Having “The Talk”: Another Awkward Holiday Dinner Conversation

Have you had “the talk” yet?  Ya’ know, the really awkward conversation we all dread?  I’ve thought about having it during our Thanksgiving dinner, but I just don’t know how to begin. They’re so young…maybe I can wait a little while longer. I mean, really, how many their age are actually doing it?

Of course, I’m sure you know “the talk” I’m referring to: a discussion with your parents and grandparents about their financial and healthcare wishes should they become too sick to make them on their own.  It’s an awkward conversation to bring up (hey, pass the potatoes…by the way, what would you do if you can’t manage your own money anymore?), and even more awkward to continue (Uh huh. Can you give my brother all the bills but me all the cash? Great turkey, mom!)–but what’s the cost if you DON’T bring it up?

I’m writing this tonight while driving (read: riding shotgun) from Chicago with a world-class estate planning attorney who’s so busy he can’t keep his head on straight. With so many changes looming around the fiscal cliff and government tax plan, people are battening down the hatches. I thought I’d take this time to interview this young man as we barrel down the freeway.

So, Mr. Estate Planning Attorney, what are the most important things you need to discuss with your parents about money?

Can they give you some? Ha ha ha.  Well, first of all, with the estate tax going up, seriously, should they be giving you some money through a gifting strategy?  Also, have they grandfathered their estate exemption?

What the heck is “grandfather their estate exemption” mean?

It basically means: Have they taken advantage of the existing laws to benefit them, compared to their new laws expected in 2013?

What about “the talk?”  What kind of healthcare questions should we, as their children, know?

First, they need to know every state has a healthcare power of attorney and the forms can be found at the local public library. That POA lets them dictate who can make medical decisions if they’re not able.  Secondly, they should probably let you know, or you should ask, what their long-term health wishes are.  I mean…the weird questions like “Do you want life support” and stuff like that.  But all of that can be handled in their healthcare POA.

So, what happens if someone doesn’t have a healthcare POA?  And, while we’re on it, when should someone get one of these things?

Everyone of legal age should have one. If you don’t have one, doctors cannot follow your specific wishes regarding your healthcare. Also, if you’re unconscious, doctors cannot make healthcare decisions for you, unless it’s an emergency. For example, we had a client who went in for surgery, routine-type stuff, when the doctors found a small tear in his kidney. Without a POA, the doctors would have had to wake him up to get his permission. Now, thankfully his wife was waiting in the waiting room, and was his POA, so they were able to fix it no problem.

So we all need these things no matter what. Got it. Anything else we should know before year end?

The fiscal cliff is going to affect estate and income taxes. If you have more than $2 million,  you need to talk to your attorney immediately. Remember, that $2 million includes the death benefits from your life insurances through work and outside policies–it’s not just your assets.

Sounds like your calendar is filling up fast!  Thanks for your insight. Maybe we can get you on our podcast?

Would love it. 

Estate Planning for Really Smart People

I’m not a dummy, so I avoid that aisle of the bookstore. You should, too. Let’s concentrate on what really smart people would do instead.

If you’re an exceptionally brilliant person who just happens to know less than you should about estate planning, I’ve written this piece for you.

Estate planning is a complicated field, but at a basic level there are only a few important items to understand. Luckily, understanding estate planning is like building a house: once you grasp the foundation, it’ll be easy to construct a manor later.

…and yes, I am in fact a ninja with similes.


The Will


In your will, write “I leave it all to AverageJoe.”

Okay, since you didn’t bite on that dubious advice, I’ll focus on some better tips: when you’re planning your estate, start with a basic document called a will.

If you’re estate is large or convoluted, you may need to gravitate toward more complex documents such as a trust, but you’ll still have a will as the base of your estate plan.

In short, a will is the basic block that everyone will need.

Here’s what you’ll accomplish in your will: you’ll determine where your belongings will go and how they’ll be divided. If you want to also control when they’re divided, you’ll need more complex documents (or a will which converts to a more complex document upon your demise).

In your will you’ll appoint a person to oversee the process. This person is often called the executor of your will.

Some practical advice: try to avoid naming two individuals. People fight about weird stuff when a loved one passes away. If you leave two people in charge equally, you’re asking for them to both fight for your interest. I’d rather you chose one single person who’s very comfortable being seen as “a jerk.”

Usually when I make that recommendation people’s mind springs directly to a specific person. Did yours?


What If I’m Sick and I Can’t Communicate With Medical Pros?

Hmmm…..this one’s a problem. Luckily, there’s an easy solution.

Here’s what we’ll do: We’ll throw into your estate planning package (doesn’t that sound official?) a document often called a Health Care Power of Attorney.

You may have heard the old story about “pulling the plug.” It used to be that you could just write down your wishes on a notarized piece of scrap paper and the doctor would follow it.

Today, that document, often referred to as a living will, isn’t recognized by many doctors and also isn’t legally binding in many states. Instead, you now nominate someone ahead of time to communicate on your behalf with doctor plug-puller.

Who would want that responsibility?

I certainly wouldn’t want the life-long psychotherapy I’ll need after deciding to pull the plug on my mother (not that I haven’t thought about it a time or two….but anger is fleeting, love is strong).

Here’s how you handle this: in the Health Care Power of Attorney, you’ll write down your wishes regarding end of life scenarios. That way, your nominated person will only be following your orders, not deciding what to do in the moment.

I told you this wasn’t difficult. In a kind-of-sick way, it’s fun. Let’s move on.



Who Will Manage My Vast Fortune I Haven’t Built Yet, But Will Someday?


You’ll also need someone to sort through your financial picture if you’re still alive, but unable to communicate or make decisions. For this, you’ll add a document called a Power of Attorney document.

In most cases, this is a springing power, meaning that it’s worthless until you’re incapacitated. You won’t have to worry about junior emptying your bank account the moment you make him your representative.

When it comes to both health care and financial powers of attorney, choose someone your age or younger. There’s a more-than-likely chance you’ll forget about these documents about 32 seconds after you’ve finished. You don’t want your power of attorney to pass away before you do.

On that note, consider a contingent power of attorney to back up your primary choice, in case your nominee can’t serve your wishes.


What About a Trust?


Trusts are important for more complex estates. Some bloggers with estate planning experience aren’t fans of trusts. Others live by them.

I’ll be blunt about trusts: I’ve seen more trust work done that was worthless than trusts which actually made sense. In many cases, there was only one reason for this: the attorney could bill more hours preparing a huge trust instead of a tiny will document.

There are good reasons you may decide a trust is for you:

  • you have children by two different spouses,
  • your net worth is well above $1M dollars (some estate attorneys will say above $5M is a better number),
  • you have specific charitable intentions,
  • there are business interests involved in your estate,
  • you have specific time frame wishes to dole cash out over longer periods or with specific caveats, and
  • You’re worried about privacy in your estate


Who Takes Care of My Beautiful Children?


Assuming you have children, you’ll choose a guardian in your will.

Many people have a will specifically for this reason. If you die intestate (that means without a will), the laws in your state will govern who cares for your children when you die. You’ve seen the mess they’ve made of our roads….imagine what they’ll do with your kids!


Should I Hire Someone Or Use A Kit?


This one is easy. A kit is FAR cheaper, but I’d hire an attorney every time.

Maybe you’re a whiz kid at estate planning. Good for you.

I’ve worked with families that have to clean up the mess left by an uber-guru such as yourself, and wading through your accounts isn’t pretty without professional help. If you work with an attorney, consider this to be your chance to pre-interviewing the person your family is 90 percent likely to deal with once you pass away.

Is this a more expensive approach? Heck yeah.

Will the lawyer’s will look suspiciously like the one in the will kit? In many cases, yup.

All of this is irrelevant. We’re talking about your children, your stuff, your healthcare. Do it right.


Okay, here’s the question of the day: is your choice of estate executor comfortable being “a jerk?”