It was probably Jim Morrison, the infamous lead singer of the 1970’s rock group The Doors, who put it best “no one here gets out alive”. What he was referring to is that, no matter who you are, where you come from or how rich you happen to be, inevitably every one of us is going to pass on one day. Seeing as it’s inevitable, one of the best things that a person can do, especially if they have a lot of money, investments, land, homes and so forth, is to make sure that their estate planning is thoroughly taken care of.
Frankly, even if a person doesn’t have all that much money but has a home that’s paid off and a few bucks in a savings account, estate planning is something that is not only important to take care of before they pass but also will make for much fewer problems for loved ones who are left behind. With that in mind we put together a blog about some of the things that you should do as far as estate planning before you pass and how to avoid common mistakes. We know it’s not exactly an uplifting subject but, if you take care of it now, believe us when we say that your loved ones will be much better off after you’re gone. Enjoy.
Unless you’re actually a certified accountant or a practicing estate planner the first thing you’re going to want to do is contact a professional. Keep in mind that even professionals can make mistakes and research your options thoroughly. If you have knowledge of someone in your family that passed in the last few years and used an estate planner you may want to contact their family and find out who that person is. Remember, any mistakes that your estate planner makes probably won’t be discovered until after you’re gone, leaving your family to clean up the mess.
Here are a couple of examples: In Chicago there is a lawsuit underway due to the advice that an estate planning attorney gave his very rich client. This attorney suggested a ‘60 day rollover’ to be used with what would be an inherited IRA but, unbeknownst to the client, this is a severe no-no with the IRS. It only became clear after his death and so now his family is embroiled in a ridiculously large and costly lawsuit.
In Clearwater Florida a client was told that she should create a trust using a ‘fee simple’ method so that, if she were to pass away, her minor daughter would get the bulk of her inheritance when she became an adult. The problem; with the fee simple plan, if she passed away before her daughter was an adult her daughter’s new guardian, her financially irresponsible ex-husband, would have received a check for practically the entire amount of the residual balance left in her trust, an obviously bad idea that only came to light six years after the initial estate planner set things up.
When setting up your estate planning it is a good idea to take into account anything that could possibly happen and make sure that you have planned for as many contingencies as possible. For example, what would happen if the mother were to die first? How about the father? What would the situation be if both parents were to die at the same time? These aren’t pleasant things to have to contemplate but, when you consider that unpleasant things happen every day, it’s better to talk about them and plan for them before they happen.
Communication between family members that have been left behind is also vitally important. A great example of this is a family in Atlanta Georgia who, after their father had a massive stroke, moved him out of his house, sold the place, shut down all of his banking and checking accounts and had him live in their home until he passed away seven months later. It was only then, when going through his personal things and paperwork, that they found a $1 million life insurance policy. The problem; since the policy was being automatically paid for out of his bank account, and since they had shut down that account, the insurance policy had been canceled and voided due to non-payment and was worth nothing. Bye-bye $1 Million dollars.
Even for people that plan their estate and their affairs quite well and define who gets all of their major assets, there are times when seemingly non-valuable items will be fought over by surviving family members. It is for this reason, especially if a person has lots of tchotchkes, memorabilia or other collectibles, that these things are also put into the estate planning paperwork and given to specific family members.
At the end of the day the best thing that you can do for your family, especially if you have a large amount of assets, investments and money, is to thoroughly plan where it’s all going to go before you go. In this way not only will you have peace of mind while you’re still here but you’ll ensure that your family won’t tear itself apart squabbling over all of the assets you accrued during your life and after you’re gone.