CYA…that is, Your Assets!

To “cover your assets” properly, you need to be proactive. And to be proactive means that you need to employ the resources, services, and appropriate vehicles to preserve the intentions you have for it/them.  Recently, an estate planning attorney brought to my attention a Forbes magazine article that featured the “7-major errors in estate planning.”

This is good information; obviously something Katy Perry should have sought some advice on a year and a half ago—as her 14-month marriage to Russell Brand may cost her $22MM in her pending divorce settlement.  But that’s not as bad as Mel Gibson’s record setting $425MM divorce settlement earlier this year!  The list could go on with Kobe, Tiger, and many others.  I’m not suggesting that every couple have a pre-nuptial agreement (that’ not what this article is about);  I am merely stating how this article struck home with me, as I’ve had to assist clients with horrible ‘reactive’ estate planning and inheritances that became an absolute mess upon the decedent’s death or client’s divorce.

At first, you may think that a properly drafted will or living trust would solve all issues.  But proper planning goes way beyond that.  I’m sure most of you wouldn’t know the difference between a GRAT, GRIT, or GRUT (those are all trust types), so how would you even know if you needed one—nevertheless ‘which’ one?  What if you outlive your primary beneficiaries? Are all of your children equal contingent beneficiaries, or did you only have the 2-children when you applied for insurance 5-years ago, and number three isn’t even listed as a beneficiary? Finally, how about your IRA or company pension?  Did you change the beneficiary when you got married or divorced?  I do know of a case where a husband died while flying his plane in Mexico, and the ex-wife (whom he couldn’t stand) ended up receiving the life insurance benefits while his current (and loved) wife didn’t receive a penny.  This is a true story…I know his friend.

You see, talking money with family members seems to be one of the most difficult conversations to have.  Everyone, especially family, likes to keep his/her money matters to themselves.  In fact, I’d be willing to bet that your brother, sister, or close friend will tell you about their very personal surgery or tenuous family relationship before they would mention the balance in their checkbook.  Now I haven’t conducted any formal research on this subject, but I believe people (in general) label others by the size of the dollar sign on their forehead.  And because of this, everybody guards their net worth as if the secret (the value of what they own) will expose a weakness.  Once you have “shown your cards,” you have nothing left to hide!

A rule that I heard a while back was called the 40/70 rule.  Either when you turn 40 or 70, it’s time to start talking about estate planning with your parents or children, depending on whether you’re the low or high side number.  This puts a definite timeline on your calendar, but it does have its obvious flaws.  The time to start talking about ‘your’ ultimate plans with your precious children, loved parents, and soul mate (spouse) are now.  Since we don’t know if, when, or what will happen to us along our path of life, it is important to be prepared at any given moment.  I have several professionals that can assist you in approaching this sensitive subject, creating a plan, and approaching those necessary to participate in it.

In summation, Frank Sinatra couldn’t have stated (what I call estate planning) it more clearly in his lines from “My Way”: “I’ve lived a life that’s full.  I’ve traveled each and ev’ry highway; But more, much more than this, I did it my way.”  Now, go out and CYA— your assets, that is, and make sure it’s done ‘your way!’

Note: Estate Planning can involve a complex web of tax rules and regulations.  You should consider the counsel of an experienced estate planning professional before implementing any strategy.  Advisor will help review the documents and recommend a local attorney that specializes in Estate Planning.