written by Donna Thrane
Reading the title to this post, you may already be singing some of the lyrics from a popular U2 song, Sometimes You Can’t Make it on Your Own. This song, surprisingly, is almost 18 years old. I thought of these lyrics, “you don’t have to go it alone”, after a recent discussion with a client about estate planning. The first word of this U2 song is “tough.” Estate planning can be a tough subject – tough to start, tough to implement and tough to keep updated as time passes. And time does pass, just like the 18 years that have passed since this song’s release.
An important task in my role as an advisor is to encourage you to focus on your estate plans and to keep them updated. While this can be a tough process, it may be one of the most important things we do together.
What Is Estate Planning?
The National Association of Estate Planners & Councils (NAEPC) defines estate planning as follows:
Estate planning encompasses the purposeful accumulation, conservation, preservation, and transfer of an estate by establishing clear goals and objectives through planning and implementation of an estate plan. The overall purpose of the estate planning process is to develop a plan that will promote and achieve the estate planning goals, values, and objectives of individuals and their families and to carry out their charitable goals, if any. Estate planning has come to include and mean lifetime planning that leads to creation, conservation, and transfer of assets. Estate planning should also facilitate the intended and orderly transfer of property at death, taking into consideration the family unit and the potential costs of different methods.
112 words make up this definition of estate planning. That alone may support the tough part I mentioned before! To help, let’s break it down step by step.
Estates are made up of unique accumulations of assets. These assets may include family businesses that have survived generations, hard-earned assets from decades-long employment, collections of heirlooms, and irreplaceable one-of-a-kind treasures. Intentionally dividing any of these sentimental assets, which may also be difficult to value can be daunting and emotional. Discussing the assets themselves and what you want to happen with the assets with an objective party, or a team of advisors, may make it easier to get started with your plan or to adjust an existing plan.
Goals and Values and Objectives, oh my!
It may be challenging to achieve estate plan goals and objectives if they are not defined. Plans should also be flexible to reflect how assets change, people change, and laws change over time. This is why the planning process should not be “one and done”, but rather a lifetime exercise. We work with you to help accomplish all of these important tasks. Financial planners and estate attorneys working closely and collaboratively will complement each other’s contributions, creating the whole plan that is greater than the sum of its parts – maximizing distributions, minimizing taxes, maintaining control, evaluating liquidity, protecting assets, dealing with incapacity.
As a financial planner, I help translate the attorney’s technical words that make up the hundreds of pages of text within the estate documents into visual road maps of the plan. Additionally, I can help quantify the plan by assigning and projecting values to assets being distributed or to income tax, estate tax, gift tax or other expenses to be paid. I can summarize what accomplishing your objectives may mean to your heirs at this or that age, or what really is being set aside or available to a designated charity. Together, we can identify additional planning strategies and quantify various “what if” scenarios. Helping distill this information may increase your overall understanding of your plan and, ultimately, increase your comfort level with the possible outcomes.
Focusing on the personal aspects or impacts of an estate plan on you and your heirs can sometimes take a back seat to the financial outcome or tax-savings that the plan is designed to achieve. If we are by your side before, during, and after the plan is drafted and implemented, we can advocate for not losing sight of this. For instance, while the final documents may deliver the most tax-efficient and financially beneficial result, does your plan also accomplish your non-financial objectives?
Planning for potential incapacity is another area that is often overlooked. What if you or your spouse have an unexpected health event leading to temporary or permanent impairment? Would you prefer to document some ideas about how and where you would like to receive care? Are your financial assets projected to be sufficient to pay for that care and for maintaining your desired standard of living thereafter?
Caring for pets is another situation to consider. Where will your pets live? Will you allocate resources to pay for their care? What is the right number? Do you have an inventory of digital assets and are they accounted for in your estate documents? What funeral plans have been made or not made? Is there a letter of instruction for your survivors, who to call for what? Our collective experiences helping generations of families enables us to ask questions about practical, real-life situations that require attention and action.
The Family Unit
Estate planning should take into consideration the family unit. Sharing the details of your estate plan with your children, other heirs or charity is a very personal decision. If you’re apprehensive about sharing this information, how can we help improve the chances of having a successful dialogue about your plan or a successful handover of these important assets?
Providing the next generation or other beneficiaries with a financial education may be one way. Building relationships with these heirs before it becomes critical is also beneficial. The truth is, talking and learning about wealth during a crisis or during a period of intense grief may not be ideal, or easy. We can create a customized curriculum teaching beneficiaries or other family members about financial concepts, publicly traded investments, private investments (including closely owned businesses), and charitable strategies.
Directly involving them in conversations and activities that expose them to saving, spending, investing, borrowing, and donating may improve their ability to handle money but also improve their relationship with it. Starting earlier may be better, but any amount of advance preparation is better than none. While devoting so much energy and thought to developing an orderly and efficient plan, why not also focus on helping the future stewards of this wealth do their best job possible?
It’s Not Always Easy…But it IS Important!
It has been almost 18 years since U2 released the song – not since you started reading this post! Estate planning is not easy – and that’s ok. Let’s plan to start Now. Let’s review some what-ifs and let’s tackle some technical terms. Let’s prioritize what matters most to you. Whether talking about estate planning or another important matter, please lean on us to make it less tough. You don’t have to go it alone.
Donna has more than 20 years of experience providing comprehensive wealth management services to individuals and families, owners of privately held businesses, officers of publicly held companies, artists, athletes and beneficiaries of family wealth.