A Step By Step Approach

Part I

When it comes to taking care of estate planning business, most clients are paralyzed by procrastination. Procrastination has cost the American public more than any tax bill ever enacted. We can hear something or see something that we, admittedly, need to accomplish for the benefit of ourselves or family, and then, put it off. The problem is that if it is delayed too long, its importance becomes diminished in our minds and is never accomplished.

Here’s an example:

A client delayed, then failed to list life insurance on his Trust Schedule B. His premium payments on a $400,000 life insurance policy were being automatically paid from his checking account. After an illness caused his disability, his daughter closed the account and moved the funds to another account at her bank via a Power of Attorney. The policy eventually lapsed because of non-payment of premiums and the proceeds were lost to the children after the client’s death.

This is just one example of how procrastination undermines our good intentions.

I have developed two booklets with an objective toward the organization of your affairs before death and the steps to take after the death of a spouse or parent. Because most people procrastinate, one booklet provides for steps to take should catastrophic or terminal illness occur. Of course the booklet can be utilized for any person who wishes to organize their affairs prior to catastrophes or death but most people wait to the end. Hence, the sub-title “Urgent Planning”. The other is a step by step guide for the surviving spouse to take to wind up the affairs of the decedent spouse. I compiled information for the booklets based on my experiences with clients and some of the planning traps they fall into by not planning and failing to organize.

Before You Say Good-bye (“Urgent Planning” Before Incapacity or Death)

Have some mercy on your family and provide some organization and information for their benefit. Communication tends to be a bit challenging after incapacity or death. I normally tell my clients to think about where their assets are located and how they are titled and paid for; where they wish to live and what funds are to be utilized for housing if they no longer have the ability to make these types of decisions; and who they want to make these decisions. Finally, who is to get their estate on their death and how their remains are to be handled.

Within these decisions are sub-decisions and incidentals which require some details. Most of those details can be implemented into the Estate Planning documents which have teeth to be upheld under our laws. We may also use Instructional Letters (Family Letters, Loved One Letters, etc.) which typically have no legal basis to be enforced but are useful to obtain insightful information from the decedent family member.

Steps To Take

  1. Update Estate Plan: Update all Estate Planning documents (Living Trust, Will, Powers of Attorney, etc.) to present law and your selection of present fiduciaries and dispositive intentions. Remember, your Successor Trustee and Agent in your Financial Durable Power of Attorney will control your assets should you lose capacity.
  2. Inventory Assets: Update your Schedules of Assets to the present including account numbers and computer passwords. Send a copy of the updated Schedules of Assets (excluding passwords) to your trusted advisors (attorney, financial planner, etc.). I prepare a Schedule A for Trust assets and a Schedule B for Non-Trust assets like IRAs, all insurance policies, annuities, pensions, etc.
  3. Confirm Trust Titling: Check the titling of all of your assets. Take a look at your real property tax statement and see that it lists your residence and other real property in the Trust name. When you receive your bank and investment statements they should reflect on the first page that such funds are in the name of your Trust. If you have a safe deposit box, make sure that it is titled in the name of your Trust or designate other family members to have access.
  4. Financial Plan Review: This is also a good time to obtain a financial review with your financial planner to obtain a basis in appreciated investments and an overall performance update. If you have a trusted financial planner, CPA or other professional who has invested for your benefit, include his/her name in your Trust or Financial DPA with an instruction that your Successor Trustee and agent in your Financial DPA continue to utilize his/her services regarding your investments, tax advice, etc. This will allow for a continuation of your investment philosophy.
  5. Confirm Beneficiary Designations: Check all contracts that designate a beneficiary such as a 401(k), IRAs, 403(b), Keough, life insurance, annuities, etc. Make sure the beneficiary designation form specifies the correct beneficiary in the percentage desired (100%, 50%, etc.). Request new forms from your financial planner to replace unintended or outdated beneficiaries (ex-spouses).
  6. Long Term Care Instructions: Make your intentions clear regarding how you wish to be handled should you lose capacity. If home care is an option and you wish to be cared for at home, make that clear in your Advance Health Care Directive (AHCD). Also, if you wish a particular child to choose your residency status, specify that information in your AHCD. It is also important that you provide that your AHCD agent has authority to demand funds from your Trustee and/or Financial Agent for home care, if that is your wish. Also, I have clients complete an attachment to the AHCD in which you specify whether or not you want 12 medical procedures in 4 different mental states. This form relieves your spouse, child or designated AHCD agent from making these very traumatic decisions including the removal of life support.
  7. Burial, Cremation, or What? I feel that it is vitally important to make your intentions known regarding how you are remembered and the disposition of your mortal body. I have had the pleasant experience of a mother who has written down her entire memorial sequence including the hymns she wants to be sung and by whom. She has pre-paid her disposition of remains and cemetery marker. This has removed many difficult arrangements by my sister and myself at this emotional time.

At this point, I want to issue some caution on pre-paid plans. There have been some fraudulent schemes on seniors and their families regarding pre-paid arrangements. I would advise you to obtain some kind of history and references on anyone you are dealing with for pre-paid plans and obtain a detailed statement in writing of the merchandise purchased and the effects of replacement if such is no longer in stock. The average funeral costs about $6,500. An alternative to purchasing a pre-paid plan is to set money aside in your Trust account or in a separate account specifically for that purpose. Once you make these arrangements you can rest in peace and so will your family.