By Samantha Garcia, CFP®, AIF®, CDFA®, Senior Wealth Advisor at Halbert Hargrove
Death is often the uncomfortable topic we all avoid, and yet it’s inevitable. End of life planning, while something many want to avoid, is crucial for many reasons: making your wishes known, reducing family conflict, providing for those loved ones left behind, and helping protect the assets you want them to inherit. It’s not as fun as planning a birthday party or a wedding, but I would argue it’s more important.
Make Advance Care Directives part of your planning
We may not like to talk about death or end of life, but if you are anything like me, you’ve thought about what you would like or not like. Maybe it’s before death and there is incapacitation, where you can’t make your own decisions. Would you like to be kept alive by machines, would you like to be an organ donor? Or maybe it’s just who is going to be the one to make those decisions for you?
Often the choices for incapacity are more important than those you make for after death. In a true crisis, who will be the one making decisions – and do those decisions align with your choices?
The documents important for this are Advance Health Care Directives. They state your choices, preferences, and who you would like to make decisions for you if you are unable to make them on your own. Directives might also include Do-not-resuscitate (DNR) orders and a Living Will; in addition, if you’ve created a Revocable Trust, you can include information about funeral arrangements and asset distribution.
Communicate – and document – end of life planning
Families are often complex, and tough times don’t always bring out the best in people. When wishes are not known or communicated clearly, there is usually tension with the family. So very many times people have told me that their family wouldn’t argue or dispute anything and they all get along well. Yet I can tell you from experience, that once there is money or emotions involved, many things can and usually do go awry.
In the case of incapacitation, there can be disagreements about medical choices, or guilt in deciding based on what a loved one may have wanted – and having to guess because it hadn’t been made clear.
There can also be disputes about inheritances. I encourage everyone to write things down. If there are collectibles, sentimental items, jewelry, etc. that you’d like someone specific to have, it should be written down and put in the same place as your trust/will if not specifically included.
Often, there are verbal commitments made, but without having them secured in writing, it’s easy to overturn as a ‘he said, she said’ moment. Disagreements can escalate quickly.
An end of life plan can help protect your heirs
If you are married, there will likely be a spouse left behind, or maybe you’re a parent to a special needs child or adult who may not have the ability to handle the estate you leave. In these cases, it’s important to put in the work up front to ensure they are provided for. For example, a spouse may not be involved in handling the finances and may not know what to do; or perhaps there is a young widow(er) who remarries and there are children left behind.
There are ways to ensure that what you wish to bequeath to your heirs is protected from another marriage of the surviving spouse. Additionally, if there are beneficiaries with special needs, an estate plan’s provisions can be created to prevent them from inheriting directly to protect them from losing assistance. Other provisions can help avoid having an heir spend down the whole amount at once.
Certainly minors should be thought of when it comes to estate planning. What happens if both parents are killed in an accident, leaving behind a child or multiple children? Without written instructions in a will, the child(ren)’s custody become a battle. In the event something happens, shouldn’t the child left behind know you thought about them and planned for them to be cared for by those you chose? And made sure their future was planned for?
Protecting your estate is a cornerstone of end of life financial planning
Protecting assets could be an important reason to plan for end-of-life decisions. Without any type of legal documents in place, the estate may go to probate. Each state has different limits and rules around probate, so it’s best to consult with an attorney who specializes in the state where you reside. In California, an estate with a value over $208,850 would need to go through probate.
In Los Angeles and Orange County, California the attorney and executor fees are determined by the value of the estate. For example, an estate worth $1,000,000 would have costs of approximately $46,000 just for the attorney and executor fees. And there are other court costs, appraisal fees, publication fees, etc. that are not included in the $46,000. Then there are the time delays for the process of probate, which can be 9-18 months on average for a simple estate – with more complex estates taking longer to settle. Probate is also public record, meaning the details are out there for anyone to look up. Why would you want to put your family through that?
Outside of the time and money spent for probate, there may be taxes to consider as well. The federal estate exemption is currently $15 million for individuals and $30 million for couples, but there are some states that have a state estate tax that should be planned for. There may be ways to offset taxes to the surviving spouse or the next generation that should be thought through.
If there is a family business, it may be important for keeping the business going or handing it off to family who are running the business, instead of just splitting the assets evenly.
Be sure to secure professional advice about end of life planning
No one thinks their family will be the one to contend with disagreements and contested decision making – but do them a favor and put your wishes in writing so there is no question.
Better yet, meet with an estate planning attorney and have them draft the documents you need and have them signed and notarized. And discuss with your family members what they should expect. This make things much smoother for all parties involved when the inevitable happens. Your financial advisor should also be informed on your wishes.
At Halbert Hargrove, we happily review your documents with you to help identify areas you may want to discuss with your attorney and to be a sounding board as you think through and plan for end of life priorities and decisions.
Disclosure:
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser with its principal place of business in Long Beach, California. HH may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. Registration does not imply a certain level of skill or training. For information pertaining to the registration status of HH, please contact HH or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov). Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com.
This blog is provided for general information purposes only. No portion of the content serves as the receipt of, or as a substitute for, personalized investment advice from HH or any other investment professional of your choosing. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither HH’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if HH is engaged, or continues to be engaged, to provide investment advisory services. HH is neither a law firm nor accounting firm, nor does it serve as an attorney, accountant, or insurance agent. No portion of its services, or this content, should be construed as legal or accounting advice. HH does not prepare legal documents or tax returns, nor does it sell insurance products. No portion of the content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if HH is engaged, or continues to be engaged, to provide investment advisory services. All opinions or views reflect the judgment of the author as of the publication date and are subject to change without notice. All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted.
