Part 2 of Estate Planning. Part 1 was featured in RG on September 13, 2014 Are we ever prepared for the worst?

Leaving our legacy. No one, almost no one, wants to think about, or even admit that somewhere sometime, we will become one of the dearly departed. That is because we wish subconsciously that we will be the one — instead — that “will live forever, who will love forever.”**

The aversion to considering one’s own demise is so strong that we would rather do anything else but plan for the survivors of our ultimate final event on this earth.

There are so many avoidance techniques we use, most of them revolving around various cash crunches or delaying excuses. The years roll on — with no action. The result. Not good — for those who have to live on without us, no doubt hitting walls from time to time due to the sheer frustration (and sadness) of dealing with the residual financial mess.

Estate planning is important — for those left behind. Some of the more common stories, quick fix scenarios, and torpedo disasters are below. I’ll bet you know personally or have heard similar tales of tragedy. Hopefully, if even just one person (after reading these) is motivated to get his/her estate in order, that is a success in my book.

No will. Around 45 percent of an individuals in an adult population do not have a will. This number has remained constant. The procrastinators cross all demographic groups: doctors, lawyers, accountants, very wealthy people, famous people, people with modest lifestyles and so on do not have a will. On death, the government is then charged with settling an intestate estate. Accounts are frozen, the process can involve tedious time before assets are released to the designated beneficiaries — per estate law. Meantime, the survivors may be financially devastated.

The excuses for not having a will are as long as the sky is high:

— Lawyers cost too much. Right now all we can do is survive financially from day-to-day. We’ll think about taking some action when the economy gets better.

— We just don’t have time.

— All my assets are held jointly, I don’t need a will. Yes, but jointly with whom? When was the last time you reviewed your property deeds, bank account ownership, pension account and life insurance beneficiaries?

— We don’t have any assets, so why bother with a will — the bank owns my biggest asset.

— I have no intention of preparing my estate. They can fight about everything when I die. What will I care then? In the meantime, we will spend it all. This statement, while a bit shocking, is probably the most practical, except there is usually some glitch that the surviving partner must untangle.

Do-it-yourself. We don’t need an attorney. We downloaded this will off the web. We filled out what we wanted in the blank sections, we took out what we didn’t like and this will works for us. See?

Years ago, I was presented with one of these ready-made wills. Ah, upon having a chat with an attorney friend, not only was the will inadequate — with several vital clauses missing and items inserted that were not applicable to the jurisdiction, but the document was not signed, or witnessed. These were just worthless pieces of paper.

Cancelling and Letting Lapse Life Insurance. Times are very, very tough for many residents of Bermuda today. Please don’t cancel or lapse a life insurance policy. If you leave your family too soon, that policy payout may mean the difference between a home and a tent. If you are struggling with payments, call your agent now. Have a chat to see if you can restructure the payments, in some way, until prosperity returns to your family.

Pulling the plug. Wills contain additional instructions these days besides designating an executor, financial or legal guardians for minor children, and other material arrangements. Your states wishes as to quality of life, healthcare directives, and specific instructional guidance as to End-of-Life Directives for termination of life-support are valuable, although not pleasant to contemplate, binding documents (in some jurisdictions). No one wants to live on as a plastic parasite — consuming the family’s’ remaining financial assets.

Too many cooks in the mix means no one is paying attention to the big picture: multiple executors, trustees, attorneys, financial advisers, portfolio managers, etc all spread out over several jurisdictions, billing multiple fees. Where is the facilitator to co-ordinate the estate planning, monitor the progress, and assure that all matters are handled correctly? All too often, these elaborate plans are crafted carefully, and completely at the time by the client. Later with no ongoing updates from the client, these documents may become almost irrelevant years due to significant tax, and regulatory changes.

Composite case stories

Poor business planning. Sorry, son-in-law, your wife’s father never got around to conveying a few company shares to you. I’m in charge now and I’m putting in my own management team. So said the second wife of this deceased businessman. The company just had their most profitable year, thanks to Sonny’s efforts, but now he is out — of luck, out of a huge financial promotion, and out of a job. His wife’s father had always made it clear that Sonny would succeed as CEO of the business, but FIL (father-in-law) just never got around to executing his future plans.

No business planning. One of the most basic elements of a partnership business, in particular, is to implement a Key man insurance policy. In general, this type of life insurance protects two ways: it buys financial time so that the surviving partner can recover to keep the business running, or the insurance can be used to buy out the deceased partner’s interest in the business. The widow/widower very often is wholly dependent upon the salary and dividends from that business. A partner’s death can not only disable the future profitability of the business, but the surviving spouse has a sudden cessation in living wages.

Wrong beneficiary. We’ve been divorced for eight years. He remarried and now has two small children. Gee, I never expected to be remembered in my ex-husband’s estate. Yes, it was a tidy sum enclosed in an annuity contract. Ex-hubby never got around to removing ex-wife’s name from his accounts. New wife and babies are now short some serious cash. Annuity contract are a matter of law, almost never can be contested. Readers, this is a very, very common mistake. If you have had changes in relationships — review all of your accounts, pension and life insurance beneficiaries, and related matters.

Get them set to rights now.

Readers, review your legacy planning. Your family depends on it.

** I want to Live Forever, as immortalised in the song by Queen and the marvellous performance of Sarah Brightman.

Martha Harris Myron CPA PFS CFP JSM Masters of Law: International Tax and Financial Services; appointed to the Professional Tax Advisory Council, American Citizens Abroad, Geneva, Switzerland. The Pondstraddler Life Consultancy: planning, publications, presentations on international tax, immigration, investment, retirement, legacy, and related financial challenges to the lifestyles of internationally mobile individuals and their businesses residing, working, crossing borders, and straddling ponds in the North Atlantic Quadrangle. Specific focus for residents of Bermuda, the premier international finance centre. Contact: martha@pondstraddler.com

This article is general consumer education only. The information provided herein may not be applicable in personal individual situations and should not be relied upon or acted upon without financial, tax and legal professional advice that is specific to your particular financial circumstances.