Have the Estate Planning Talk

In honor of National Estate Planning Awareness Week, I talked to two different professionals, each of whom offered specific advice about how to conduct difficult family conversations about money in general, and estate planning specifically. Why is this topic so hard? “Because feelings and money get tied up,” says psychologist Lisa Damour. Money can evoke feelings of control (or lack thereof), privacy, dignity, shame, fear and lack of confidence. And when we express our concrete views on financial matters in a way that minimizes the emotional aspects, things can get thorny. Just imagine an exchange like this:

Son (age 40): “Mom, have you and Dad updated your will recently?”

Mom (age 75): “Why—are you hoping that we will die soon, so you can finally pay off that big mortgage that we warned you not to take?”

You can see how these kinds of conversations can go downhill pretty fast, which is why each side needs to resist the urge to grab whatever bait is thrown out. After all, you are not going to litigate your entire relationship with your parents or your adult children during these interactions. Just like she tells parents of teenagers to “not take anything that they say so personally”, Damour’s advice applies to discussing financial and estate issues with your loved ones.

Instead, of jumping in full throttle, estate attorney Virginia Hammerle says that it is helpful “to focus on an isolated issue, like titling of a bank account or making a beneficiary designation,” which can lead to a broader discussion on family finances and estate planning.

Once you break the ice and start the process, it is helpful to ask what goals you are trying to accomplish. Do you want to ensure that your assets will be passed to the next generation and beyond? Are you worried that one of your heirs will squander any money that is left to him or her? Do you want to be charitable? Are you anxious that you will offend one of your heirs? The good news is that by discussing your concerns with a qualified estate attorney, you can build a plan that addresses the issues that currently exist. Remember not “to get stuck on the next fifty years,” says Hammerle. “Every estate plan can be changed and in fact should be revisited every few years. Here are the basic documents that you will likely draft:

• Will: Ensures that assets are passed to designated beneficiaries, in accordance with your wishes. In the drafting process, you name an executor, the person or institution that oversees the distribution of your assets. If you have minor children, you need to name a guardian for them.
• Letter of Instruction: This may contain appointment of someone who will ensure for the proper disposition of your remains, creepy, but important if you are choosing a method that is contrary to your family’s tradition.
• Power of Attorney: Appointment of someone to act as your agent in a variety of circumstances, like withdrawing money from a bank, responding to a tax inquiry or making a trade.
• Health Care Proxy: Appointment of someone to make health care decisions on your behalf if you lose the ability to do so
• Trusts: Revocable (changeable) or irrevocable (not-changeable) trusts may be useful, depending on family and tax situations. For 2016, the first $5.45 million of an estate is exempt from federal estate taxes. If an estate is above the threshold (or twice that for married couples), you may want to consider a trust.

Estate Planning Checklists

It’s National Estate Planning Awareness Week, which means it’s time for me to nudge you to "do estate planning". I received great feedback when I published estate planning advice last year, soon after my father died. A year later, I have fine-tuned a few things, but must say emphatically that while you should consult with and hire a qualified estate attorney to help you through the process, estate settlement requires a lot of work from the Executor/Executrix, so be prepared! Prior to death, here are the basic documents that you will need:

Legal Documents

• Will
• Letter of Instruction
• Power of Attorney
• Health Care Proxy
• Trusts (not necessary, but many people have either revocable (changeable) or irrevocable (not-changeable), depending on family and tax situations)
• "DNR" or "Do Not Resuscitate" order (this may need to be completed upon each new entry to hospital or nursing home)

Accounts

• List of all bank accounts
• List of all user names and passwords
• List of automatic pay accounts with name and contact information of each payee
• List of safe-deposit boxes
• 401 (k) accounts
• IRA's, Roth IRAs
• Pension documents
• Annuity contracts
• Brokerage account information (name, contact phone number and e-mail address)
• Detailed list of savings bonds (and copies of actual bonds)
• Life insurance policies (private and through employer)
• Long Term Care insurance policies

Other Documents

• Housing, land and cemetery deeds
• Mortgage accounts
• Proof of loans made
• Vehicle title
• Partnership and corporate operating agreements
• Previous three year's tax returns
• Marriage license
• Divorce papers
• Military discharge information
• List of contact information (contacts on accounts, names, current addresses and Social Security numbers of all people named in the legal documents, as well as the contact information for the estate attorney and CPA who will be handling the estate.)

After completing all of this hard work, you need to inform your executor/executrix as to where everything is stored. My father actually made sure that I had an executed copy of all the documents, which was helpful.

After death, things get complicated, because you have to shift between grieving and doing. I learned not to go too fast with my mother, so that she did not feel overwhelmed. It’s helpful to remember that everyone in the family grieves in different ways, which is why patience and compassion are often your most valuable commodities during the process.

Get organized. I found solace in a spreadsheet, which helped me keep track of the estate settlement progression, but you can use any system that works for you. Just remember that there are usually many moving parts and you may not be at the top of your game for remembering everything that needs to get done. A visit to your favorite stationery store will help you keep records of everything stored neatly in one location.

Request plenty of death certificates. Some institutions want originals, not copies, and it’s easier to make the request from the funeral home, not after the fact from the city or state.

Keep track of all bills that are attributable to the estate. These include funeral and memorial arrangements, death notices and other ancillary expenses. The estate can reimburse individuals for these costs.

Contact the estate attorney. When you are ready, schedule time to meet with the estate attorney. He or she will likely tell you to gather documents and to ascertain a date of death valuation for all accounts to which the deceased held title. If there is a surviving spouse, you should itemize what is in both the living and deceased spouse’s names.

Contact the CPA. Even if there are no estate taxes due, in most cases, it will be necessary to file an estate tax return. If you prepare your own taxes, it may make sense to hire a pro to help walk you through the process.

A well-planned estate is a wonderful legacy you can leave your heirs--instead of untangling a messy estate, they can follow concrete steps, which allows them to take care of business while mourning their loved one.