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Planning for death? Far better to makes plans for living

Brian Loy

In the late 19th century, Japan clashed with the forces of advancement and modernization from the West, and the preservation of customs and traditions of their ancient culture. In one of the closing scenes from the movie “The Last Samurai,” Emperor Meiji contemplated his country’s future. Captain Alger fought alongside samurai leader Katsumoto against Western influence in a tragic yet predictable last stand. The Emperor asked the Captain about Katsumoto’s final moments: “Tell me how he died?” “I will tell you how he lived,” was the reply.

Most people step back from estate planning, some even run, because they think it’s about planning for death. Who’s eager to discuss that eventuality?

Rather, why not transform the conversation? Is it planning for death, or is it planning for living? Shouldn’t it be about preparing your family for your estate, and not the other way around?

Life’s curly. Things change. Author, speaker and poet Denis Waitley has memorable words relevant to planning: “Expect the best, plan for the worst and prepare to be surprised.” No matter how well-laid the plans for financial success, life has a way of getting in the way. Three of the biggies are the periodic economic or market meltdowns (that’s why they’re called “cycles”) where wealth temporarily disappears, income-interruptus (such as business slowdowns, job changes, accidents or health) that slows our ability to save money, or finding ourselves suddenly alone from death or divorce.

I’ll discuss three key reasons why estate planning plays a key role in holistic financial planning.

Know your number. How much do you need to accumulate in order to live a life of independence with dignity, with freedom and flexibility to live life on your terms, and having the confidence to know you’ll never be moving in with your children (arguably the best gift we can give them)? That’s knowing your number. Good estate planning, including how you own (title) assets, beneficiary designations, and legal documents (wills, trusts, buy/sale agreements, employment contracts, etc.), helps protect that accumulated wealth from the erosionary impacts of taxation and legal disputes.

A fate worse than death. What if you become mentally or physically disabled due to health or accident? It could be temporary, or worse. Consider these statistics:

* Three in ten workers entering the work force today will become disabled before retiring (Social Security Administration).

* Close to 90 percent of disabling accidents and illnesses are not work-related (National Safety Council).

* Average long-term disability absence lasts 2.5 years (Commissioner’s Individual Disability Table A).

If you’re an accumulator (not a spender or retired), this impacts your ability to save for retirement, college funding and other financial goals. And it could increase living expenses for health care and maintaining the household.

Personally, I have a greater concern for disability over death. If I die, I’m gone. But I’ve got to live with a disability and I don’t want to be a burden on anyone. There’s insurance available for many risks (disability, medical, long-term care and the like). What risks should you insure for? What should (can you afford to) assume without coverage? If you are unable to make sound decisions, who is going to help manage your affairs in a way you wish them to be? Trust agreements, powers of attorney and other tools help protect the incapacitated and those with special needs.

What’s important about money to you? Your values and beliefs about money play important cornerstones in wealth management. They’re unique to everyone. There’s no “one size fits all” in financial planning. Perhaps planning for one lifetime (you and your partner) is sufficient a secure retirement, you can provide financial assistance to family members and contribute to charitable causes as you see fit Should a breadwinner die prematurely (or become disabled), your family’s lifestyle won’t be fatally compromised. College education plans remain intact, they’ll stay in the family home and the family’s business won’t suffer a fire sale.

But what if there’s a high probability you’ll have more than enough to meet “your number?” Where do you want the excess to go – your family, cherished organizations or causes – and would it be more advantageous to make some of those wealth transfers well before you leave this good earth? When is the best time to talk about the verboten topic of “money and inheritance” with your kids?

In closing, I’ll focus on the last point… building legacies and intergenerational transfers of wealth.

“Shirtsleeves to shirtsleeves in three generations” is a concept foreign to many people, and most question how that could happen to them. Really? History is rich with stories of family wealth that vanishes … entrepreneurs who accumulate vast sums of wealth … the wealth lasts one or two generations before being exhausted by the third. What can we do to teach our family how to protect and sustain wealth from generation to generation?

You may have heard about the Rothschild family dynasty. It’s a family wealth success story that has endured for over two centuries. The old man, Myron, raised five sons. Each was well-schooled and taught strong work ethics. He loaned his sons money to each start a bank in five major cities in Europe. His conditions were two: First, the loans would be repaid, and second, the sons would share their knowledge and experiences with one another and the family. Their family shield included the words unity, integrity and hard work, as well as five arrows. And on his death bed, he handed each son a bundle of five arrows. “Separately you can bend and break the arrow, but bundled together, you cannot.”

This is the notion of shared trust, values, missions and visions that help build everlasting wealth.

Consider estate planning essential in planning for life. We can only control those things that we can control. Put things in your favor. And remember the words of Max Asnas, a Russian emigre who built one of the most fabled eating establishments in New York, the Stage Deli – “Money is something you got to make in case you don’t die.”

Brian Loy is the founder of Sage Financial Advisors in Reno and past president of the Estate Planning Council of Northern Nevada. Contact him at 775-324-7244 or through sagefinancialadvisors.com.