The New Problem of Estate Planning: Longevity
The new problem of estate planning: longevity
All practitioners involved in trust and estate planning are facing the same challenge .i.e. the increase in life expectancy. As a result, drafting estate plans for people who are about to die is not enough anymore. You will find below a synopsis of why everyone needs to adapt to the fact that people live longer and how it impacts the estate planning requirements of the elders and their families both pre- and post-mortem.
Pre-mortem, the needs of the elderly have changed drastically: nowadays, the issue is not what happens when we die. It is what happens depending on their life expectancy! To put it simply, pre-mortem estate planning has become retirement and wealth planning for the long run and post-mortem is simply a question of anticipating the conflicts that might occur due to the increase in life expectancy. Post-mortem, the heirs end up with less money than expected because their parents live longer and they will have, more often than in the past, to personally contribute to the welfare of their loved ones. As a consequence, as mediators, we see more and more conflicts taking place before and at the time of inheritance.
1.Draft an estate plan that will not outlive the elders income.
The first rule is to make sure that your clients will be able to pay for their basics needs until they die. As a consequence, when you itemize the elders incomes and wealth, get one step further and seek the "hidden value items" that your clients or parents might not think they are worth a fair amount of money . This way your clients/parents will be in a position to decide what to keep and what to sell before their passing. This will also have a collateral positive effect for the heirs who are too often lead to believe that some items are very expensive when they are not and vice versa.
2. Examples of such items include:
Collectibles (e.g. paintings, books, antiques, dolls)
High end vintage clothing (e.g. shoes, handbags)
Tableware (e.g. silverware)
Chandeliers (e.g.crystal chandeliers)
Old cars (e.g. bikes, motorcycles)
Value of real estate properties: This is the one of the items about which heirs and collaterals fight the most about because this usually is the most expensive asset of the deceased. As a realtor, I always paid to have a professional such as property inspection company check the physical condition of the property. It is crucial to know whether or not the house is in good condition. Bear in mind that deferred maintenance items will impact the fair market value of the property.
3. Include a mediation clause in your estate planning package for issues between the trustees and between the trustee(s) and the other parents (siblings, step mom, dad, etc)
4. Act before it is too late: nowadays people are incapacitated ( physically and/or mentally) later in life but they all share the same demeanor : being the prey of greedy persons. Having more than one trustee can be useful as they can share the load work and watch each other(s)
5. Always add a letter of intent for the funeral expenses
6. Identify, locate and contact heirs as part of your estate planning preparation and keep in touch with them on a regular basis
7. Solve as many conflicts as possible before they arose is the aim game. Due to their parents increased life expectancy the heirs will, most likely, be older when they will inherit and they will receive less money than before. Instead of in- cumulating they will de-cumulating. Unfortunately, lots of people still include their inheritance in their own retirement plan. Therefore, it is good practice to gather the following information:
• Learn about the heirs financial situation and how they can help their elderly parents: a small contribution now might be better than a huge one in a decade from now.
• Learn about what bother them as well as the current family dynamic.
• Make sure that the heirs are informed that they might not inherit was they expected and may even have to contribute to the welfare of their loved ones.
We hope this helps and will allow you to have a more holistic vision of what could be done to avoid family feuds in the future.