Wednesday, June 17, 2009

Fw: Get Rich Slowly-- Do It Now Estate Planning

It's inevitable that we all will die. What's scary is not knowing where or when. After my frightening bout with DVT after my hysterectomy, I can tell you it's a bit of a shock when you become aware of your own mortality. Be smart and take the time to do these little steps along and along. Most won't hurt a bit, like #9.


I know from experience watching a friend who suddenly found out the executor of an estate could impose his personal religious views on the heirs, including my friend, who ended up with nothing from his grandmother's estate. Grandma hadn't spelled out her promises to her grandson that he could have her collection of Depression glass, or her antique sewing machine no one else wanted. All those things were sold and given to charity because my friend --a licensed minister of a non-Christian faith-- refused to "return to the Pentecostal faith" of his childhood. Yes, the grandmother's will said the executor could "distribute her money and goods as he saw fit."


In a similar manner, I know as a wife that my DH wants to be cremated and his ashes scattered in the sea he loved. My mother in law will be appalled at this, I think. She feels it important to have a burial in a grave so the living may mourn, so unless I have written instructions, there might be a battle royale over my DH's corpse. I will be devastated enough without that ordeal, thank you.


Come to think of it, I'd better update my version of #9 ASAP. If I pass first, DH wouldn't be able to find the current bills, much less know how to pay them online. Oh, dear.


Get Rich Slowly

Estate Planning 101: Preparing for the Possible — and the Inevitable

Posted: 17 Jun 2009 05:00 AM PDT

This is a guest post from Robert Brokamp of The Motley Fool. Robert is a Certified Financial Planner and the advisor for The Motley Fool's Rule Your Retirement service. He contributes one new article to Get Rich Slowly every two weeks.

We interrupt this regularly cheerful website to bring you some unpleasant news: You're not going to live forever. And, just to pile on the unpleasantness, you might become incapacitated before you join that Great Tax Shelter in the Sky.

I know, this isn't fun to think about. But what's even worse is not thinking about it at all, which could leave your family trying to sort through all your affairs at a time of turmoil and grief.

We're talking about estate planning, something many think is just for "rich" people — but it's not. Everyone should take the following 10 steps to get their legal ducks in a row.

  1. Create (or update) your will. If you die without a will, the state decides who gets what (including your kids or pets), costing your family time and legal fees. If you already have a will, update it every three years, whenever you go through a significant life event (e.g., marriage, divorce, sell a business), or if you move to a different state.
  2. Get a living will. Make known the kind of medical care you wish to receive, and at what point you no longer wish to receive any care.
  3. Appoint a durable power of attorney. Designate a trusted person to handle your financial affairs if you ever become incapacitated.
  4. Factor probate into your plan. Probate is the process by which the state validates legal documents and ensures they're properly executed. Depending on the state, this can be a lengthy, costly, and public process. There are several simple ways to avoid probate (discussed later) and a few more complicated and expensive ways (e.g., trusts). Research the probate process in your area and determine whether bypassing probate should be a priority.
  5. Update your beneficiary forms. Insurance policies and investment accounts with properly completed beneficiary forms bypass probate and go directly to the named beneficiaries — even if the deceased person's will directs the assets to go to someone else. Contact your financial-services companies to make sure they have updated forms, and keep copies for yourself.
  6. Review the titling of your property. The legal status of your accounts, home, and other assets will also determine whether they bypass probate and a will. For example, an asset that is "joint tenancy with rights of survivorship" will become the sole property of the surviving co-owner(s) when another co-owner dies. That automatically disinherits other heirs from that asset, which may or may not be what the deceased intended.
  7. Make moves to lower estate taxes. If the sum total of all you own — investments, cars, homes, furniture, collectibles, and other assets — is close to $2 million, then start considering strategies to lower your potential estate tax bill.
  8. Know the truth about trusts. Trusts can be useful for avoiding probate, lowering estate taxes, and providing for relatives who may not be able to manage assets on their own. But they can also be expensive and over-promoted by law firms pejoratively known as "trust mills." Get informed before agreeing to a trust.
  9. Create a document that explains everything. If something were to happen to you, you'd want your family to know how to locate your accounts, insurance policies, legal documents, safe-deposit boxes, hidden stashes of cash, attorney, financial planner, and other trusted advisors. Include the important information in a document that you give to someone you trust.
  10. Discuss your plan with the people who matter. Explain your wishes to important friends and family, especially if they might have a future role to play (for example, you want them to raise your kids if something happens to you). And encourage them to get their own estate plan. If your relatives have their affairs in order, it could spare you a great deal of difficulty down the road and keep as much wealth as possible within the family.

The Bottom Line
Those are ten important steps, and they'll involve some very difficult decisions, such as who will be your executor and your plans for your final arrangements. But creating a well-designed, complete estate plan will save your family a good deal of heartache and money.

As fee-only financial planner Sheryl Garrett (of the Garrett Planning Network) told me during an interview:

Get your financial household in order and it will take as much of the financial burden off of your family and your survivors. When death occurs, it is a very, very traumatic thing on the surviving family. Don't make it worse by not taking care of your financial affairs ahead of time.

How do you get all this done? Seek out the help of a qualified, experienced estate-planning attorney in your area. Yes, you can take care of some of this by putting your notarized John Hancock on forms downloaded from the Internet. But laws vary from state to state, and recommendations vary from person to person. So spend the extra money to get the professional help. And send this article to all your relatives; making sure they have a solid estate plan will save you grief and money down the road.

J.D.'s note: I was just talking with our house painter about this on Monday. He's settling his mother's estate, and he says it's a nightmare — one filled with lawyers and $100,000 in fees. He told me, "Get a will. Learn from my family: Get a will." Photo by Seize the Photo.

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