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Now available in paperback, this accessible and entertaining guide to estate planning helps readers gain power over the disposal of their assets. Included is advice on talking to parents about their plans, arranging an estate, and keeping peace among the whole family. And all the laws are clearly explained, ...
Now available in paperback, this accessible and entertaining guide to estate planning helps readers gain power over the disposal of their assets. Included is advice on talking to parents about their plans, arranging an estate, and keeping peace among the whole family. And all the laws are clearly explained, without the financial doublespeak that makes most people dread taking this important step.
Pass It On uses familiar TV characters (including the Odd Couple, Ralph Kramden and Ed Norton, and Ozzie and Harriet), songs, and humorous cartoons to illustrate problems, solutions, compromises, and all the laws. Fun to read, and filled with vital information, this book takes the sting out of an important topic that readers cannot afford to ignore.
We all have to face the music sometime. What if the worst happens? The phone rings. It's bad news. Fonzie has gone to his great reward--for him it would mean fast cars, motorcycles, and plenty of women poured into leather, no doubt. Maybe not too bad for the Fonz, but his old friend Richie hangs up the phone in shock. He has absolutely no idea what to do. What would the Fonz want?Where should he be buried? Does he have a will, or life insurance? What does he own? And who on earth would know?
An estate plan, while perhaps not the most exciting of plans, is a necessity of life. Anyone with sense would choose to make a plan. To waltz in, smooth things over, snap his fingers, and make a graceful exit. To build the meataphorical Bridge OverTroubled Waters and take comfort in the fact that the beat will go on. The Fonz, like most of us,wouldn't have it anyother way.
This book is not about dying, but about living--and keeping one's perspective. Luckily, we have been able to keep ours through the losses of many who were near and dear. We write this book based on our experiences with those close to us who died sooner rather than later.
One of us lost a young husband who had a will and a well-planned estate, and left two small children. Each of us has lost a brother who had no will. In one case, the brother was single with a professional business of his own. In the other, the brother left a wife and two young children. One lost both parents after long illnesses; the other, a mother by tragic accident. In our close families, uncles, young cousins, and a niece have died long before their time.
We have been executor, custodian, and trustee; have dealt personally with wills, trusts, a sizable family business, distribution of family property, and retirement plans; have endured funerals, burials, and probate. And we have learned a great deal along the way.
Having been friends since college days, we stayed in touch overthe years, occasionally lamenting our losses and rather extensive careers in coping with the various estates.Weren't we lucky to have the professional background to deal with the legalities and investment questions involved in administering an estate? we thought. And hadn't we learned the hardway not only how the process works, but how it could be made easier? The entire experience had, in fact, strengthened us. If only we could put it to good use. Thus, the idea for Pass It On was born.
Experience had also taught us that like anyfamily gathering, even a meeting to discuss a will or a funeral is bound to have moments of levity. This is precisely the reason we have used humor in our book. A good belly laugh has a scientifically proven positive effect on health and general well-being. In time, one realizes that humor is a saving--and truly amazing--grace.
Estate planning is not a dreadful task. It is neither as dull nor complicated as you might believe. It does, however, require initiative. We owe it to ourselves and those close to us to accept the inevitable. Someof us probably think we can control things beyond the grave, but think again.
Picture yourself in mid-1850s London. Smoke, fog, soot, and squinty-eyed characters dressed in black waiting around everycorner. In Charles Dickens's aptly named novel, Bleak House, the entangled Jarndyce family battled overa large estate through hell, high water, decades, and generations.
The will that had been presented to the probate court was challenged from everycorner, and the lawyers of Bleak House were little help. In fact, quite the contrary. Entirely too willing to continue pressing their suits and countersuits, they kept the family at each others' throats--and kept the meter running--until the valid will was finally discovered. Unfortunately, by then the entire estate was lost to lawyers' fees, and nothing at all was left for the heirs.
What could be worse? you might ask. Consider how Archie Bunker might have felt had he known his whole estate--primarily his favorite chair and his union card--had gone to the Meathead after Edith and Gloria were killed in a stampede at a Republican rally for Richard Nixon?
Or imagine the surprise of Dick and Jane's children upon discovering that their parents had left their very substantial estate in trust for their dog Spot (soon to be recognized by Willard Scott on his hundredth birthday).
Truth is stranger than fiction. The fate of your family, fame, or fortune depends on your making an estate plan.Where money and property are involved, families have lied, stolen, cheated, married, divorced, even murdered, among their own. Don't let this happen to you and your family!
Naturally, none of us looks forward to the death of a parent, a favorite aunt or uncle, or anyone close to us. But how many can say, in all honesty, we have not dreamed of actually owning that cabin at the lake, getting our hands on the silver, or selling off the works and settling our debts, or sailing around the world on a whim?
Our parents, many of whom scraped through more than a few lean years, have much more to leave us than their parents left them. In particular, the baby boomers not only stand to inherit more than anyprevious generation--an estimated $10,000,000,000,000 (that's ten trillion!) or more--but with smaller families, we can live well and preserve more to pass on to our children.
Before we start shopping for yachts, we must cope with that ever-present, greedy relative, Uncle Sam, who stands ready to take a big chunk of what is rightfully ours! In somecases he'll clean us out completely and break up our families--not to mention what he can do to small family businesses and farms, which may soon go the way of the dinosaur.
A good estate plan includes a will and other essential documents, each designed to minimize the effect of estate taxes. Although not every estate actually pays tax, current federal rates are steep, ranging from 37 to 55 percent. In somecases, combined federal and state taxes on the estate, plus income taxes due during estate administration, can add up to more than 70 percent. Top it off with legal fees andthere might not be much left for your family.
John D. Rockefeller, Sr., was apparently better at making money than holding on to it. Sixty-one percent of his $27 million estate was lost to settlement costs including taxes. Walt Disney's estate fared considerably better, losing less than a third of its $23 million value along the way.
While most of us are not concerned with millions, we are all well aware that we pay taxes all our lives.We're taxed on the money we earn, the money we spend, on someof what we keep, and the profit on anything we sell. Our taxes build the roads, and we are taxed on the automobiles and fuel we buy to use those roads. None of us likes the idea of paying taxes again on what we are lucky enough to have left when we die. The good news is, we don't have to.
Planning--or not planning--your estate can have dramatic results. If you do nothing, you create unnecessary stress and work for your family, and line the pockets of Uncle Sam. You might end up holding a lifelong grudge because lifeisn't fair, being jealous of those who have more, or wallowing in self-pity and guilt because you have squandered your opportunities.
But if you act like a grown-up and make a plan, you win in everyway.
Ties That Bind
American Pie Let's skip aheadw-a-y ahead. None of us wants to die, but we all will. Unfortunately, somesooner rather than later. If you want to keep your home, your savings, your investments, and your heirlooms in the family, make plans now while you have your wits about you, while your better judgment is not tainted by undue influence or (heaven forbid!) senility. Let's face it, we are not going to take it with us, andthere is a lot more at stake than taxes.
In settling an estate, the circus of sibling rivalry and other family jealousies and tensions, certain to bring out the worst in everyone, can be most distressing. You may think you know your brother and your sweet little sister, but beware. The prospect of inheritance elicits unfamiliar strains in nearly everyone's character. It is important to strike a happy balance with everyone involved.
The original Me first! generation has taken for granted the stable influences of old-fashioned family harmony, which has served as a generational security blanket. We baby boomers think we can always have it our way simply because styles and markets have chased us with a vengeance all our lives. Even hamburgers have been sold to us because we can have them our way.
Now: Passing the vision test
For some, the real boom of recent decades has been financial. As markets have soared, many baby boomers, now in middle age, have accumulated enough wealth to live comfortably, often very well.
Many have a comfortable home, a couple kids, a couple cars, and a couple jobs to stay afloat financially. Others have become new-age consumers with fancy homes, apartments in the city, cabins at the lake, or condos on the shore or in the desert; maybe a boat, a motorcycle to get through the midlife crisis, ski vacations, winter trips to the tropics, and on and on.
For a remarkable number of baby boomers and others, life is good, and for those lucky souls, an estate plan is critical to wealth preservation. But for all of us, even those of very modest means, a plan of somesort is necessary. For the sake of ourselves and our family's well-being, we ought to know what we have, what we need, and whether Uncle Sam is going to claim a share.
It is crucial not only to consider how to plan our own estates but also to recognize what we might inherit, and to discuss the situation with our parents. They may not be aware of desperate needs among their children and they would probably like to know if no one wants the silver tea set.
Parents, whose blood, sweat, and tears gave rise to well-to-do adult children, might rather spend what they have on themselves than preserve it for those who don't really need it. They'd feel better if they heard you say, out loud, I don't really need it.
Parents might make gifts now not only to enjoy the giving, but to avoid taxes that will diminish their estates later. If they want to leave their property to you, they might as well preserve as much as possible. Perhaps they need a lawyer, or a better lawyer, a second opinion to confirm their plans, or just a bit of help locating pertinent documents. What they most certainly want and deserve is an offer of assistance, somehonest information, and the privacy to make their own informed decisions.
Short sermon. It is important to be a decent child to your parents and a decent parent to your child, to be considerate of your relatives and friends who have special needs, who have done the unexpected or to whom the unexpected has been done. Respect and fairness in living preserve the most powerful legacy and probably a good deal of comfort in dying.
When not busyhaving it your way, or being decent, which rarely occur at the same time, take a minute to contemplate how you and your brother and sister are actually going to manage to share that family cabin. Who will take care of the house painting and the leaky roof? Who will choose the new canoe, and what if you don't even want a new canoe? Is it worth the trouble and expense if youcan't have the cabin everyFourth of July? What if you want your money instead of a share in the cabin?
The way to get the most, keep the most, pass it on, and still have a happy family gathering everyThanksgiving is to think about it, talk about it with everyone involved, and plan it from everypractical angle.
Everyone needs a plan--perhaps not a fancy plan with trusts and tax schemes, but a basic game plan that will work for you and your family. Estate planning requires perspective and the advice of an expert; nevertheless, it can be accomplished quite easily and will prevent big disappointments and unwelcome surprises down the road. A thoughtful plan brings everyone concerned into the loop and helps keep the peace.
Everyone should, at the least, have a will, a living will or health care power of attorney, and either a durable or springing power of attorney. Those with significant assets would be wise to consider a trust, insurance plan, or gift program to counter the effect of estate taxes. Specific situations, such as living with a disability, owning and working in a family business, or sharing finances with an unmarried partner, require custom-tailored solutions.
This friendly guide to passing it on walks through the essential elements of an estate plan, with a view toward the expanding wealth and diverse life situations of new-millennium America.
We do not intend to make light of a serious matter, but rather to throw in a little humor to ease the difficulty of getting the subject on the table. A lot of people are intimidated by the big, scary words and the legalities involved in planning an estate. But it could be even more frightening for your family to face a long and costly paper chase in settling your estate. Our purpose is to get past the fears and cut through the confusion often associated with planning and settling an estate.
Explanations and descriptions provide general guidelines--meaning just that. Each circumstance is unique, requiring legal and financial expertise specific to state law, the property, and individuals involved.
This book is not designed as a legal treatise on estate planning or a do-it-yourself guide. The object of the exercise is to point out the pitfalls and somesurprisingly simple solutions to familiar situations and problems. We encourage you to seek professional help and, perhaps most importantly, to have open and honest discussions with family members and loved ones to put your mind to rest long before you are laid to rest.
We want to help people become more comfortable with the issues of estate planning and get the subject on the table by giving it to them straight--and laughing a little as we go.
|Acknowledgments: For He's a Jolly Good Fellow||xiii|
|Prologue: Recognizing the Need: Let's Face the Music and Dance|
|Ties That Bind: American Pie||7|
|Get Smar: That'll Be the Day||9|
|1||Getting Started: Think|
|Family Harmony: Wouldn't It Be Love'r'ly?||16|
|A Very Good Place to Start: We've Only Just Begun||18|
|Gathering the Facts: Get Ready||20|
|Making a List: Checking It Twice||20|
|Long-Term Needs: Anticipation||26|
|Family Discussions: Yakety-Yak||27|
|We Can Work It Out: Send in the Clowns||28|
|Let's Get Together: Yeah, Yeah, Yeah||32|
|Finding the Pros: Shop Around||36|
|Placing the Call: Getting to Know You||38|
|Setting Up a Team: Come Together||41|
|2||Essentials: If Ever I Would Leave You|
|The Will: Where There's a Will, There's a Way||46|
|What happens Without a Will: Do the Mashed Potato||48|
|What Constitutes a Valid Will: Ain't Nothin' Like the Real Thing||49|
|Appointments: If You Want This Choice Position||56|
|Married Couples Making Wills: Side by Side||60|
|Distributions Under a Will: It Had to Be You||62|
|Special Instructions: Listen to What the Man Said||70|
|Distributions Outside a Will: Whatever Will Be, Will Be||72|
|Other Essential Documents: With a Little Help from My Friends||73|
|Power of Attorney: I'll Be There||74|
|Health Care Power of Attorney: Someone to Watch over Me||77|
|Living Will: Let It Be||77|
|Location of Documents: Searchin'||81|
|Safe Deposit Boxes: Behind Closed Doors||82|
|Periodic Review and Update: Turn Around, Look at Me||83|
|Unified Transfer Tax: Who's Afraid of the Big Bad Wolf?||85|
|3||Trusts: Come Rain or Come Shine|
|Trust Basics: Peaceful, Easy Feelin'||88|
|Revocable or Irrevocable: Did You Ever Have to Make Up Your Mind?||90|
|Helpful Tax Loopholes: Here We Go Loop-de-loop!||94|
|Unlimited Marital Deduction: You Make Me So Very Happy||95|
|Unified Tax Credit: Money, Money||95|
|Credit Shelter Trusts: Gimme Shelter||96|
|Marital Trusts: Tea for Two||98|
|Irrevocable Life Insurance Trusts: You Bet Your Life||103|
|Charitable Trusts: Crats, Cruts, Nim-Cruts, and Clts: Sweet Charity||107|
|Generation-Skipping Trusts: Teach Your Children Well||111|
|Grantor-Retained Trusts: Return to Sender||112|
|Grats and Gruts: Half Heaven, Half Heartache||113|
|Qprt: True Grit||115|
|A Trust by Any Other Name: I Heard It Through the Grapevine||116|
|4||Putting Your House in Order: Hold on, I'm Comin'|
|Gifts: Hot Diggity (Dog Diggity Boom)||119|
|Completion of a Gift: Got to Give It Up||120|
|Incomplete Gifts: Oh, Dear, What Can the Matter Be||121|
|Deathbed Transfers: In the Midnight Hour||122|
|Tax Advantages of Lifetime Gifts: I'm into Something Good||123|
|Valuation of Lifetime Gifts: Super-cali-fragil-istic-expiali-docious||125|
|Planned Giving: When You Wish upon a Star||127|
|Gifts to Minors: The Candy Man||129|
|Restricted Gifts: Call Me Irresponsible||133|
|Step-Up at Death: The Morning After||135|
|Entitlements: A Little Bit Me, A Little Bit You||137|
|Property Titles: From a Jack to a King||137|
|Property Rights: Ticket to Ride||139|
|Protecting Assets from Creditors: The Way We Were||142|
|Emergency Funds: Pennies from Heaven||146|
|5||Special Situations: That's Life|
|Divorce and Remarriage: Breaking Up Is Hard to Do||150|
|Pre- and Postnuptial Agreements: Fifty Ways to Leave Your Lover||151|
|Protecting the Family Estate: Show Me the Way to Go Home||154|
|Elderly and Disabled: Help!||158|
|Government Programs: High Hopes||160|
|Long-Term Care Insurance: You'll Never Walk Alone||163|
|Incompetence: Still Crazy After All These Years||167|
|Singles and Widows: O Solo Mio||170|
|Unmarried Partners: Sign of the Times||174|
|Unmarried Parents (All Parents, For That Matter): Parent Trap||181|
|Childless Couples: Born Free||186|
|6||Qualified Retirement Plans: When I'm Sixty-Four|
|Elements of a Qualified Retirement Plan: She Works Hard for the Money||190|
|Types of Retirement Plans: I've Been Workin' on the Railroad||192|
|Plan Distributions: Know When to Hold 'Em, Know When to Fold 'Em||197|
|Beneficiary Designations: B-I-N-G-O||201|
|7||Closely Held Businesses: Heigh Ho, Heigh Ho, It's Off to Work We Go|
|Continuing a Business: Jeopardy||207|
|Types of Closely Held Businesses: Eight Days a Week||208|
|Sole Proprietor and Self-Employed: My Way||208|
|Family-Owned Business: We Are Family||211|
|Partnership: It Takes Two to Tango||213|
|Family Limited Partnership: It's a Family Affair||213|
|Family Limited Liability Corporation: That's the Way I Like It||214|
|Corporations: Risky Business||215|
|Transfer or Sale of a Business: Taking Care of Business||217|
|Buy--Sell Agreements: Hello Goodbye||219|
|Private Annuity: There's a Kind of Hush||221|
|Installment Sale: You've Really Got a Hold on Me||222|
|Valuation: The Price Is Right||224|
|Valuation Methods: Let's Make a Deal||224|
|Freezing Techniques: Time in a Bottle||227|
|Special-Use Valuation: Home on the Range||229|
|Tax Deferral and Exclusion: Take It to the Limit||230|
|8||Final Arrangements: Happy Trails|
|Funeral and Burial Arrangements: When the Saints Go Marching In||235|
|Precatory Letter: Gonna Sit Right Down and Write Myself a Letter||239|
|Prepaid Funeral Plans: Sounds of Silence||241|
|Probate: It's Too Late||243|
|How Probate Works: The Long and Winding Road||243|
|Types of Probate: Guess Things Happen That Way||245|
|Who Assumes Responsibility for Probate?: Big Shot||247|
|Probate Costs: Ain't That a Shame||249|
|Is Probate All That Bad?: It Ain't Necessarily So||251|
|Settling the Estate: After You've Gone||252|
|Thanks for the Memories: Twilight Time||262|
|Big Scary Words (and Other Mysteries of Estate Planning Explained): The Name Game||265|