ESTATE PLANNING

If you are concerned that your children’s inheritance is being reduced by the collapse of the housing and investment markets, rising medical costs, a sluggish economy and a longer-than-expected lifetime, you needn’t be. According to a recent study, family values, traditions and history still mean more than money as an inheritance.

These results are from the 2012 Allianz Life American Legacies Pulse Study* which surveyed baby boomers (age 47 to 66) and “elders” (age 72 and older). Allianz Life conducted a similar study in 2005. Interestingly, despite the financial crises that occurred between 2005 and 2012, the results were strikingly similar, with a high percentage of both boomers (86%) and elders (74%) agreeing that family stories, values and life lessons are the most important part of a family’s legacy.

In addition, in both studies, only four percent of boomers said that an inheritance is “owed” to them. By contrast, the number of elders who felt an inheritance is owed to their children dropped from 22% in 2005 to 14% in 2012; this may be a result of their concern about having to use more of their savings for living expenses, compounded by loss of savings from lower market values.

While the size of the financial inheritance is not seen as important, planning is. A high percentage of both groups (82-84%) emphasized having instructions in place in the event a parent were to become terminally ill or permanently unconscious. Both have strong desires to avoid family conflicts when it comes to estate planning and legacy issues. Younger people also believe that keeping family possessions is important.

Elders also want to impress upon their children the importance of personal responsibility. About three-fourths of elders surveyed have obtained some professional assistance with estate planning and have initiated discussions with their children about end-of-life and inheritance issues. By contrast, only about a quarter of the boomers have planned their estates and less than half have had discussions with their own children about these issues. That may be partly due to boomers being less frugal in general than their parents, or that they simply feel they have plenty of time left to plan.

Wondering how to ensure your family values, traditions and history are passed on to future generations? Here are some ideas to help you get started.
-Encourage elders to tell stories about their family and their own lives and experiences. Family gatherings when multiple generations are present are perfect, but one-on-one conversations work well, too. Videotape as much as possible to capture not only words, but also the storyteller’s personality and mannerisms. No need to have a formal interview; just put the camera on and let it roll. Don’t tape too long at a time, though; the storyteller could tire easily. If you don’t have video, assign someone to take notes and share the stories with other family members.
-Scrapbooking and photo albums are great ways to document family history by themes and occasions. Just be sure photos are identified with names, dates and places.
-Write your memoirs or autobiography, family history, or a collection of essays about your relatives or what life was like when you were growing up.
-Write letters to your children or young grandchildren about life lessons you would like them to learn from you.
-Share your faith and/or testimony with family members in person or in writing.
-Create a family medical history. Include date and location of births and deaths, cause of death, burial location, marriages and children, notable illnesses and medical conditions.
-Make an inventory of special family heirlooms and possessions. Take a photo of each and document its story. If you want a certain person to receive a certain item, include that in your estate plan. Better yet, if you can bear to part with it, go ahead and give it to that person now.
-Use the internet to share family history and traditions with other members of your family. Create a family website. Post stories or videos of your elder storytellers and old family photos. Document family reunions, marriages, births and passings.
Note: If you store information on your computer or online, be sure to provide access for someone else in the event something happens to you. Include specific information about where files or accounts are located and passwords that might be needed to access them.

Most importantly, talk with your parents or children about end-of-life issues (incapacity and health care directives, location of important financial documents, estate planning) and what is important to them and to you. Do this now, before illness or aging interfere and prevent you from having these discussions.

* 2012 Allianz Life American Legacies Pulse Study, sponsored by Allianz Life Insurance Co. of North American, surveyed 1,000 “boomers” (age 44-67) and 1,007 “elders” (age 72+). The online survey was conducted January 12-19, 2012. For more information about the survey, go to https://www.allianzlife.com/about/news_and_events/news_releases.aspx?articleID=106

Instead of blogging about New Year’s resolutions, I’m thinking the better topic is New Year’s solutions. Solutions to the never ending question of “why can’t I sleep at night.” This question means something different to everyone. For some, it could be time to address those nagging pains and buy a new mattress. For others, those nagging pains are as sign that there’s a serious problem that needs medical attention. The truth is our inability to get a full 8 hours stems from the fact that as a society, we have no inner peace.

Inner peace is not just a Buddhist or Hindi sentiment. Inner peace can refer to peace of mind, or being at peace. This peace may come from a strong sense of self, or religious or spiritual faith. Being at peace is usually the opposite of being stressed or anxious. Therein lies the problem. When are we not stressed or anxious? Time is against us more often than it is for us. Our burdens are heavy and we feel compelled to keep them to ourselves.

Here are a few solutions; and I will be trying a few.

Ask for help. Stop trying to be everything to everyone. Pick your biggest stressor and focus on that. Reduce your to do list by one item per day (maybe pick the one you didn’t do the last few times it was on your list). Use all your resources (time, money, energy, technology, people, etc.) Create a bedtime routine, waking up routine, and a coming home routine. Procrastinate less.

We all procrastinate, whether it’s on the big things, or the little things. For me, I often say, I’ll do that later when it comes to simple tasks. For the last week if I hear my inner voice say “I’ll do X later”, I make sure and do it now. It’s worked so far. That’s probably because I’ve only been implementing it on small tasks, but I’m going to try to get to the bigger things soon. Baby steps.

Many people hear or see the word “trust” in estate planning and think they are all the same. But there are different kinds of trusts for different purposes, and they perform differently.
For example, an irrevocable trust is frequently used in tax planning. Generally speaking, once an irrevocable trust is established, you cannot change it or remove assets that have been transferred into it. These include charitable trusts, life insurance trusts, asset protection trusts, grantor trusts, qualified personal residence trusts and others.

A testamentary trust is created after you die by a provision in your will. This is a “trust in a will.” It can be used in tax planning or to manage assets for minors or other beneficiaries. Common estate planning trusts used by married couples, like an A-B trust, or credit shelter trust, or QTIP trust, can be part of a testamentary trust. But because a testamentary trust is part of a will, it cannot go into effect until after you die and your will has been probated. It provides no protection or instructions in the event of your incapacity, and any provision you have made for others in your will cannot go into effect. If you have a trust in a will and become incapacitated, your family will probably have to go through the probate system twice—first, for a guardianship at the incapacity and then to probate your will after you die. Both processes are public, and can become expensive and time consuming.

A revocable living trust, known simply as a living trust, is now preferred over a will by many consumers and professionals. While it is similar to a will in that it has instructions for what you want to happen to your assets after you die, it also contains instructions in the event you become incapacitated. It becomes effective while you are living instead of only after you die. When you set up a living trust, you transfer ownership of your titled assets from your individual name to the name of your trust, which you control. (This is called funding your trust.) Technically you no longer own anything, so there is no reason for the courts to become involved when you die or if you become incapacitated. The concept is very simple, but this is what keeps you and your family out of the courts.

So, how do you know which kind of trust you have? You can read the document; it should say “revocable living trust” or “last will and testament” right up front. Or ask the attorney who prepared it for you.

Here’s the bottom line. If you did not transfer your assets to your trust, you either have a testamentary trust (trust in a will) or an unfunded living trust—neither will prevent court interference at incapacity or death. If that is your desire, take action now before it is too late.

Most people start thinking about planning their estates when they reach retirement age.

After all, the “normal” progression of life is to get out of school, get a job, get married, have kids, get your kids through college, retire, become grandparents, enjoy life…and then, after a long and fulfilling life, we know that we will eventually die.

But we all know that real life rarely happens this way. People have children and don’t get married, people get divorced, they marry more than once, they may never marry or have a family. Real life is full of options, choices, and twists of fate.

Dying, of course, is not an option. Nor do most of us choose how or when it will happen to us. Every time we leave our homes and get in our cars, we are at risk of being in a fatal car accident. Some people never have to leave their homes. Fires and carbon monoxide poisoning take hundreds of lives every year. In some parts of the country, drive-by shootings have taken the lives of innocents, young and old. Athletes in top physical condition die on the practice field. People of all ages are dying of cancer and other illnesses. And now that terrorism has reached our shores, hard-working people in the prime of their lives have died just because they went to work, like any other day.

We take precautions to try and extend our lives for as long as possible. We make sure our cars are in working order. We inspect our homes for fire hazards, and use smoke and carbon monoxide detectors. We eat healthier foods, exercise, and have regular checkups. And, since 9/11, we have all become more aware of our surroundings. No guarantees, but we are doing the best we can.

But what if that is not enough? What if you don’t make it to the end of the “normal” road of life? What would happen to your loved ones if you died today? Will there be enough money to provide for them the way you would want? Will they even be able to get to the assets you leave behind, or will your assets be tied up in courts, held ransom by attorney fees and court calendars? How long will they have to wait? And how much will they really get?

Wouldn’t it be better to make sure that the people you care about will be taken care of the way you want, especially if your life were to end suddenly and unexpectedly?

Or, let’s say you do live until a ripe old age. You could gamble, and wait until the last possible minute to plan your estate. You could be like those people who make estate planning decisions from their death beds in the hospital. But all too often, those hasty decisions are unwise and wrought with error. Wouldn’t it be better to put a plan in place now (so you’re covered, just in case), and then possibly have years to think about it, polish it and fine tune it until it’s just right?

Planning your estate now doesn’t mean you will die tomorrow, just as buying homeowner’s insurance doesn’t mean your house will burn down tomorrow. But if you act now, you won’t have to worry about what could happen to your family if your life doesn’t follow the normal progression…or about making bad decisions when you’ve run out of time.

It’s called peace of mind…and you can have it. So, when’s the best time to plan your estate? Right now!