moneyFYI
Financial Freedom Is Merely Organized Common Sense
How To Tell If You Are Dead
The key to understanding estate planning is dealing with a simple observation. “When you are dead, you won’t know. It’s difficult only for the others.”
As a public service
I have devised a test so that a dead person may discover that they have passed on. There are several questions. Answer each either Yes or No.
- Are you wearing your best clothes but have nowhere to go?
- Are your children fighting over your property?
- Are there people in the room who you know but have not seen for more than five years?
- Has your lawyer just ordered a Mercedes?
- Has it been more than 12 hours since your last meal?
- Is your business out of control?
- Are you cold?
- Do you owe an exceptional amount of income tax?
- Is your blood pressure lower than usual?
- Does your bank want its loans and guarantees liquidated?
- Are your eyes closed, but you aren’t sleeping?
You are undoubtedly dead if you have answered “Yes” to more than six questions. If fewer than three, you are probably alive.
What use is that?
Even-numbered questions are the ones where you can do something before you’re gone.
- Are your children fighting over your property?
- Has your lawyer just ordered a Mercedes?
- Is your business out of control?
- Do you owe an exceptional amount of income tax?
- Does your bank want its loans and guarantees liquidated?
Unless you are confident they don’t apply, give them some thought while you can. The problems arise from situations where no steps were taken to prevent them. More conflict, more negotiation, more work for lawyers. Who runs the business without you? Do you know what your tax situation would be? You should. Heir conflicts arise when two people want the same thing. It is often not an especially valuable thing.
Unless you provide the necessary tools, your executor cannot efficiently solve any of them.
Resolving in advance.
- Many will solve with simple communication. “I left Grandma’s wedding ring to Julie because Grandma asked me to. I owned life insurance to pay the taxes. I want Joe to have the business because he helped me build it and knows how to run it.”
- One area of thought will involve the difference between equal and equitable. Understand that some heirs have emotional attachment to some of the assets. Some assets like a bank account are easy to value. A cottage, house or business not so much. Fair is not the same thing as equal.
- Consider generation skipping.
- It’s necessary to understand the problems arising with complex and indivisible specific assets. Learn about “fungible.”
- Talk to your executor about the meaning of what you are trying to do.
Your executor choice
A twelfth even-numbered question you might ask yourself is, “Would my executors prefer not to be involved?” I know people who have executors who neither want to act nor could do the minimum necessary. Sometimes there will be too many, or too difficult problems for casual help.
A simple solution. Consider a corporate executor. They have the skills to do what is needed or know where to get them. In very complex situations, they will turn out less expensive. Always recall the adage cheap is expensive.
Know what you want to accomplish with an estate plan
A good estate plan addresses problems in advance and provides:
- Optimal income and security while you are living
- An equitable division of property
- Minimization of costs and taxes
- Liquid assets to meet unavoidable obligations
- Completes a program of business ownership and management succession
- Understands what to do with family real estate
The bits to take away
You have worked hard to have the income and assets to deal with what you need and leave something for the next generation. Now is not the time to become careless. Most estate problems have solutions, but you need to start early to avoid them.
Problems and opportunities you can anticipate are halfway solved.
An estate and income model can help identify both problems and opportunities.
Help me please. If you have found this useful, please subscribe and forward it to others.
I build strategy and fact-based estate and income plans. The plans identify alternate ways and alternate timing to achieve both spending and estate distribution goals. In the past I have been a planner with a large insurance, employee benefits, and investment agency, a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business. I have appeared on more than 100 television shows on financial planning, have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, Banks – from CIBC to the Business Development Bank.
Be in touch at 705-927-4770 or by email to don@moneyfyi.com
moneyFYI 