Broker Check


Many years ago, a friend John called me to get some information. His sister-in-law, Mary was undergoing treatment for cancer and was in the hospital in a very serious condition. Mary had married late only a few years ago. Her husband, an immigrant from abroad, in his late 40’s had never been able to obtain a stable job. Mary had worked for almost 25 years as a nurse and had bought a house and accumulated a significant amount of money in her pension/403b plans. In the hospital, Mary indicated to John that she wanted to leave some money to her aged mother who also lived abroad. Shortly thereafter, Mary passed away. John wanted to know if the conversations in the hospital entitled the mother to any of Mary’s assets. I sought advice from an estate planning attorney and was quickly told that such ‘death-bed conversations’ are rarely enforceable! All the pension/401k assets, life insurance and annuities would be distributed through beneficiary designations and all other assets would depend on the ‘titling’ of the assets, the provisions of a valid will and state law. Needless to add here, all the assets legally (and rightfully?) went to the husband with nothing left to the mother. Adding to the sadness, nothing more has been heard from Mary’s husband!

Benjamin Franklin is supposed to have made the comment “nothing can be said to be certain except death and taxes”. We have taken that to mean that estate planning only refers to death and the reduction of taxes for the wealthy. Nothing can be further from the truth! While death and taxes are important, the whole purpose of estate planning is to leave a positive legacy for the family, one might even call it a positive imprint of your life for the future. And still there are many of us who do not plan for what happens to us at the end of life or if involved in an accident. For those who do not plan, the consequences of not planning are visited not upon the dead or the injured alone but upon the other family members. We are creating problems and bitterness amongst our family that does not have to occur with proper planning.

Who needs estate planning? Let us look at some situational examples. While most of us would think no planning is needed for young people with no assets, do we wonder why the auto insurance premiums are so high for anyone under the age of 25 and unmarried! Children over the age of 18 need at least powers of attorney for someone else to make medical/ financial decisions in case of an emergency and a living will (remember Schiavo and Ann Quinlan cases). Also, anyone older and unmarried may also want to plan. Why leave your assets ‘in limbo’ after death or after being ‘incapacitated’? Now consider a couple with no children. Is it not better to write down a plan so that assets are left as per your specific wishes (perhaps some assets going to your side of the family?). As to couples with young children, estate planning becomes even more important. With no ‘will’ or ‘living trust’ in place that specifies guardians for the children, and with both parents untimely death, it is possible that court-appointed guardians will handle the care of the children till they reach the age of 18. As beneficiaries of pension plans, IRAs or insurance contracts, children under the age of 18 may not receive the benefits directly but may receive benefits only through a court-appointed guardian or trustee. It means a harrowing time and a billable by-the hour expense for the family. Lastly, we have families who have accumulated significant amount of wealth, who may be in an ‘estate tax’ situation. With laws pertaining to estate taxation in a state of flux, it is very difficult to plan the exact steps to take at this time. However there are a couple of things to remember. It is possible that congress might not enact any law this year which means that the exemption from estate taxes will go back to the year 2001 exemption of $ 1,000,000. Most estate attorneys think it is probable that Congress will enact changes with exemptions pegged at $ 2.5 to $ 3.5 million per person. So the super wealthy with estates of more than $ 5 to 6 million would in any event need to do some advance planning. There are obviously a number of complicated issues to consider such as the best ways to minimize or mitigate those taxes through the use of gifting, trusts and charitable planning. With the foregoing, we recognize that everyone needs estate planning!.

Here are ten pointers to estate planning that are often overlooked:

  1. Wills and living trusts documents: They are signed, reviewed and updated every few years or as family circumstances change. Name guardians for minor children.
  2. Medical/financial powers of attorney: Name 2-3 alternates for each position
  3. Appropriate beneficiary designations for pension plans, 401ks, IRAs are made.
  4. Trusts: Name trustees with the ability to make changes to those trustees
  5. Coordinate verbal instructions, will/ living trust provisions and beneficiary designations so there are no conflicts among family members.
  6. Small or family businesses: Business succession and buy sell agreements are in order
  7. Living wills- make sure we do not burden our families with a “schiavo” situation
  8. Family Limited Partnerships, Trusts and Private Foundations: All state and federal tax filings are current.
  9. Document and communicate with your executors, trustees and family
  10. Consult a qualified attorney to assist you in the estate planning process

Jay Kabad, CFP®, is President of Jaykay Wealth Advisors, Inc, a Houston-based wealth management firm. He received his Graduate degree from IIT Madras and an MBA from University of Pittsburgh, PA in 1980 and has been in business for 27 years. He can be contacted at 713-780-4575. The opinions voiced in this material are for general information only. Jaykay Wealth Advisors and LPL Financial do not provide legal advice or services. Please consult your legal advisor regarding your specific situation.