Financially Speaking: Estate Planning: The Good, The Bad & The Ugly
It’s hard to believe that summer is almost over. As we head into the shoulder season, the ocean is still warm, the crowds are beginning to thin, and you can probably get a reservation at your favorite restaurant more easily.
Over the years, one subject many people have found difficult to discuss is death. I have written about it before, and one comment I have heard numerous times is, “If I die…” The reality is that we are all going to die at some point. Thankfully, none of us knows our expiration date. Some people will pass away after a long illness, while others will die unexpectedly. That is why most financial advisers discuss estate planning as an important part of the financial planning process.
I often think of estate planning as The Good, The Bad, and The Ugly. There is no intended connection to the Sergio Leone classic starring Clint Eastwood, released nearly 60 years ago, but the title seems to fit.
The Good: Completing Your Estate Plan
Estate planning is the process of determining how your assets will be managed and distributed after your death. A well-designed estate plan helps protect your assets, ensures your wishes are respected, and provides for the people you care about most.
Generally, a last will and testament begins by identifying you, stating your residence, and declaring that the document revokes all prior wills and codicils. The will names your executor and successor executor, identifies your beneficiaries, and specifies how your property is to be distributed. If you have minor children, it also designates a guardian.
Your attorney will typically prepare a financial power of attorney (POA), which authorizes a trusted person to manage your finances, pay bills, and oversee financial matters if you become incapacitated.
In addition, you may complete an advance healthcare directive, often called a living will, which outlines your preferences regarding medical treatment and end-of-life care (life support, feeding tubes, etc.).
Depending on your circumstances, your attorney may also recommend trust documents. Trusts can help manage assets during your lifetime and transfer wealth efficiently to future generations.
If you have decided on unequal distributions among your heirs, I often recommend creating a video or writing a letter explaining your reasoning. Doing so can help prevent misunderstandings, hurt feelings, and family conflict after you are gone. Many parents discuss their estate plans with their children, but many do not. The absence of communication can sometimes lead to confusion, resentment, and unnecessary disputes among family members.
If a family member or friend asks you to serve as an executor or power of attorney, carefully consider the responsibility before accepting. I have served in both roles and understand firsthand the challenges they can bring.
Several years ago, I received a call informing me that a family member had died unexpectedly. After the initial shock wore off, I realized I had been named as the backup executor. For confidentiality purposes, I will refer to him as Jody and his spouse as Buffy. Each had a child from a previous marriage.
Because Buffy was suffering from Alzheimer’s disease when Jody passed away, I became both the executor of Jody’s estate and Buffy’s power of attorney.
Settling Jody’s estate was relatively straightforward. Most of his assets passed directly to Buffy through beneficiary designations, transfer-on-death accounts, or jointly owned property with rights of survivorship.
The Bad: Dealing with an Unhappy Heir
As Buffy’s POA, I managed her financial affairs and oversaw matters related to Jody’s estate. The challenges began when Buffy’s son became upset that he had not been named as either POA or executor.
Following Jody’s death, I consulted with Buffy’s physician, who advised that she would require around-the-clock care. Although I visited several nursing homes, I ultimately decided it was best for her to remain at home. That decision reflected both Buffy’s wishes and those of her late husband, even though home care was significantly more expensive.
Buffy lived for almost 5½ years after Jody’s death. During that time, she was cared for by three aides recommended by her physician. I often referred to them as Buffy’s angels because of their compassion and dedication.
Fortunately, Buffy had sufficient financial resources to remain in her home and receive the care she needed. My primary responsibility was to honor her wishes and ensure her well-being.
The Ugly: Enduring Harassment from an Unhappy Heir
During my time as Buffy’s POA, her son repeatedly sent me emails and text messages that were harassing and, at times, threatening.
Eventually, I asked Buffy’s attorney to petition the court to relieve me of my duties as power of attorney.
Because this occurred during the pandemic, it took several months before a hearing could be scheduled. The court ultimately approved my request, appointed a guardian ad litem to serve temporarily, and reviewed my records concerning Buffy’s finances and care. After confirming that everything had been handled properly, the court appointed a permanent guardian.
Although I was relieved of my duties as POA, I remained the named executor under Buffy’s will.
Following her death, her attorney and I filed her last will and testament with the county Register of Wills. I contacted both her son and stepson. The stepson was cooperative and never presented any issues. Buffy’s son, however, believed he was entitled to inherit everything she owned.
Approximately one month after Buffy’s death, he filed a formal caveat contesting the will.
Buffy’s final will directed that her estate be divided equally between her son and stepson. Her son believed an earlier will may have left him a greater share of the assets and wanted that document considered instead. As noted earlier, a properly executed will supersedes all prior wills and codicils.
For a variety of reasons, it took nearly 10 months for the Register of Wills to ratify Buffy’s final will. Five days later, I received the short certificates that granted me authority to act on behalf of the estate.
My first stop after receiving them was Buffy’s home, which had remained locked since her death. What I discovered was shocking. The home had been burglarized only days earlier.
After filing a police report and insurance claim, I eventually hired a company to auction the remaining valuables and clear out the property. Because of the ongoing disputes with Buffy’s son, administering the estate became an exhausting and frustrating process.
Quite frankly, it has been a nightmare – and it continues to this day.
Final Thoughts
If you agree to serve as a power of attorney or executor, understand that the role may involve unexpected obstacles, family conflict, and difficult decisions.
When preparing your last will and testament, choose someone who will faithfully carry out your wishes, even in the face of pressure from unhappy heirs. I also encourage you to leave a letter or record a video explaining the reasoning behind your decisions. Because these messages will be shared after your death, they provide an opportunity to speak candidly and reduce confusion among your heirs.
Estate planning is ultimately about providing clarity, preserving family harmony, and ensuring that your wishes are honored.
Now that you’ve given some thought to your estate plan, and whether you’re willing to serve as a POA or executor for someone else, grab your favorite beverage, a good book, and a comfortable chair. Then head to the beach, relax, and enjoy an endless summer.
Fred Dunbar, CLU®, ChFC®, RFC®, AIF®, is the former President of Common Cents Planning. Fred’s team may be contacted at 610-361-0865, by e-mail at info@commoncentsplanning.com or by mail at 239 Baltimore Pike, Glen Mills, PA, 19342. Investment advisory services offered through Planning Directions, Inc., d/b/a Common Cents Planning a Registered Investment Adviser. Fixed insurance products and services are separate from and unrelated to Common Cents Planning.
This commentary is meant for general informational purposes only and is not intended to be a substitute for professional financial, tax or legal advice. Investing involves risks including the potential loss of principal. Past performance is no guarantee of future results. All indices are unmanaged, and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance does not guarantee future results.
