Cascade Investment Group, Inc. is more than 20 years old and our advisors worked with clients for many years before our firm started. We have many long-term relationships with clients; at times with multiple members and generations of the same family. We value our association and position as a trusted advisor with so many people.
An unfortunate part of our work involves the times in our clients’ lives when someone passes away or becomes incapacitated. These events can come suddenly or happen over time. Either way, we have found that proper planning can alleviate some of the emotional strain caregivers and survivors feel and help make next steps easier to handle. Good estate planning gives time to grieve, to spend with family and to remember the recently deceased rather than fill that time with financial and legal issues that can be unsettling and difficult to discuss.
Good estate planning accomplishes many goals. One is to reduce taxes and have descendants receive more money that would otherwise go to the government. Another is to avoid probate battles as potential heirs will know what they should receive and where decisions are well-documented. There are other benefits like the ability to make medical decisions, make payments and provide care while a person is still alive.
From our perspective, it is worth taking time this month to review your estate goals and make sure your legal documents match those goals. Here are some challenges we have seen and solutions that clients have taken to avoid them.
1. Aging parents and dementia. We have had several clients who have made poor financial decisions as a result of undiagnosed dementia or the onset of dementia where no action was taken to protect family members. These include gifts made to family members, property that was taken by care givers and personal financial information that was given out and used for identity theft. Some of these issues could be avoided by the use of the right legal documents.
One technique is the use of trusts to own financial assets and personal property. The trustee can be a family member, a friend or a professional organization that can step in to pay bills, handle assets and enable the right financial assistance to have the beneficiary live in the best possible way. Another technique is to give medical power of attorney and a general power of attorney to someone to help assist in making decisions. Some families find it easier to help set up automated payments for regular bills to make sure there is no loss of utilities, rent or important insurance coverages.
2. Out of date documents. When was the last time you reviewed your will, other estate documents and beneficiary designations on retirement accounts, TOD accounts and life insurance? Transferring assets on death happens much quicker when these are correct, otherwise there is the risk of lawsuits against the estate. Take time this year to review beneficiary designations with us and your attorney. We have seen instances where assets took a long time to transfer due to the lack of planning or out of date documents.
3. Cost basis. Do you have what you paid for each investment on your account statement and documentation of cost for houses and other significant personal property? If you become incapacitated, a trustee or family member might need to raise cash by selling assets. Updated cost basis will help them understand the tax implications of these transactions. 2017 might see the end of the estate tax, but if this plan goes through it could also mean a decrease in the value of the step-up or loss of the step-up on death. This could mean heirs pay higher taxes on estate gifts, especially if there is no basis on a statement and it’s assumed the basis is zero.
4. The right people. Do you have the right people in place to help you and your heirs? Your estate documents could include appointments for trustees, guardians, medical powers of attorney, general powers of attorney, end of life decisions, beneficiaries, spouses, ex-spouses, charities and more. Are these up-to-date? Do you have the people you want most providing you care and receiving inheritances?
Every few years, take out your will and other estate documents for a quick review. From our perspective, it seems like peoples’ lives change enough every five to 10 years that will require some updates to be made. Some of these changes can be handled easily through beneficiary forms. Other times, the changes require a complete rewriting of the documents.
Jack Lemmon is reported to have said that, “death ends a life, not a relationship.” Having an updated will and making sure your choices are in place gives a gift to those surviving you and lets them spend their time remembering you fondly instead of chasing after court documents when you are gone.