Untimely Death Provides Lessons for Proper Estate Planning
Submitted by Desmond Wealth Management, Inc. on October 5th, 2019Sometimes it takes celebrities like Whitney Houston or James Gandolfini, to show how poor estate planning can be costly and disruptive in so many ways. Philip Seymour Hoffman’s untimely death on February 2, 2014 ended a great film career and we mourn for both the man and the future film-going pleasure we will all now be denied. As is so often the case when a public figure passes away, Hoffman’s will garnered more than a little media attention. It was drafted in 2004 and references only the first of his three children, as a result. The provision that is making headlines is Hoffman’s desire that his son be raised in Manhattan, Chicago, or San Francisco, and the further wish that if his son could not reside there, that he would visit those cities at least twice per year so that he “will be exposed to the culture, arts and architecture that such cities offer." Hoffman’s will is a prime example of how an estate plan can help ensure that your desires are understood as well as the importance of keeping the plan up to date.
When a person dies suddenly, family members are often ill-equipped to handle the estate administration, especially during a time of mourning the loss of a loved one. You can make this process easier by, in advance, organizing your affairs and documents so they can be easily located and understood. A good place to start is:
- Documents and Records - Keep good records of your Estate Planning documents and your assets, including deeds for real estate, investment accounts, bank accounts and ownership documents for corporations, LLCs and partnerships. Be sure to put them in a place where they can be easily found.
- Don’t forget to review and update your estate documents - As Hoffman’s will illustrates, it is important to review your estate documents on a regular basis, when your desires change, or when any major life-changing events occur such as marriage, divorce, having kids, adoption, etc.
- Prepare a List of Important People - Don’t keep it to yourself. Your heirs will need to know the names, addresses and phone numbers of your attorney, CPA, financial planner, brokers, and any other people with knowledge of your documents or assets. Knowing these people will make it easier for your family to administer your Estate Fund.
- Your Assets to Your Trust - By transferring ownership of assets to your Trust you can exclude them from the time delays and cost of Probate. Funding will often facilitate more effective control of the assets.
- Designate Life Insurance Policy Beneficiaries - Life insurance benefits are paid directly to the designated beneficiary. The reasons for which you purchased insurance may change depending on life events, and the choice of beneficiaries may change too. Periodically review your policies and your beneficiary designations to ensure payment to the appropriate parties. If no beneficiary is named, or the beneficiary has died, the Plan benefits are subject to Probate. This can also mean the benefits are subject to probate fees, and may be reachable by creditors when they would otherwise be protected.
- Designation of Persons for Making Legal and Medical Decisions - You should continually review and update the list of people you have designated to make legal and medical decisions in the event you become incapacitated. Over the years, your ideas for who you may want to make these decisions may change and you need to revise your documents to protect yourself and your family.
- End of Life Decisions - Prepare a document or discuss with your family members your desires for end of life decisions. Doing so will take pressure and anxiety away from your loved ones and enable your final wishes to be fulfilled.
- Distribution of Personal Items - Prepare a list of items of personal property you want to be distributed to specific friends or family. This will allow you to give items of sentimental and/or economic value to people you care for. Not doing so may cause personal items to go to those who may not appreciate or deserve them.
- Service Providers - Make a list (with phone numbers) of the individuals or companies you use to handle repairs and maintenance, such as landscaper, plumber, etc. Not knowing who to call causes additional stress to your family at an already stressful time.
- Digital Assets - Make a comprehensive list of all digital assets, including online accounts, passwords, data files, email accounts, websites, hard-drives, important Word and Excel documents, online storage accounts and social media accounts. Get your kid’s password somehow; maybe make some kind of a deal with them after explaining the need. This is a growing area and few states have passed legislation.
They say two things in life are certain: death and taxes. Plan for both - now. You can always make changes, so starting off with where you are now is an excellent step, no matter how your thinking ultimately changes. The cost of not having a plan can result in family disputes, your desires not being carried out, higher court fees, and/or higher tax liabilities.
Now, the rest is up to you! However, if you have any questions about estate planning or if we can provide assistance in any way, please get in touch.