(Tuscon) Bill, a retired doctor, recently asked me: “What would you do if you knew you had 30 days to live?” Spend some quality time with family and close friends, of course. And then? Now this is the lawyer in me: double-check my estate plan.
So, Bill asked, “Why not do that now?” Indeed, there is no better time than the present to make sure that your family and friends feel your love. And there is no reason to delay putting one’s financial house in order.
There is another reason to place a review on the top of your priority list: This is National Estate Planning Awareness Week — the week that Congress set aside for “assisting the public in understanding the importance and benefits of estate planning.”
Estate planning is not just for the wealthy or the aged. If your biggest asset is your personality, you won’t need to worry about estate taxes. But someone will need to decide where your assets go, including bank accounts, real estate, IRAs, cars, furniture, digital assets and everything you own. It’s best if you make that determination yourself instead of the state you live in.
Statistics tell us that 4 out of 10 adults have wills (not enough). That includes all age groups. But if you break things down a little further, 8 out of 10 millennials do not have wills, while 8 out of 10 seniors over age 72 do.
Writing a will, checking assets (including in whose name assets are held), checking 401(k) and IRA beneficiary designations, examining life insurance policies, assessing the value of real estate and art and collectibles — these are straightforward and some would say simple things to take care of. That is, an organized effort will get you good results.
But that is not enough. What about changing circumstances and changing laws? And what about the potential inheritors? Should you teach them about your plan for them?
The RBC Wealth Transfer Report 2017 found that “individuals have every intention of transferring their [financial] knowledge to the next generation. However, it turns out that many families are repeating the cycle of inadequate financial guidance, delivering too little too late.”
There is a “remarkable gap between intention and action, resulting in a general lack of preparedness.”
Whether assets are to go to family or charity, there needs to be a conversation. Not about money, but about the plan and about making sound financial decisions. That is, inheritors will want to “anticipate the questions that a first-time inheritor might have about fulfilling their benefactor’s wishes and carrying out their responsibility,” quoting RBC’s report. “It’s likely that inheritors will want to know, ‘Do I need to pay taxes on these assets?’ or ‘Does my benefactor have a financial adviser who can help determine how to manage the inherited assets?’”
That brings up whether the inheritors’ interests and yours are (or should be) aligned. Statistics tell us that millennials are counting on an inheritance to pay for retirement, as reported by Bloomberg’s Suzanne Woolley. They view an inheritance as “sort of a safety net.” As Woolley points out, however, they may need to wait quite a while for the inheritance. Based on another survey of people with more than $1 million in investable assets, 53 percent expect to live to 100.
If a child’s retirement planning depends on an inheritance from you, that can be a surprise indeed. Being prepared avoids surprises and lowers family stresses.
As RBC points out, there is “a strong correlation between a person’s degree of preparedness and the confidence they have in their heirs’ ability to maintain their legacy.”
RBC said it well: Knowledge is the “most important investment anyone can make in their financial future, regardless of net worth or socio-economic status. Those with a solid financial education are better positioned to make more informed decisions to build, preserve and grow their wealth across the generations.”
This is how Bill Ringham, vice president and senior wealth strategist at RBC Wealth Management-U.S., put it: “Think of a plan as a guide for your heirs.”
I like that.
