FORECASTS & TRENDS E-LETTER
By Gary D. Halbert
August 25, 2009
“Death Panels” Aside, End-of-Life Planning Is Important
IN THIS ISSUE:
1. The “Death Panel” Controversy
2. Untimely Death – An Unpopular Subject
3. Most Survivors Are Unprepared
4. Getting Your Affairs in Order
5. Leaving a Written Record
6. Special Offer for My Readers
7. Conclusions – Be Prepared
8. Personal: Central/South Texas in Record Drought
You’d have to be living on a desert island lately to not be aware of the “Death Panel” controversy surrounding the health care reform bill. Former Alaska Governor, Sarah Palin, first made the news with the assertion that a panel of bureaucrats would have the power to make life and death decisions regarding the rationing of the limited supply of health care. Thus, the theory goes, anyone not deemed “worthy” of treatment could be denied expensive drugs or medical treatments.
As discussions about Death Panels spread like wildfire, liberals and their mainstream media lapdogs howled at this accusation. Palin, usually a favorite target of the loony left and liberal media, initiated such a national furor that the provisions discussing Medicare reimbursement for end-of-life counseling have been dropped, or so we are told.
So far, I have refrained from commenting too much on the ever-changing health care reform proposals, although it has been so tempting since there is so much information and mis-information about the various proposals already in the news and on the Internet. Suffice it to say that you simply can’t add the care of 46 million uninsured individuals to the existing number of health care providers and not create shortages (rationing) at some point.
This week, however, I would like to point out that the Death Panel discussion may be having an ancillary positive effect, no matter which side of the health care debate you land on. I have seen numerous articles and Internet blog discussions about how Palin’s (and many others’) remarks have increased interest about the importance of end-of-life planning, which is a positive benefit from my point of view.
I will also revisit several important end-of-life financial planning issues that I have covered in the past that everyone should consider, just in case the unthinkable happens. I will also tell you how you can obtain a very helpful resource entitled, “All They’ll Need To Know” that will help you prepare for the time when you will no longer be around to make your wishes known.
Untimely Death – An Unpopular Subject
Much of the recent end-of-life attention has centered on the need for a “living will,” which the MedicineNet.Com website defines as “… one form of advance medical directive…pertaining to treatment preferences and the designation of a surrogate decision-maker in the event that a person should become unable to make medical decisions on their own behalf.” Both I and members of my staff have had to deal with end-of-life issues with terminally ill parents, so we know the value of this service first-hand.
However, you shouldn’t stop there. Living wills are only the tip of the iceberg when it comes to planning for survivors. There are many financial, legal and family issues that should be addressed prior to death or becoming incapacitated to help take some of the pressure off of a surviving spouse or other loved ones.
No one likes to talk about death, and many people put off planning for this contingency for that reason. Most young people think that death is a long way away, so they do nothing in the way of planning. Yet people of all ages are killed every day in accidents. The survivors of premature deaths are usually the hardest hit, because the death comes as much more of a surprise. That’s why it’s very important to plan for the possibility of an untimely death, even if you are young and healthy.
Also note that in this E-Letter, I will refer to the “financial partner” as the person who primarily handles the family finances, and the “non-financial partner” as the one who is usually not aware of all of the financial details.
In the financial services business, we have more than our fair share of widows and widowers who come to us without a clue as to what kinds of investments they and their late spouse owned, how much was invested, or how and where the assets are held. They are not alone. I have read in the past that over 90% of survivors are not fully prepared for an untimely death.
This isn’t surprising given how many families handle their financial affairs. In many cases, one spouse is in charge of the checkbook, investments and most importantly, filing of important papers. The other spouse is often minimally involved, signing on the dotted line when necessary and generally knowing where important records are, but not familiar with the details.
Unfortunately, the non-financial partner is sometimes that way by choice. I have talked to many couples where the husband or wife will say that the finances are the other partner’s responsibility, and they don’t care to know anything about them. In other cases, the financial partner intentionally keeps the other partner in the dark. This is especially prevalent with single individuals, who are often reluctant to share their financial information with someone else, even a family member.
Add to this lack of knowledge the shock and grief that accompanies an untimely death and you have a recipe for a financial disaster. And then it gets worse: Widows and widowers are often preyed upon by unscrupulous scam artists who offer help in time of need, but end up taking advantage of bereaved survivors whose judgment may be clouded by sorrow.
Yet, most of these problems are almost totally preventable. Just by taking a little time to document the financial details that pertain to your family can save hours of searching, not to mention the emotional strain coming from being thrust into the financial role without any preparation.
Gather and Organize Your Information
My first bit of advice may sound too simplistic, but it is to gather your financial information into one place: a file cabinet, bank safe deposit box or other suitable storage medium. It is amazing to me how many different places financial information is kept in many families. Some have part of their information at their office, other parts at home, some in a file cabinet, some in a dresser drawer, some in all of the above, etc., etc. There are times when survivors find important documents only by accident, and sometimes many years after death.
There’s no wonder why many survivors have a hard time figuring out what their financial situation is, because they are having a hard time finding all of the information, much less sorting it out. An article I recently read (http://www.unclaimedassets.com) estimated that more than 25% of life insurance benefits are not paid because beneficiaries didn’t know a policy existed. How sad!
When deciding where to store your important financial information, be careful about using bank safe deposit boxes. In some cases, banks will freeze access to safe deposit boxes upon notification of the death of the holder. This can be true even if the box is jointly owned with right of survivorship. Therefore, access to any important paperwork kept in the safe deposit box could be significantly delayed. If it is necessary to keep original documents in a safe deposit box, you should make copies of them to access if death occurs when banks are closed or access to the box is restricted.
Getting Your Affairs in Order
Once you have gathered all of your financial materials together in one place, it’s time to review them and get them in order. By getting them in order, I don’t mean alphabetizing them or putting them in nice neat file folders. What I mean is that you should review your overall financial situation and make sure that it reflects your current and long-term plans. Specifically, I would recommend that you do the following:
1. Update your will. If you don’t have a will, get one ASAP. It is also very important to update your will periodically. Estate laws change periodically and differ from state to state. I recommend that you consult a competent attorney who specializes in estate planning for this, even if your estate is not expected to be large enough to trigger an estate tax.
I do not recommend using do-it-yourself resources to do your will because they can never tailor a document to fit all of the intricacies of most families, and this is especially true when it comes to blended families. Plus, since estate planning law changes frequently, websites and books will not always notify you when your document needs to be revised, but a good attorney will.
2. Make sure all of your assets are titled correctly. The way assets are titled has an effect on how they transfer upon your death. For example, a bank account held by two people as “joint tenants” transfers differently than if it were jointly owned with “right of survivorship.” However, consult with your attorney regarding titling issues as there are some risks involved when naming other owners to your accounts.
In addition, it is important to keep your information current and updated. For example, if you have recently married, you may want to add your spouse to the account, unless it is intended to be separate property in community property states. Or, you may have remarried and want to remove an ex-spouse from the title of an asset.
If you have established trusts as part of an estate plan, it will be important to make sure that any assets that are part of these trusts are also titled correctly. Trusts are a key element of estate plans, and you will need a good attorney to help you with this.
3. Make sure contractual beneficiary designations are current. Life insurance, annuities, retirement plans and IRAs can all be transferred contractually by naming a beneficiary. This means that the proceeds are transferred outside of the will and need not go through probate. However, this makes it even more important to keep these beneficiary designations updated.
If you have recently married, or if one or both parents are deceased, you will need to replace parents or other family members as beneficiaries of your insurance policies. Just as important, if you have divorced, you may want to remove your ex-spouse as beneficiary, unless your divorce decree requires otherwise. It is not uncommon for insurance proceeds to be paid to an ex-spouse just because a person never got around to changing the policy beneficiary.
Under most retirement plans, the current spouse is required to be the beneficiary of death benefits, but this is not always the case for IRAs. Therefore, you will also want to make sure your IRA beneficiary is current. It is also important to name contingent beneficiaries should the primary beneficiary predecease you.
4. Make sure you have a “financial power of attorney.” A financial power of attorney simply empowers a trusted individual to manage your financial affairs should you become incapacitated. It takes effect at such time that you can no longer handle your own business affairs, and ceases upon your recovery or death.
In addition to the financial power of attorney, it is important to note any automatic payments you may have set up to be withdrawn from your checking account. If deposits are no longer made into the account, these automatic withdrawals could bounce, possibly affecting utilities, insurance coverage, debt payments, etc.
If you pay your bills via the Internet, then it is also important to make that known, as well as the user ID and password for your financial power of attorney designee or survivor to use to access your banking information and pay bills as they become due.
5. Make your wishes known. This piece of advice is obviously not limited to financial issues, but it is vitally important to make your wishes known when transferring financial holdings or any other asset with significant value upon death. While I have noted above how many financial instruments can have joint ownership with right of survivorship, or carry the ability to name a beneficiary, there are other items of value that may not be able to be transferred as easily, such as family heirlooms, antiques, valuable collections, personal items, etc.
In those cases, it is imperative that you state your wishes clearly in either a will or living trust. I think this is especially true today when there are so many “blended families” made up of children united by remarriage of the parents. What may be a family heirloom to one child could be a valuable commodity at the local pawnshop to another. It happens.
Another very important item to consider in this process is the disposition of financial assets. Whether those financial assets are stocks, bonds, investment or security accounts, or real estate, it is important for the financial partner to leave instructions as to how they should be handled upon death.
We often get calls from widows who are now trying to sort through the family investments and determine what they should do with them. Sometimes these callers are in a near-panic trying to make decisions about assets they know little or nothing about. Had the financial partner left clear written instructions, this confusion could be avoided. Thus, it is critically important for the financial partner to consider the level of sophistication of the non-financial partner, and leave written instructions for the disposition of assets accordingly.
Along this line, I am sad to report that survivors are often targeted by brokers and insurance salesmen and even bankers who offer financial help, but are really out to liquidate all assets and put them into products that will generate commissions or fees for them. From my experience, it is rare that every single investment should be liquidated upon the death of one partner, yet we often hear from survivors who have been given this very advice.
Therefore, an important part of getting your affairs in order should include the knowledge that your survivors will likely be targeted by the financial services industry and others, so you should leave very specific instructions as to how each asset should be handled.
6. Note all important contacts. There are some who successfully go through all of the prior steps in getting their affairs in order, only to fail to make a list of important contacts for their surviving partner. This list should contain the names, addresses and phone numbers of all important contacts. From a financial perspective, these should include your bankers, brokers, insurance agent, attorney, accountant, and financial and investment advisors. You should also include user names and passwords for websites where you have made any financial or investment transactions or have accounts.
This list is important because while the surviving spouse may be able to find all of the insurance policies and account statements, he or she may be totally lost as to how to proceed from there. Having a complete list of contact information will be very comforting during this time of great emotional stress for the survivors.
Write It All Down
Once you have all of your affairs in order and organized where they can be found, it is important that you document all of this in a concise manner. This documentation will serve as a guidepost for your survivors to let them know what assets you have, where they are located and how they should be treated. It is not enough to just tell the other partner about these issues and hope they remember. As the old saying goes, “a short pencil is better than a long memory.”
There are various methods of documenting everything your survivors will need to know. The simplest is a letter to the surviving partner detailing where all of the important papers are and how they should be handled. However, it is sometimes hard to think of everything to put into the letter, and a letter that does cover everything may be so long that it’s overwhelming.
Others keep a summary file folder along with their other important papers that contains copies of statements for assets, special instructions, important contacts, etc. The summary file approach is usually easier to update than rewriting an entire letter to address changes.
I don’t recommend either of these approaches. I have always recommended a more detailed method of keeping track of your assets and leaving detailed instructions for your loved ones when you are gone. There are various products on the market for doing so. However . . .
Back in 2005 I ran across one of the most useful and thoughtful financial tools I have ever seen to help organize all of the important items necessary to pass on to loved ones in case of an untimely death. It’s a booklet entitled ALL THEY’LL NEED TO KNOW from Emerson Publications. I was so impressed with this planning tool that I negotiated the right to reprint them and offered them to my clients and E-Letter subscribers.
To put it mildly, the response was HUGE! We mailed out thousands of booklets to clients and readers, many of whom had their own stories to tell about how a previous death showed them the need for such a resource.
All They’ll Need To Know provides checklists that cover virtually every piece of information you would need to pass on to surviving loved ones. This format is superior to a letter, in that it allows you to simply enter information into a template. You can even provide information on who you want to receive your special personal possessions, and even details about the funeral service you would like to have. Believe it or not, these small things are sometimes some of the most stressful decisions that survivors must make.
We still have a very limited supply of these printed booklets available, free of charge, on a first-come, first-served basis. Just complete our online request form to get your own copy while they last.
As a practical matter, the printed booklet has limitations in that personal preferences and financial information change over time, especially for younger individuals. Thus, mark-outs and erasures are common, which can also lead to confusion. Plus, in our electronic age, much of our personal information is now kept on our computers. Fortunately, Emerson Publications also has a Microsoft Word version available that is much easier to update.
I have managed to negotiate with Emerson Publications on the electronic version of the All They’ll Need To Know booklet so that my clients and readers can purchase it at a discounted price of only $16.99. I am delighted to be able to share this with you, as this is something we all need and can make use of.
To obtain your discount on the electronic version of All They’ll Need To Know, click on the following special Emerson Publications link. This web page has been specially designed for my clients and readers so the discount is automatically incorporated. Note that neither I nor my firm receives any part of the purchase price of this software, nor are we compensated in any other way. Here’s the link:
Or, if you prefer, you can request one of our remaining printed copies of the booklet by either giving us a call at 800-348-3601 or by completing one of our online request forms. There is absolutely no charge for the printed version, but the supply is limited. When they’re gone, they’re gone and we will not be reprinting them.
Once you receive your booklet in the mail or via download, I encourage you to complete it soon, and then let your spouse or other loved one know where it will be kept. Since the booklet will contain some of your most sensitive information, you should select a keeping place that is safe and secure. Plus, be sure to completely erase the electronic version from old computers before you sell, trade or discard them.
It is also important that you review the information in your All They’ll Need To Know booklet at least annually to make sure all information is current. Outdated records can be just as confusing as no records at all.
As I stated at the beginning of this article, I wanted to keep my comments non-political and generally focused on basic end-of-life financial matters. There are many other estate planning and family considerations to be made in addition to the above items, including deciding guardianship of minor children, setting up and maintaining trusts, establishing a succession plan for sole proprietors, funeral expenses, etc. However, all of these are far beyond the scope of this short E-Letter, and most require the services of a qualified attorney and CPA.
Suffice it to say that there are many financial, legal, and family issues to be considered upon a person’s death. These issues can either be dealt with prior to death through careful planning with qualified professionals, or left to bereaved survivors who will have to face these issues during a period of great stress and turmoil.
If you are reading this E-Letter, it is likely that you are the financial partner in your family. If so, I suggest you carefully consider the suggestions I have given and take steps to inform and protect your loved ones upon your death. I also encourage you to order the All They’ll Need To Know booklet and complete it with the help of your non-financial partner. This will help him or her see the importance of becoming involved in the family finances.
While the subject matter of this week’s E-Letter may be less than cheerful, it is nonetheless important, especially in terms of long-term financial and estate planning. We all know that none of us are guaranteed to see tomorrow, so pre-death planning is an important consideration for anyone who wants to make it easier for their surviving loved ones.
That’s all on that subject for now. I hope this helps.
Personal: Central/South Texas in Record Drought
As you may have heard, the central and southern parts of Texas, where my family and I live, are in the grips of the worst drought on record. During 2009, we have received only a fraction of the rainfall we normally receive, and this comes on the heels of a greatly reduced year in 2008. You can see from the following link that the drought is “exceptional” (ie – worst ever) in this part of Texas, with no end in sight: http://www.ndmc.unl.edu/DM/MONITOR.HTML
Long-time clients and readers will recall that we live outside Austin on Lake Travis, arguably the most pristine, picturesque and clearest lake in this part of the country. It is 65 miles long with depths up to 200 feet, and 120 feet at the deepest point where we live. The lake provides water supplies for Austin and other surrounding areas. The lake is now down 50 feet from normal and is dropping at the rate of more than two feet per week. It is a real hike over rocks to get to our boat dock, which we move further out as the water level drops.
Adding to the drought, we have had a record heat wave this summer. As of today, we have had over 60 days of 100+ degree heat this summer. Everyone in this region of Texas is under mandatory water rationing which is on-track to get even worse, as there is no meaningful rain in the forecast. I am struggling to keep our grass and landscape alive on our five acre property. The good news is, some weather forecasters believe that “La Niña” could bring some major drought relief to Texas sometime this fall, and at least the days are getting shorter.
Other than the drought, things are all well and good with the Halbert family. The kids are back in school now; my son is a sophomore engineering major in college and earned an academic scholarship at the end of his freshman year; my daughter is a Senior in high school this year and was awarded “student of the year” honors last year by the school faculty and administration.
As always, I am most grateful for my loving family, my many loyal clients and to all of you who faithfully read these weekly E-Letters. Your comments and suggestions are always appreciated.
Very best regards,
Gary D. Halbert
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Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert, Mike Posey (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.
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