The Four Commandments of Estate Planning
One of these days, I am going to go up a mountain somewhere and get the 10 commandments of estate planning. But, until then, I have at least four in my pocket.
I realized this as I was writing the latest Estate Planning Failures of the Rich and Famous. In the middle of one of the stories I mumbled that someone had broken Thou Shalt Update Your Estate and I saw that I had something there.
What’s on the list is not a big-shocker. That would be much like the 10 commandments we’re all familiar with. Not many people would be surprised by what’s on there, with the possible exception of “Honor Thy Father and Mother.” That is a good thing, no doubt, but a little bit of a head-scratcher that it made the Top 10.
Here they are: I. Thou shalt have a will. II. Thou shalt have a trust, (if you are fabulously wealthy and of great renown). III. Thou shalt update your plan. IV. Thou shalt have life insurance.
People seem to get the first one – famous people, at least. It’s become unusual to find a high-profile person of means died without a will. In the 1950s and 1960s when “live fast, die young and leave a good-looking corpse” became every rebel’s favorite phrase, they probably thought, “I’ll live fast, you’ll die young and I’ll get plastic surgery later.” But die some did and left behind a pretty ugly mess.
If celebrities and their advisors caught on, not all of the public did. Not many surveys are available on how much of the public does estate-planning, but the few that less than half of Americans have any estate planning done. A survey done for EZLaw in 2011 showed that 44 percent of Americans had something in place, although 60 percent though it was important. Advisors would do well to look among their current clients, if they don’t already ask in fact-finding.
Thou Shalt have a Trust is also important for any estate of means and particularly complicated ones. I know estate-planning attorneys and advisors get a little dreamy when they start discussing trusts. They start talking fast about all the possibilities, strategies and exotic names. OK, Crummey is more goofy than exotic, but there’s one for everything. They truly pity the fool who dies without one.
Thou Shalt Update Your Planning – that’s another one that commonly pops up. Forgotten heirs, scribbled promises and estranged assets all come banging on the door after the deceased is dispatched. Here is another easy way for advisors to help their clients while uncovering sales opportunities.
Then there’s Thou Shalt Have Life Insurance. This is good for everybody. The very poor should help their loved ones by providing burial costs and extra money to help through the bereavement and adjustment process. Families should have it to secure children’s future. Rich people should have it to provide liquidity while the probate process grinds on. And of course the really wealthy need it to offset estate taxes. It’s the answer to most estate planning problems!
Those are the four I have so far. Feel free to let me know if you have other candidates. I have some others coalescing, I think. This one might be my surprise – Thou Shalt Tell Someone Where Everything Is. Most estate-planning advisors and attorneys have stories of families frantically searching for a will or even a way of knowing all the assets somebody had, even life insurance. Of course, the death master file issue wouldn’t be one if everyone knew their loved one had life insurance.
Maybe instead of “Honor Thy Father and Mother,” we would have “Honor Thy Heirs,” so people can plan with them in mind. OK, I have five.