- The “Letter:” We estate planners commonly tell our clients to write letters of instruction to children and other key people informing them of information that might be critical in the event of an emergency (e.g., renew my Pilot discount card so I can continue to get my ½ gallon cups of coffee for $1.19 at truck stops around the country). But how many clients have really heeded our advice? My guess is too few. But have we heeded our own advice? Well, I for one, in this very public forum will now embarrass myself by admitting that I haven’t. But now I have to! And now you get the ulterior motive for this article! We need to write a letter to the kids documenting critical information that they would need to help us in an emergency: ►names and contact information for key professional advisers (wealth manager, banker, CPA, insurance agents, etc.); ►location of key original records; ►how to find passwords and other key online information (see below); ►key medical information (names, specialties and phone numbers of physicians, location of medications lists, etc.); ►insurance summaries;►key financial information; ►instructions generally; ►etc.
- Passwords: We all seem to have so many passwords with so many variations, not to mention security questions (what was your mother’s favorite poem), that it is impossible for anyone to remember them. How many variations can you create for your spouse’s nicknames (honeypoo1, cuteness*, …)? More significant, I recently read an article on line that indicated that from age 60 on our ability to make financial decisions declines. Ouch! Well in prior years we tackled the task of buying an app to collect these gems in Keeper Security. While that collection helps us remember critical information we’ve never tackled that proverbial estate planning “Plan B.” If we’re in some mountain RV park out of cell range and an emergency happens (or something worse), we need others to have access to our Keeper Security account. So it is past due to have that unpleasant chat with the kids, that chat that we estate planners always tell clients to have, but I guess we ourselves haven’t yet addressed.
- Plotting: I’ve never been much of a real estate investor, especially if there are no tax benefits in the deal, but I guess that time has come to buy some land. Just as we all advice clients, make arrangements now to save the children the aggravation and stress of making a decision at one of life’s more difficult times. We need to bite this bullet too. I’ve made some initial inquiries for a place with a good view and will endeavor to wrap this one up in the near term. The details of this will go in the letter of instruction above.
- Life Insurance Review: I can proudly say I already met this year with one of my life insurance gurus to review existing term coverage. (Don’t be impressed, this has been on my to-do list of more than a few years). All five boys are out of college. Four of the five are married so we are thinking of cancelling some term coverage that only has a modest duration to run, and which has served its primary purpose. Those premium dollars can be redeployed to bribe the kids to participate in family financial meetings (see below). Permanent coverage has been reviewed every few years (and premium payments increased modestly to keep them on track).
- SLAT/ILITs: Long long ago we created rather plain vanilla life insurance trusts (and remarkably, were actually current on all Crummey powers (this is in print what would you say?). More recently we created spousal lifetime access trusts (“SLATs”) for state estate tax (although the NJ repeal might make that academic) and asset protection purposes. Yes, they were structured in the manner we suggest to clients: grantor trusts, trust friendly jurisdictions, directed, dynastic, GST exempt, gift tax returns filed meeting the adequate disclosure rules, etc. Unfortunately, the SLATs did not contemplate owning life insurance. I have wanted to restructure the SLATs so that they are more conducive to life insurance ownership and then transfer (likely by sale) from the grantor ILITs to the grantor SLATs the life insurance we will retain after the termination of the no-longer-needed term policies noted above. This will avoid the need for future annual gifts or Crummey notices as the earnings in the SLATs will cover the premiums. It will also eliminate two trusts simplifying our planning and what the children will eventually have to deal with. Holding life insurance in the SLATs will also help address the mortality risk of premature death of my wife or me, a risk/issue that clients are similarly encouraged to invest (and occasionally they actually listen and do so). The SLATs are, in my view, a more robust incarnation of the traditional ILIT being repurposed to provide asset protection benefits with perhaps less risk than self-settled trusts, dynastic planning for future generations, institutional trustee protection for the decline in cognitive ability that age might bring (although my kids might ha long ago brought), protection from elder financial abuse, and more. Hence I’ve dubbed this expansion of the traditional ILIT, “MILITs” for Multi-purpose ILITs. It is also enjoyable to have another acronym to bounce around in casual cocktail conversations.
- Grandchildren 529s: A couple of the grandchildren don’t yet have 529 plans so we’ll be getting those set up with some gifts to get them all on the road of college savings (even if the money is ultimately put to different use).
- Home Inventory: Our insurance broker has been after us (OK for a while!) to make a proper home inventory and have appraisals completed for collectibles and other items. Last year we made a lot of progress in terms of organizing and collecting all of the disparate documentation on each item and photographing each separate item. And all of this information is suitably backed up from our laptop to a portable hard drive and the cloud. We need to take the final step of assembling it all and having it appraised.
- Property Casualty Insurance Review: I’m still carrying a six month old “to do” letter from our new property and casualty insurance company. Yes Mariya, I will get back to you as promised.
- Charitable Bequests: Time to update these to reflect charitable commitments in our revocable trusts made to The National Multiple Sclerosis Society, The American Brain Foundation and the American Cancer Society. Can I send each organization a copy of this article to hold in our file until I get this taken care of? I know that there is likely to be no estate tax benefit to these bequests (New Jersey my home state has repealed its estate tax effective January 1, 2018 and the federal estate tax is likely to get Trumped), so I also will update our durable powers of attorney to expressly permit agents to make advancements on charitable bequests. I probably should suggest this in the letter of instruction noted above.
- Beneficiary Designations: We need to revise all of these to reflect the trusts for the kids under our revocable trusts as secondary beneficiaries after each other (i.e., the spouse as primary).
- Family Meeting: I’ve kinda tried to orchestrate this with less than zero success. The interest level amongst the kids was nil. I’m going to try again this year and will resort to sheer bribery (a great pricey dinner and some payola). Should I introduce this topic by sending the kids a copy of this article?
New Year’ Resolutions by an Estate Planner
I figured I had a few minutes when I was not using my New Year’s resolution gwee gym, or drinking my New Year’s resolution Marie Osmond lose 10 pounds in 10 day shakes, I’d write an article about other New Year’s resolutions. After reading the endless financial New Year’s resolution articles that proliferate like Tribbles after the ball drops in Times Square, I thought I’d write my own. So here it goes:
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