliminate the need for probate. Consider having a “probate avoidance” Living Trust drafted to provide you with more options concerning the disposal of your estate
- Financial Power of Attorney and Advance Health Care Directive—a Financial Power of Attorney and Advance Health Care Directive (which in some states are put into separate documents called a Living Will and a Health Care Power of Attorney) can be extremely helpful to you in circumstances where you are unable to make informed financial or healthcare decisions. These documents designate a person to make decisions on your behalf and how you should be cared for if you are seriously injured or sick
When Should Children/Heirs Inherit?
There are at least four ways to make a gift to your children or heirs. (Click here for our pdf on “Estate Options for Beneficiaries.”)
Conclusion: Don’t Put It Off …
While addressing the subject of death is difficult for some, it is inevitable (unless you know something you aren’t sharing with us!) Either you do the planning for it and get your affairs in order … or you are leaving it for loved ones to pick up the pieces after you are gone. Do you really want your family and friends to spend significant time and money in court fighting over your children and assets – when it is already such a difficult time? I would think not …
If you do not have your estate documents in place, or you would like a second opinion on what you have vs. what you need … and that your current documents accurately reflect your present intentions, please contact us at Wealth Legacy Group®, Inc. to discuss how to provide for your loved ones and shape your legacy. We do not draft documents for clients but provide this overview as part of our comprehensive Critical Actions Roadmap™ or Wealth Legacy Assessment™ process.
It’s been said that proper estate planning is the “art of dying neatly.” It is more than that. It is, ideally, the expression of love and intention to a life’s work and passions – regardless of how many years have been lived. Individuals often spend more time planning their vacation than thoughtfully addressing how their wealth – which includes more than just financial – is to be directed in the most positive ways possible. Rather than being a negative experience you dread, sitting down with a professional team to sculpt a desired outcome at the end of one’s life can be a positive experience. It can be both responsibly practical as well as emotionally liberating …
“Imagine That™!”
Written by R. J. Kelly – June 2019