- Consumer
Stop Heir Loss with Estate Planning Propecia – Part 1
Summary:
“I’m not only the Heir Club president, I’m also a client.” “Finding the right heir loss
solution is an important decision that can accentuate your lifestyle in
unimaginable ways. But one size does not fit all heir loss cases.” Estate
taxes, medical expenses, jealous siblings, legal fees, or other avoidable
problems might infringe on, or even eliminate, your anticipated inheritance. The
solution should be as individual as you are. We’ll use the title “parent” and “kid”
to simplify the discussion, but the concepts applies to many relationships of benefactors
and beneficiaries.
Get Involved
Your active participation not only can maximize your
inheritance, but can provide tremendous assistance to your parents or other
family member or benefactor. Too often, poor planning dissipates money.
Although the proposition may offend some people’s sensibilities, you should not
feel guilty about planning to maximize your inheritance. Invariably, inadequate
planning results in spending significant sums of money on unwarranted legal
fees, professional fees, medical costs, and so on. Done properly, maximizing
your inheritance will not harm your parents or other benefactors. Rather, it
will safeguard their own interests and ensure that asset distribution after
their death will reflect their true intent.
Open a Dialogue.
To inherit more, your first step should be to open a
dialogue with your parents (aunt, uncle, or other prospective benefactor).
Since much of the planning depends on cooperation from your benefactor, without
a dialogue there is often little you can do to maximize your inheritance. ◙ You could discuss strategies that might
give your parents comfort in later years, ways to assure their financial
security, your own estate planning, charitable giving, or religious issues.
Pick the most feasible approach, move slowly, and be sensitive. ◙ Focus on how you can help protect your
parents. Has an overly aggressive stockbroker undermined your parents’
financial security? Once you are actively talking about your planning, it may
become a simple matter to segue from a discussion of your living will to a
discussion of theirs. You need only to ask if they agree with your decisions
and if they are in any way similar to the decisions your parents made when
drawing up their living wills.
2ND Spouse/Partner
◙ The classic
2nd marriage estate-planning approach uses trusts to provide for the
new spouse while protecting assets to ultimately be distributed to children
from a prior marriage. Typical estate tax bypass and marital (qualified
terminable interest property, or QTIP) trusts can accomplish these goals. There are a myriad other variations and
options. ◙ A life
estate is common. Mom let’s her new husband live in the house for life, but
then the house reverts to you and your siblings. Sounds great and seems simple,
but it’s not. Although it’s common and inexpensive, it’s not always the best
option when you want to maximize your inheritance. Too many ambiguities and
issues are left unsettled when implementing a standard life estate. What if the
house needs a new roof? What if the new husband moves into a nursing home? ◙ Prenuptial (spouse) or living together
(partner) agreements are vital to protecting assets from the new
spouse/partner. If dad uses trusts in his will to protect your inheritance,
that might be nice, but it may prove academic if his new partner/spouse spends
or takes all the assets before his death.
Get dad to consider entering into a prenuptial (or postnuptial) or living
together contract with his new spouse/partner to minimize the likelihood of
legal and financial entanglements if the relationship terminates. ◙ A spousal right of election can be important in
determining the ultimate distribution of any decedent’s assets. This is a right
under state law for a surviving spouse to take a specified minimum percentage
of the deceased spouse’s estate no matter what the will said. Unless your
parent has planned to address this, or had the new spouse waive it, you might
loose a large chunk of your inheritance.
Insurance Coverage
A conversation about QTIPs may prove irrelevant if key
assets are lost to fire or theft. Insurance means more than life insurance. ◙ Life insurance could be essential to
protect your parents’ assets by providing for a new spouse, paying estate
taxes, or providing liquidity to ride out a downturn in the market before you
have to sell. It can be the toupee of planning – covering up for assets
bequeathed elsewhere. ◙ A house
without fire and casualty insurance may be a total loss in the event of such a
calamity. ◙ A theft can
be devastating to the financial worth of a parent who has never insured
valuable art, coins, or other collectibles, or has insurance that is based on
an assessment made 30 years ago. ◙ Elderly parents who have no nursing home or long-term
care insurance may deplete their assets to the point that their children must
help support them.
Financial Planning/Investments
◙ Consolidation
of a parent’s financial assets is a simple, no-cost, step to help your parent
achieve important financial goals: control over her finances, safety through
better investment planning, simplicity so she can follow the accounts and
transactions, etc. Consolidation minimizes probate expenses and delays. ◙ Fewer
accounts makes it much easier to maintain an investment allocation consistent
with your parent’s risk profile. ◙ Budget is not
a 4 letter word. Proper investment decisions require an analysis of financial
needs, time frames, and expenses. Who is helping your parents make these
decisions? Proper investment and budget planning will assure that your parents’
wealth will, to the extent feasible, last them throughout her lifetime. ◙ Longer life spans mean investment and
spending have to consider the real time frame. The average woman will live 22+
years in retirement. In 1950, the figure was only 14 years. That is 8 more
years to risk running out of money and to exhaust your inheritance. The only
way to assure your parent adequate resources for her retirement years is to put
in place an optimal investment strategy. And the real issue is that the
preceding figures are averages. An average means a lot of people will live a
lot longer in retirement than 22 years. So unlike a popular book about dying
broke, your advice to your parents should be to focus on saving and spending so
that their money will last to say 95%+ of their life expectancy. ◙ Investment
policy statements (IPS) are an essential tool. If your parent hired a
professional to manage her money, she should have signed an IPS that clearly
identifies heir investment goals and objectives.
Theft and Loss
Theft or loss of valuables is not uncommon. 50% of
those over age 85 have some cognitive impairment. ◙ As parents age, the likelihood
increases of home health aide walking off with a coin collection and a piece of
jewelry inadvertently ending up in the trash. Take steps to account, insure and
protect personal property. Move small valuables that are not needed to a safe
deposit box. ◙ If a parent
dies, secure their residence (change locks and alarm codes or install an alarm
if none existed). ◙ If a parent
loans family or friends money, encourage them to have a note signed documenting
that the advance was a loan and not a gift. Many borrowers seem to have
selected memory about the nature of the transaction when questioned at a later
date.