HOLISTIC ESTATE PLANNING: (PART 2)

Jun 17, 2016

Imagine the Buck's, John and Jane, a married couple with three children: 

1)      a 25-year old son who is married, has a newborn daughter, has $50,000 in student loans, and is working at an engineering firm making roughly $60,000 annually;

2)      a 20-year old son who recently dropped out of college after being convicted of three minor in possession of alcohol charges and is now in Vail, CO working at a ski resort because CO recently legalized marijuana and he doesn’t want to work a "real job;"

3)      and, finally, a 15-year old daughter who is first in her high school class and suffers from a degenerative nerve disease that will confine her to a wheelchair within two years and eventually leave her unable to care for herself. 

John and Jane have done fairly well for themselves, with John being the managing partner in a local golf course and Jane teaching at a local middle-school.  They have a recently refinanced home in the suburbs, own a 1/3-share of Jane's family cottage in northern Michigan along with her two siblings, their retirement accounts—a mix of work-related plans and individual IRA's total nearly $250,000, they have tried to save a six-month emergency fund (but it's more like two), each has a modest life insurance plan provided by their employers, and they stand to inherit a rather substantial sum when John's mom, who is now in a nursing home, passes away.  Life is complicated for John and Jane, but not that out of the ordinary.

John and Jane could go to the internet and create their own wills and powers of attorney on the cheap or they could simply go to an attorney who will write them a will, or maybe even a simple trust, to ensure that, when both have passed away, the remaining assets will be distributed to the kids and name others (or each other) to act for them should they become disabled.  OR, they could engage in holistic estate planning, working closely with:

-           an insurance agent to put coverages in place to insure against loss of income due to disability, losses to the home (fire) or car, general liability (i.e. the papergirl slipped and fell in the driveway);

-          a financial planner to insure that their financial assets are maximized, protected, and situated to meet their future needs by employing an investment portfolio that matches their risk profile and utilizing life insurance and long-term care insurance appropriately;

-          a doctor to advise them on what they might expect in regard to the short- and long-term needs for their daughter;

-           an estate planning attorney to help them structure a plan that will serve them while they are still alive, in the event of disability, after one of them is gone, and, finally, when both have passed. A plan that will distribute the family legacy in a way that will protect the beneficiaries from creditors (student loans), predators (bad marriages), and themselves (see the ski bum). A plan that will address the future health care expenses and needs of their daughter (special needs planning).  All without placing undue burden on any of the children upon their deaths (see the eldest son) and minimizing tax consequences to them as well (tax basis planning and IRA stretching);

-          an accountant to insure that the plan is up to snuff with the IRS and all returns get filed accurately and completely; and,

-          in view of all that is going here there must be a plan in place to deal with the family share of the cottage, how the inheritance will be folded into the estate plan, and what steps must be taken to ensure that the daughter's ongoing medical expenses will be covered and that someone will be there to care for her.

Whoa! My apologies for the run-on sentence.  As you can see, what might appear to be a fairly normal family situation can necessitate a fairly complicated plan in response.  Had John and Jane simply run out and bought a will or a trust, they likely would have missed some planning opportunities and failed to ensure that their estate plan was in tune with the family’s finances (now and future), health status, and insurance coverages. 

Not only that, but most family circumstances are dynamic and change greatly in a short period of time, creating the need for periodic review to keep the plan consistent with and responsive to those changes.

Again, the primary objective should be to involve all of the potential moving parts to ensure that the plan operates as closely to the Buck's wishes (within the boundaries of the law, of course) while they are alive, if either or both become disabled, and upon death.  All the while, the plan should act to protect and maximize their assets while also building in a buffer for life's unexpected events.  Remember, We're in this together . . . your family and ours!