Clients typically consider their estate planning at three predictable junctures in their lives:
1. when they first have children and are concerned about who will raise them if “something happens”
2. when their children are grown and need to be named as successor trustees
3. when they are old, realize that they are much closer to the end than the beginning, and want to ensure that their estate plan is updated before they make their final passage
Near the end of a long life, older clients often have too many savings, checking, and investment accounts than they can manage. The paperwork—dealing with a dozen or more institutions—can become overwhelming. Statements pile up and go unread, some accounts may be forgotten, and other accounts sit in cash for years, earning little or no return. Ideally, we would like to see clients with only two accounts: a checking account and a “master” brokerage account containing sub-accounts for taxable and tax-deferred assets such as IRAs and 401ks. This makes it easier for the client to manage his or her investments and reduces the stress of burdensome paperwork. Additionally, in the case of incapacity or death, it is easier for the successor trustee to identify and marshal the decedent’s assets.
It is common for children to fight over the tangible personal property of little or no economic value. The administration of multi-million dollar estates and trusts come to a standstill over old photographs, silverware, jewelry, or father’s favorite shotgun. To avoid this, consider gifting these items to your children while you are alive. At Christmas, give one child your silverware and another the antique clock. This allows you to experience the joy of passing on family heirlooms and reduces conflict when you are gone.
We are all moving inexorably towards the moment when we should no longer be making important financial decisions. Many clients hold on too long, subjecting themselves to the risk of elder abuse, undue influence, or a financial mistake made out of confusion or misunderstanding. The wise choice is to resign as trustee well before there are any signs of diminished capacity. This relieves the client of the day-to-day burden of managing their financial accounts, reduces the risk of elder abuse, and eases the burden on the successor trustee when death or incapacity occurs.
Few clients follow all of this advice, and usually, there are no serious adverse consequences. But if you can bring yourself to take even one or two of these steps you will do yourself and your heirs an enormous service.