Every once in a while, Congress gets things right, as they did in 2008 by declaring National Estate Planning Awareness Week, October 19– 25, 2015. This is another great way to honor my father, who would be celebrating his 94th birthday on October 19th. It is estimated that 56% of Americans do not have any form of estate plan or critical decision-making documents in place, such as a Durable Power of Attorney, Medical Power of Attorney, HIPAA Authorization, Directive to Physicians, or Guardian for Minor Children. BE AWARE – BE INFORMED.
September 27, 2008.
Whereas it is estimated that over 120,000,000 Americans do not have up-to-date estate plans to protect themselves or their families in the event of sickness, accidents, or untimely death;
Whereas a 2004 Roper poll commissioned by the American Institute for Certified Public Accountants found that two-thirds of Americans over age 65 believe they lack the knowledge necessary to adequately plan for retirement, and nearly one half of all Americans are unfamiliar with basic retirement tools, such as a 401(k) plan;
Whereas careful estate planning can greatly assist Americans in preserving assets built over a lifetime for the benefit of family, heirs, or charities;
Whereas estate planning involves many considerations, including safekeeping of important documents, documentation of assets, operation of law in the various States, preparation of legal instruments, insurance, availability of trust arrangements, charitable giving, inter vivos care of the benefactor, and other important factors;
Whereas estate planning encourages timely decisions about the method of holding title to certain assets, the designation of beneficiaries, and the possible transfer of assets during the life of the benefactor;
Whereas many Americans are unaware that lack of estate planning and `financial illiteracy' may cause their assets to be disposed of to unintended parties by default through the complex process of probate;
Whereas alternatives to disposition of assets after death, such as planned gift-giving, may accomplish a benefactor's goal of providing for his or her family and favorite charities;
Whereas careful planning can prevent family members or other beneficiaries from being subjected to complex legal and administrative processes requiring significant expenditure of time, and greatly reduce confusion or even animosity among family members or other heirs upon the death of a loved one;
Whereas important considerations as to donation of organs and use of life support functions may be made through the estate planning process;
Whereas the implementation of an estate plan starts with sound education and planning, and then may require the proper drafting and execution of appropriate legal documents, including wills, trusts, and durable powers of attorney for health care;
Whereas the third week of October should be designated as `National Estate Planning Awareness Week'; and
Whereas the National Association of Estate Planners and Councils, representing over 28,000 estate planning professionals, together with the Universal Press Syndicate, the largest independent newspaper syndicate in the world, are prepared to provide such educational information to the public in a focused manner during National Estate Planning Awareness Week:
Now, therefore be it Resolved, That the House of Representatives —
Historically, most people think of an estate plan as a “Simple Will” which turns into a dusty old document tucked away in a safe deposit box, safe, or desk drawer, creating a false sense of comfort. As a document without force or effect until after death, it risks becoming a dead and incomplete expression of intent: never changing despite a succession of life events such as marriage or remarriage, birth of children and grandchildren, changes in wealth or inheritance, divorce, loss of a spouse, or dramatic change in health or disability. A lonely Will, without an accompanying system, just lays there waiting for you to die and hoping that your executor and heirs can locate and identify all of your assets.
However, the following statistics suggest that writing a Will is only part of the process. A provision that your spouse or children will receive “all of your estate” is meaningless if they don’t know what you own or where to find it. It is also confers no benefit if you become incapacitated and all of that information stored in your head cannot be recovered.
A record of online accounts is crucial to a system, (Online Accounts – Where is Your Cheese? March 1, 2013) but I find that a significant number of clients just don’t do the computer thing. And of course some assets are not necessarily managed online - an old life insurance policy, real estate owned in Hawaii, family burial plot in Arkansas, gold coins or savings bonds in a safe deposit box, stock certificates in a passive business venture, or mineral leases in Wyoming.
Granted, a “Simple Will” may be simple on the front end, but it won’t resolve calamitous complications and failed expectations on the back end. Sometimes the old cliché “you get what you pay for” becomes a haunting reality. You need to finish the job, set some time aside and incorporate the following items into your planning system. I suggest storing the information all in one place, preferably on a thumb drive.
The goal of a system is to plan a smooth transition of responsibility and management and distribution of assets in the event of illness, disability, or death. If it seems like a lot of work to you, just imagine how overwhelming it would be for a spouse or children after you are gone. It is clearly easier for you to make decisions and create your system now, without any acute time pressures, than it will be for your family, who may have only hours or days to figure it out.
Make a system part of your legacy.
© Will Morris, JD, LLM 2014
I grew up as a teenager in Hawaii and graduated from Punahou School, a prestigious private school in Honolulu. The author of the Descendants is a Punahou graduate and her father, Fred Hemmings, Jr. was a football star and world champion surfer that graduated a few years ahead of me. Her uncle, Aka Hemmings graduated a year after me. I have known the Hemmings for over forty years
Several scenes were filmed on campus and one prominent scene was filmed at the home of an old Punahou friend (who also played a small part). The dialogue includes several references to key characters as being Punahou students and graduates. Not surprisingly, I knew I was going to enjoy the movie the simply because of my strong connection to Hawaii.
So what does that have to do with estate planning? Amidst the beautiful scenery and George Clooney (Matt King is his character), the movie addresses several estate planning themes about which I am often asked.
Directive to Physicians (Living Will) – The movie starts with Matt King’s wife (Elizabeth King, played by Patricia Hastie) in a coma from a head injury sustained in a boating accident off of Waikiki Beach. She had signed the Hawaii equivalent of a Directive to Physicians, providing that she did not want to be kept alive by artificial means. That seemed simple enough, but as the characters developed and the many themes and family conflicts unfolded, the Directive to Physicians proved to be a final expression of love and respect. Without this Directive the family could have faced challenges similar to the seven year legal battle that embroiled the Terri Schiavo family in Florida a few years ago. It is assumed that Elizabeth had also executed a Durable Power of Attorney, Medical Power of Attorney, and HIPAA Authorization to facilitate the handling of her affairs.
Living Trust – Another theme of the movie revolves around 25,000 acres on the island Kaua’i that has been held in trust and preserved in its pristine natural state for decades. Matt is the trustee of the trust and facing the pressure of a long line of descendants who want to sell the land for a multi-million dollar windfall. Although this is an extreme circumstance, it illustrates how a trust can be used to control the timing of the distribution of property beyond the death of the trust creator (subject to the Rule Against Perpetuities). A trust is most often used to hold and invest assets for the benefit of children and delay large distributions until the children are older and more mature.
Memorial Instructions and Funeral Arrangements - After Elizabeth’s death, Matt and his daughters spread her ashes in the ocean off the beach at Waikiki, representing her love of the ocean. However, in some families a dispute could arise between selecting (i) a traditional burial or cremation, or (ii) if cremated -preserving the ashes or spreading them at a favorite location. The Texas Health and Safety Code, Section 711.002 provides for the written Appointment of Agent to Control Disposition of Remains to minimize such disputes. It is important to express your wishes in writing, particularly in blended families or unique situations.
Rule Against Perpetuities – It is not an easy rule to understand but was a predominant theme in the movie – so here is a topic for casual conversation. Although some states have abandoned or expanded the rule, Texas preserves this rule for non charitable trusts. The rule provides that property cannot be held in trust forever. At some point title must be finalized by permanent ownership, not later than 21 years after the life of a person that exists at the time of the trust interest was created.
Every family has a different set of facts, but the problems solved by proper generational planning remain the same.
© Will Morris, JD, LLM 2014