Thoughts On Money


The Most Procrastinated Part of the Plan

Pipe

Friends of TOM,

You may have noticed that we skipped a publication last week, as we welcomed our newest subscriber, our son,  Shepherd Cru Cummings.  Thank you to all of you who sent kind notes, gifts, and prayers for our family.  A dear friend of the TOM blog started the little man off right with his own piggy bank which he is pointing at! 😊

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Man’s Search for Meaning

“A rich and mighty Persian once walked in his garden with one of his servants. The servant cried that he had just encountered Death, who had threatened him. He begged his master to give him his fastest horse so that he could make haste and flee to Teheran, which he could reach that same evening. The master consented and the servant galloped off on the horse. On returning to his house the master himself met Death, and questioned him, “Why did you terrify and threaten my servant?” “I did not threaten him; I only showed surprise in still finding him here when I planned to meet him tonight in Teheran,” said Death.” – Victor E. Frankl

The quote above from Victor Frankl’s Man’s Search for Meaning is a story he called “Death in Teheran” has really stuck with me.  We all have finite lives and we don’t know when they will end.  Death is a bit of a taboo topic in our culture, but it is a common trait we all share, and we will all deal with someday.  As Benjamin Franklin put it, “In this world, nothing can be said to be certain, except death and taxes.”  I’m sure we will address taxes in a future blog post, but today we will cover the other thing no one can avoid.

What does our mortality have to do with financial planning?

Financial planning would be much easier if we knew exactly what inflation was, future tax rates, what our rates of returns would be, exact spending for each future year, how long we would live, etc.  If we knew these things, then we could calculate it to make sure we spent our last penny on our last day.  That’d make for some easy math and reduce the need for much of the planning.  As we know though, it just ain’t so.  These variables are unknown, and many financial plans will end with some “leftovers.”  This surplus will be some folks legacy; it will be left to future generations or charities of their choice.

This is where estate planning comes into play.  A plan that will outline specifically how you want your assets to be handled when your tour of duty here on earth ends.

A lack of enthusiasm around planning

This is pretty important stuff, right?  I mean most of us work our whole lives building up this nest egg to fund retirement and pass down to future generations, we’d assume that everyone must have a solid estate plan in place, right? Unfortunately, many don’t.  I find this part of the financial planning process often the most neglected and procrastinated part of planning.

This lack of planning isn’t limited to the average Joe, you will read in the newspaper each year of a star who passes with no will or estate plan in place.  The world lost The Queen of Soul, Aretha Franklin earlier this year and USA Today wrote in August how she didn’t leave a will.  The article states,

“So what happens to the fortune she accumulated over a decades-long career?

Because Franklin was divorced and she left no will or trust to manage her assets after her death, the short answer is that her four sons will split her estate, experts say.

Of course, creditors will have the chance to make claims on the estate, and Franklin had a history of bad debts. If other celebrity estates are any guide, shirt-tail relatives and long-lost friends could appear looking for a payout. Those questions will be resolved in Oakland County Probate Court, where Franklin’s estate has been assigned to Judge Jennifer Callaghan.”

Business Insider noted Franklin’s net worth as roughly $80 million and now the courts may spend years and lots of dollars figuring out who these monies should be allocated to.

Why we plan

One of the basic goals of an estate plan is to avoid the time and cost associated with not having one. Have you ever been an executor of an estate before?  If not, ask around and get the firsthand experience from a friend.  Settling an estate can be a very difficult venture during a very difficult time.  A well-outlined estate plan should help to ease the burden of this process.  Most importantly these plans allow our wishes and desires to live beyond us.

For some of us these plans will be simple and for others, they may be more complex.  Some may have minors that will be inheriting assets, some may have family members with special needs.  We might want these monies to be used for some things and not for others, we may want to leave some to family and some to charity.  Each plan will be unique, and it will be tailored to our plan and our aspirations.

What does a typical Estate Plan look like?

Like I mentioned earlier, procrastination is our enemy when it comes to establishing an estate plan, so it is best to start by taking the first step – setting up a meeting.  Your financial advisor should be able to recommend a suitable estate attorney and help you to get a meeting on the calendar.

Here’s what to expect. The attorney will meet with you to learn about your assets, family, and legacy wishes.  They will then organize these objectives into the appropriate legal documents which help to outline your desires.  Typically, this will result in the creation of four documents for your initial plan: a financial power of attorney, will, living trust, and medical directive.  These documents will vary based on the State you live in, the size of your estate, and a few other variables.

Think about it, just four documents that plan for something that none of us can avoid but all of us (and our families, charities, businesses) will benefit from.

One final note on one common mistake

One final note and one you want to make sure to remember.  Establishing the estate plan is very important, but this only gets you to halfway done.  We come across a lot of folks that have done the heavy lifting and hard work to get a plan established, but then we find that they did not execute the plan.  This might mean that some assets are not held in the name of the trust, perhaps the deed to a property was left out or you forgot to inform your bank that you have established the trust.  It is really important that the plan gets fully implemented and this is a good review to do with your advisor to make sure all your “t’s” get crossed and all your” i’s” get dotted.

TOM’S TIPS

What are you waiting for? Work with your advisor to help get an appointment with an estate attorney scheduled today!

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