Almost three years ago I published a piece “What Every Client Needs To Know About Estate Planning In 64 Words.” It says:
Everything you own now and every dollar you acquire in the future will end up in one of three stacks. You will spend it while you are alive. You will lose it. You will give it or leave it to someone else. Spend it, lose it, or leave it. There are no other choices.
Can we agree that losing is not the best option?
Notice the “Needs to know part.” That is strategic. Tactics or the “how to” part is different. There are dozens of details that the client may wish to know. Many of them are dealt with in other articles but as a summary, notice these ideas.
- Monuments like a business or family farm are not the same as other assets.
- Heirlooms are emotional and handling them properly matters.
- Depending on the viewing point, estates look different . Parents, trustees and heirs each have a different take.
- Wills and powers of attorney sometimes do not mean what you think they mean.
- Fairness is a value, equality may not be.
- The most common problem with an estate that does not work is the will maker left a specific asset to someone and at the time of their death they no longer owned it. (Never mind sale of assets, think about corporate reorganizations or joint tenancy, for example)
- Understand the idea of stewardship
- Wills are public information. If there is a privacy issue, like the value of a business, find ways to keep it private.
Around the same time as the article above, I published “The Rules of Practical Estate Planning”
Rules 1 and 2 are instructive. There is small advantage to being the richest person in the cemetery and don’t bend your life far out of shape to maximize the amount for the children.
Estate planning covers a time frame from now to the end of the time of settling the estate. Each phase has limits and priorities. Some overlap and some that provide a solution to one aspect provide flexibility in another. People should look at the problem from a global viewing point first. The details support that view or do not, or maybe there are problem areas with no solution attached.
For complicated estates, the losses incurred at death are substantial. 30% of the total is not uncommon. If you factor in the losses along the way to needless taxes, unorganized cash income methods, paying taxes too soon and inadequate use of financial tools, the loss stack is often the largest of the three.
Most people work a lifetime to build their financial estate. It seems a shame to needlessly give up part of that when easily understood planning could minimize the loss.
People do not become good at anything they do only once. Consider the services of a guide.
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.