What estate planning mistakes can we learn from? Most people
ignorantly procrastinate on this issue.
What estate planning mistakes can we learn from? Most people ignorantly procrastinate on this issue. “I’ll get to that, but not right now. The game is on. I have to tend to my parents. Let’s plan a trip to Hawaii,” etc. What other excuse is there? There is an endless supply.
Let’s review what happened to Eve. Eve is in her mid 60s; her husband in his late 60s. They were both healthy and happy. This was a truly nice couple that was financially secure – not rich, but comfortable and pleasantly frugal. They did not have to try hard to limit their expenses; it came naturally. Generally, Eve’s husband was the lead in most of the investment decisions. With confirming wisdom from Eve, these people were solid in their approach to financial management.
Most of their financial accounts had done very well over the years. Even in the most recent market downturn they held their own and did not suffer the losses that most people did. They had a good mind for reason and value. Thus, they used common sense to manage their nest egg.
Their tax situation was minimal because a lot of their investment earnings were tax-deferred and Eve’s husband’s income came from disability. Fortunately, they were in the enviable position of being able to “play” with a few hundred thousand dollars – meaning not that they gambled with this money but that they formulated calculated decisions with regard to individual stocks from time to time.
The problems began when, quite unexpectedly, Eve’s husband passed away. He was healthy, smart, kind, helpful and a competitive gamesman. He was sincerely a good man and fun to be around. This was a blow that will take years of emotional recovery. Eve had always been very strong and savvy with regard to her approach to tasks at hand and organization. Hence, she was on the phone with me right away.
When we met, she showed me statements from approximately 11 different financial investment accounts. Six were managed by me and the rest were either outside brokerage accounts or various investments that they started before they knew me.
The accounts through my management were settled quickly. We simply re-titled the ownership of the accounts based on the fact that Eve was now the sole trustee of their living trust. However, much to my surprise, some of their other accounts were titled in Eve’s husband’s single name only. On several occasions, I counseled them to be sure to use the living trust to title their non-IRA accounts. (IRAs cannot be titled with a living trust).
“What’s the problem?” you may ask.
The estate will settle fairly easily with the assets titled in the trust, but the single-name assets may not avoid the potential rigors of probate, which can be costly in time and money. It’s a shame that two or three accounts were left behind here because it’s a red-tape nightmare for Eve to regain control of these accounts. And they’re stock accounts to boot. Thus, the market volatility may cause price movement that’s not in Eve’s favor. She’ll end up with the money, but a lot of hassle could have been avoided.
How could it have been avoided? While some responsibility must lie with Eve’s husband, I believe the investment professional handling each account should have been more complete. The titling of accounts is a rudimentary skill for a professional investment counselor. So now Eve has to struggle to gain control of the decisions on the stocks in these accounts. In addition, probate fees may be tacked on down the road.
Eve’s simple re-titling of accounts has turned into a jigsaw puzzle of sorts. Right now, she does not need this maze.
Unfortunately, several clients that I am very close to have recently passed away. This is a sad time for me. There is an age-old postulate in my business that says, “The clients you attract are a mirror to your own personality.” Over many years of advising individuals, this very accurate statement becomes more true every day. These people are good people.
While taking care of them after a tragic event like this is my duty, it is sometimes difficult to separate business from personal. In this case, Eve will be fine when we complete this financial estate process, but it could have been a lot less stressful on her.
This article is not intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.
Jeff Welch helps individuals with long-term financial planning. He is a registered representative of and securities offered through Financial Network Investment Corporation, member SIPC. His office is at 339 Seventh St. in Hollister. Phone 630-1525.
