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Is what you own really yours?

Walt Disney was valued at more than $23 million when he died. Yet, after estate taxes and probate costs nearly $7 million of that was lost to his descendants- nearly 30% of his net worth! Elvis Presley lost 73%.

If you are a high net worth individual, and the above examples make your stomach queasy, you have 3 viable options available to you. You can (1) spend everything you have and die just as you go broke, (2) give everything to charity, or (3) engage in advanced estate planning. 

I'm convinced that the only folks who have substantial amounts of their estates taken away at death are those who have chosen to remain ignorant in legal tax strategies, which are available to everyone who will take the time and trouble to investigate them.

Will the death of your partner rock your financial world?

Did you know that the number one reason for widows to be in poverty is because their spouse died? In other words, before that person passed away everything was rosy. Your financial plan absolutely needs to take the death of your partner into account (as well as their long-term care needs). Failure to do this is simply negligence.

One of the things I'd like to talk about this time has to do with the subject of titling your assets. This is something that sometimes doesn't get as much attention as it should, but doing it wrong can have very undesirable consequences.

For example, suppose that you and your partner own a brokerage account worth $1 million dollars. Your partner's share in this account is $500,000. The account is titled as TOC, which means Tenancies in Common.

Life is beautiful. Then, one day your partner is bitten by a rabid dog, and after biting many of her old acquaintances, dies shortly thereafter. When the will is read, your partner has specified that she'd like to leave her portion of the brokerage account to her son, Otis, who is an alcoholic living in Mayberry, NC with his alcoholic wife Agnes. You haven't seen either of them in twenty years.

Can she do that?

Yes. 

Your Legacy: Does it matter to you?

I'd like to take a minute to discuss how your estate plan and your legacy are tied together. How will you be remembered by your children and your community? 

If you're a high-income earner, the way that you arrange your affairs for the day when you are no longer in the picture may make a great deal of difference to those that you leave behind. 

You have worked hard all of your life. It was you that studied for exams, rose at the crack of dawn, and sacrificed your time and energy to accumulate the assets that you have today. You are where you are today because you've worked very hard to be. 

Don't let a government that doesn't even know you or care about your family take 40-60% of your assets from your family when you die.

Proper estate planning will ensure that your positive image survives intact. Here are 5 absolutely essential steps you should take to protect your legacy.

A Matter of Trust

In my previous blog I spoke about the importance of having a revocable living trust in your estate planning toolkit.  This type of trust can do several things for you, such as reducing the amount of taxes and fees your estate will pay, shortening the amount of time that beneficiaries will have to wait to take ownership of assets, and removing all of the transactions from the public eye.

Trusts can be an invaluable tool in your estate plan. Irrevocable trusts are usually used by higher net-worth folks to escape the absolute pillage of their estate by the government. There are also some significant tax advantages found in gifting to these trusts, as well as to charities.

The immediate tax advantages with a revocable living trust are less dramatic. However, for the person with an estate of less than $5 million the living trust is much more commonly utilized. Sometimes people confuse the two types- revocable vs. irrevocable - and the benefits that each kind provides.

Fins to the left, fins to the right

Everything in our world today seems to be expensive, doesn't it? When I was a child, which was, admittedly, a long, long, long time ago, my Mom used to drop me off at the local movie theatre to watch the latest Elvis film (...a long, long, long, time.....). She'd give me a dollar to spend. The price of admission was 50 cents and then I could get a large coke and popcorn for the rest of it. Have you tried taking your family to a movie lately? There's a good reason to come and see a financial planner, right there!

Well, we know how expensive everything in life can be, but have you considered dying? Kicking the bucket can be one of the most costly endeavors ever, especially if no estate planning has been done. Does the thought of giving away 30-60% of your children's inheritance give you a warm and fuzzy feeling? That's not the case for most.

There are lots of expenses that come into play when you die. Court costs, executors fees, attorney fees, taxes, filing costs, and the funeral costs are among the top. You might be interested to see how the estates of some of our most famous Americans have been plundered:

You can see from the chart above that not only does having a good estate plan makes sense, but not having one can be a very expensive mistake. One interesting note....you'll notice that one of the folks in the table above, J.P. Morgan, was a financial professional. Hmmm... 

Your Life, Your Death, and Your Legacy

If I were to ask you the name of your great great grandfather could you tell me? Not many folks can. But if your great great grandfather had set up a trust that was today paying you $50,000 a year tax-free I'll bet you could.

Death isn't something we like to think about, and I guess that's a good thing. After all, I believe that most people are optimistic by nature, and the subject of death isn't high on the optimist's list!

Yet, we cannot deny that this life will one day come to an end for us. We will then leave someone behind to pick up the pieces and carry on. Leaving a positive legacy is all about easing the strain on those who will have to do that. 

Have you given any thought to those who will be following in your footsteps?

The Civil War

The American Civil War was the bloodiest conflict in our history. Over 600,000 young men made the ultimate sacrifice, and thousands more were maimed for the rest of their lives. It was a gruesome, ugly picture of what happens when our American family can no longer get along. I hope we never see such a thing again.

There is another civil war that I have personally observed. It begins at the death of the parents in a family, and many times separates and maims siblings for the rest of their lives. It's an ugly legacy to leave behind, and almost always could have been completely prevented. 

How?

By taking care to adress financial issues beforehand. I know of folks who have spent years in probate, dealing with courts and attorneys, and it could all have been prevented so easily if only a detailed and well-thought out Will had been prepared.

Most families don't want to leave behind a legacy of hatred and strife amongst their children, but it's a rare family that can escape turmoil when the Patriarchs of the family leave this part of their financial plan undone.

Is what you own really yours?

Walt Disney was valued at more than $23 million when he died. Yet, after estate taxes and probate costs nearly $7 million of that was lost to his descendants- nearly 30% of his net worth! Elvis Presley lost 73%.

If you are a high net worth individual, and the above examples make your stomach queasy, you have 3 viable options available to you. You can (1) spend everything you have and die just as you go broke, (2) give everything to charity, or (3) engage in advanced estate planning. 

I'm convinced that the only folks who have substantial amounts of their estates taken away at death are those who have chosen to remain ignorant in legal tax strategies, which are available to everyone who will take the time and trouble to investigate them.

Will the death of your partner rock your financial world?

Did you know that the number one reason for widows to be in poverty is because their spouse died? In other words, before that person passed away everything was rosy. Your financial plan absolutely needs to take the death of your partner into account (as well as their long-term care needs). Failure to do this is simply negligence.

One of the things I'd like to talk about this time has to do with the subject of titling your assets. This is something that sometimes doesn't get as much attention as it should, but doing it wrong can have very undesirable consequences.

For example, suppose that you and your partner own a brokerage account worth $1 million dollars. Your partner's share in this account is $500,000. The account is titled as TOC, which means Tenancies in Common.

Life is beautiful. Then, one day your partner is bitten by a rabid dog, and after biting many of her old acquaintances, dies shortly thereafter. When the will is read, your partner has specified that she'd like to leave her portion of the brokerage account to her son, Otis, who is an alcoholic living in Mayberry, NC with his alcoholic wife Agnes. You haven't seen either of them in twenty years.

Can she do that?

Yes. 

Your Legacy: Does it matter to you?

I'd like to take a minute to discuss how your estate plan and your legacy are tied together. How will you be remembered by your children and your community? 

If you're a high-income earner, the way that you arrange your affairs for the day when you are no longer in the picture may make a great deal of difference to those that you leave behind. 

You have worked hard all of your life. It was you that studied for exams, rose at the crack of dawn, and sacrificed your time and energy to accumulate the assets that you have today. You are where you are today because you've worked very hard to be. 

Don't let a government that doesn't even know you or care about your family take 40-60% of your assets from your family when you die.

Proper estate planning will ensure that your positive image survives intact. Here are 5 absolutely essential steps you should take to protect your legacy.