Americans Can’t Handle Will, Estate, Inheritance Talks

No one likes talking about death, but that doesn’t mean you shouldn’t. In fact, you should be talking about end of life planning a lot more than you think you should.

Seventy percent of families have strong misconceptions about the value of an estate and more than 30 percent of children don’t even know the value of their parents’ assets, says a study from Fidelity Investments. It probably doesn’t help that most inheritors haven’t talked to their benefactors about their eventual wealth, RBC Wealth Management-U.S. says.

Discussions around estate and succession planning can be emotionally charged, so families tend to shy away from them

Bill Ringham, vice president and senior wealth strategist, RBC Wealth Management-U.S.

“Discussions around estate and succession planning can be emotionally charged, so families tend to shy away from them,” says RBC VP Bill Ringham. “But for families that want to leave a legacy and ensure the nest egg they have built is protected across generations, communication and planning are key.”

Why you need to have a will and estate plan

Being unprepared for an inheritance comes from hard-to-have talks with relatives. Not having any knowledge about what they are receiving becomes a huge issue when the benefactor has passed. RBC says more than one-third of inheritors don’t receive any professional help after learning about their new wealth.

RBC says the sooner children understand major money matters – like estate planning, the better. But that raises the question, “what exactly is estate planning?”

Estate planning is comprised of wills, which is your very basic document saying who gets what, and who’s in charge of your estate

Samantha Fitsgerald, wills, trusts, estate planning and probate attorney

“Estate planning is comprised of wills, which is your very basic document saying who gets what, and who’s in charge of your estate,” Samantha Fitsgerald, wills, trusts, estate planning and probate attorney located in South Florida, told Debt.com. “In the estate planning process, people are also designating someone to make healthcare decisions for them while they’re alive.”

Financial literacy is an ongoing problem in this country. The vast majority of Americans aren’t great when it comes to handling money, everything from basic saving and budgeting to investments and estates. With our basic lack of understanding, it’s no wonder we can’t handle talking about money issues for when our loved ones are no longer with us.

“No matter who you are or what your family portrait looks like, establishing an estate plan is your best bet to ensure your loved ones are taken care of in your absence,” says Kevin Ruth, head of wealth planning and personal trust at Fidelity Investments. “While it is human nature to avoid thinking about one’s own mortality, leaving the next generation in good hands with the information they need to be successful can help build a stronger family foundation.”

Fidelity says it’s best to start out with outlining your estate plan exactly the way you want to.

How large is your estate? What’s your family situation like? Children, step-children, grandchildren, and other relatives may be considered when planning.

Estate planning tips

Estate planning attorneys can help you create a plan that is right for you. It’ll cost you, but making sure you’re doing everything legally and correctly is worth it. You don’t want your death to create any drama.

Confirm your money is in line with your estate. Being financially aligned with your estate plan should be essential. Remember that just because you’re done planning doesn’t mean you can’t change something later. It can be updated and changed any time you want it to.

No matter who you are or what your family portrait looks like, establishing an estate plan is your best bet to ensure your loved ones are taken care of in your absence

Kevin Ruth, head of wealth planning and personal trust at Fidelity Investments

Once you’ve got a handle on your will and estate, make sure inheritors know exactly what is coming. Let them know that they know they can ask any questions, regardless of how uncomfortable they are, so they understand everything that should happen after you pass. Just because they are hard to ask doesn’t mean it isn’t necessary.

“Everybody should have beneficiaries listed on their financial accounts,” Fitsgerald says. “A lot of people don’t have beneficiaries listed on their checking accounts or any accounts for that matter.”

Who you list in the will to receive your assets are referred to as beneficiaries. A few accounts to add beneficiaries to…

• Life insurance
• Retirement accounts
• Checking
• Savings
• Brokerage accounts

Estate Planning and Debt

Estate planning and debt are crucial considerations that can significantly impact your financial legacy and the well-being of your loved ones.

1. Debt Assessment: When engaging in estate planning, it’s essential to assess your outstanding debts, including mortgages, loans, credit card debt, and any other financial obligations.
2. Asset Liquidation: If you have substantial debts, your estate may need to liquidate assets to cover those debts after your passing. Your will or trust will specify how these assets are used to settle the debts.
3. Impact on Beneficiaries: Outstanding debts can reduce the value of the estate that you intended to pass on to your beneficiaries. It’s crucial to consider the impact of debt on their inheritances.
4. Life Insurance: Life insurance policies can be a valuable tool in estate planning to ensure that your debts are paid off, leaving your assets intact for your beneficiaries.
5. Estate Tax Considerations: Some debts may be deductible from the gross estate for estate tax purposes, potentially reducing the overall estate tax liability.

Funeral planning

If you don’t face your own mortality, your loved ones will face a different truth: Overspending.

Modern American culture has a taboo against discussing death. After all, who likes planning out their burial plot when they’re young or healthy? But this way of thinking hurts us financially.

When you’re planning, understand and articulate with your family clearly what a comfortable budget is that does not require you to take on debt. How much money do you have – not how much you think it has to cost

Joshua Slocum, executive director of Funeral Consumers Alliance

People tend to leave the funeral planning to their loved ones, making them guess what the deceased wants and limiting the ability to shop around.

No one wants to make a quick decision on a costly item when the emotional stakes are high.

The national median cost of a funeral with viewing and burial for 2017 – the latest year this data is available – was $7,360, according to the National Funeral Directors Association. But just because that’s the median cost doesn’t mean you need to spend it.

Joshua Slocum, executive director of death industry watchdog Funeral Consumers Alliance (FCA), gave us tips to follow as you plan your funeral in advance when you don’t believe death is near.

1. Follow a budget

There are a lot of details that people often consider for a funeral: cremation or burial, type of casket, and myriad other choices. But the first step is establishing a budget.

“People do this when they buy a car. They do it when they buy a house. But they completely forget it or think they’re not supposed to when it comes to a funeral,” Slocum told Debt.com. “When you’re planning, understand and articulate with your family clearly what a comfortable budget is that does not require you to take on debt. How much money do you have – not how much you think it has to cost.”

2. Shop around

Once you’ve chosen a service, compare prices in your area. If there’s a local FCA group, check there first for local price surveys. Large price discrepancies, sometimes up to thousands of dollars, exist between different funeral homes in the same city. That information can help you narrow down which funeral homes to consider for a more detailed quote.

Don’t merely tell your survivors what you want. That’s nice, but it’s awfully selfish if you don’t go further and add on to that, ‘Hey, guys, you’re going to be here when I’m gone. What do you think will work for you?

Joshua Slocum, executive director of Funeral Consumers Alliance

When you visit funeral homes, ask for their price lists on paper (which they’re required by federal law to provide) so you can look at their prices at home, outside of a sales context. And ask funeral homes specific questions if you don’t understand something.

If you need help during the planning process, contact the FCA.

3. Talk with your loved ones

Have a conversation about the funeral arrangements with your family or the circle of people closest to you.

“Don’t merely tell your survivors what you want,” Slocum says. “That’s nice, but it’s awfully selfish if you don’t go further and add on to that, ‘Hey, guys, you’re going to be here when I’m gone. What do you think will work for you? What would make you feel better and what would you find meaningful?’ Make it a dialogue, not a dictation session.”

After you have that talk, write down the decisions and the prices you found in your area. Make physical copies of these and hand them to your family. If you have it in an email, safe deposit box, or password-protected file, people will overlook these at the time of death.

4. Don’t forget that a casket is just a box

People are accustomed to spending $2,000 or more on a casket, but that number should make them pause. “It is simply a box, and they’re vastly marked up over their wholesale price,” Slocum says.

Remember that caskets do only one thing, and every casket does it just as well as another: It simply holds the body.

Joshua Slocum, executive director of Funeral Consumers Alliance

If you find a casket on your own, funeral homes must legally accept it without charging a fee. (The same goes for urns.) Choose a casket using two criteria: Is it affordable for you, and does it appeal to your eye?

“Remember that caskets do only one thing, and every casket does it just as well as another: It simply holds the body,” Slocum says.

5. Never prepay

There are a few reasons to never prepay for a funeral. You could move cities. You may want to choose a different funeral home later because your choices have changed.

“Do you really believe that you will want exactly the same thing at 78 as 40-year-old you would?” Slocum says. “Most of us, by the time we’ve gotten to middle age, realize how much things can change.”

6. Keep returning to your decision

Funeral shopping is not a one-stop process. If you’re 40 years old and you’re planning for a funeral ahead of time, you need to revisit the decision every few years or if you move.

Rechecking costs can also save you money. Sometimes, prices lower over time because conditions have changed.

Inheritance ignorance

A poll of 1,000 “affluent” Americans concluded that a third couldn’t live without their parents’ inheritance, according to investment firm Merrill Edge. That number jumps to 63 percent among 18-24-year-olds.

The key to financial freedom is outlining and following an action plan for short- and long-term goals beyond an inheritance – which may or may not ever come.

Aron Levine, head of Merrill Edge

“We’ve never seen such a strong reliance on receiving an inheritance,” says Aron Levine, head of Merrill Edge. “The key to financial freedom is outlining and following an action plan for short- and long-term goals beyond an inheritance – which may or may not ever come.”

Most Americans don’t have a plan to transfer an inheritance

Determining your financial stability on a windfall of cash from a loved one may not be the wisest choice. And like Levine says, what if you never receive that inheritance?

As previously outlined, an estate plan is a preparation of moving one’s assets over to their surviving family members after their death. The family will need to settle their estate taxes, which typically involves an attorney with a background in estate law.

Failing to have an estate plan in place can lead to significant family confusion once a beloved family member passes

Fidelity executive Kevin Ruth

“When it comes to legacy planning, generally speaking, the sooner the better,” says Fidelity executive Kevin Ruth. “Failing to have an estate plan in place can lead to significant family confusion once a beloved family member passes. Too often, it may result in costly mistakes or the wishes of a loved one’s estate and legacy plans going unfulfilled.”

Wasting the family fortune

Within the next four years, the older generation will turn over $4 million in wealth to their kids and grandkids.

At least so says an Ohio State University researcher, Jay Zagorsky, in a 2012 study. He also predicts Americans will only save about half of that money. The other half will end up donated, spent, or just wasted.

Inheritances can help make up these shortfalls. Families that primarily spend the money will boost their current enjoyment and consumption but will not improve their financial situations

2012 Ohio State University study

Even more alarming, a more recent study from Zagorsky says 30 percent had negative savings two years after receiving their inheritance.

“Many families have not saved enough for retirement or their children’s college education,” the study says.  “Inheritances can help make up these shortfalls. Families that primarily spend the money will boost their current enjoyment and consumption but will not improve their financial situations.”

End-of-Life Planning and Debt

End-of-life planning should include a thorough evaluation of your debts and a clear strategy for how they will be managed. Effective planning can help protect your assets for your beneficiaries and minimize financial burdens on your loved ones during a challenging time. Consulting with professionals who specialize in these areas can be invaluable in creating a comprehensive plan that addresses both your financial legacy and your end-of-life wishes.

1. Debt Resolution Plans: As part of your end-of-life planning, consider how your debts will be resolved. This may involve using assets, life insurance, or other financial instruments to pay off outstanding debts.
2. Communication with Loved Ones: Communicate your end-of-life plans regarding debt with your loved ones, so they understand the financial aspects of your estate. This can prevent confusion and conflicts later.
3. Advance Directives: Your advance directives, including a living will and healthcare proxy, can address medical expenses and potential debt related to end-of-life care. Specify your preferences for medical treatments and their associated costs.
4. Funeral and Burial Expenses: Consider pre-planning your funeral and burial arrangements. These costs can be significant, and having a plan in place can ensure that your estate or insurance covers these expenses, preventing your loved ones from incurring debt.
5. Beneficiary Designations: Ensure that beneficiary designations on your financial accounts and insurance policies are up to date. This can facilitate the smooth transfer of assets and the settlement of debts.
6. Legal Assistance: Consult with an attorney experienced in both estate planning and debt resolution. They can provide guidance on how to structure your estate plan to address outstanding debts effectively.

Starting Your End-of-Life Planning Checklist

Remember that estate planning is not just for the wealthy; it’s for anyone who wants to ensure their assets are distributed according to their wishes and minimize potential conflicts among heirs. Taking these steps can provide peace of mind and protect your legacy for future generations. Estate planning is a vital aspect of ensuring that your assets are distributed according to your wishes after your passing. Here are the essential steps to estate planning:

1. Gathering Essential Documents: Begin by gathering essential documents such as birth certificates, social security cards, marriage certificates, and insurance policies. Store them in a secure location and share access details with a trusted individual.
2. Take Inventory of Your Assets: Make a comprehensive list of all your assets, including real estate, bank accounts, investments, retirement accounts, life insurance policies, valuable personal property, and business interests.
3. Set Your Goals and Objectives: Define your objectives for estate planning. Consider how you want your assets to be distributed, who your beneficiaries will be, and any specific wishes or conditions you want to include.
   • Pre-Planning Your Funeral: Consider your funeral and memorial service preferences. Pre-planning can ease the emotional and financial burden on your family.
   • Memorial Service Considerations: Think about how you’d like to be remembered. Share your wishes for your memorial service with your loved ones.
   • Registering as an Organ Donor: If you wish to donate your organs, ensure you’re registered as an organ donor. Discuss your decision with your family.
   • Estate Distribution: Consult with an estate planning attorney to ensure a smooth transition of your assets to your beneficiaries.
4. Create a Will: A will is a legal document that outlines how your assets should be distributed upon your death. It also allows you to appoint an executor who will manage your estate and carry out your wishes. Drafting a will is essential for distributing your assets according to your wishes. Seek legal assistance to ensure your will is legally binding.
5. Consider a Living Will and Healthcare Proxy: A living will specify your preferences for medical treatment in case you become unable to make decisions. A healthcare proxy designates someone to make medical decisions on your behalf.
   • Selecting a Healthcare Proxy: Choose someone you trust to make medical decisions on your behalf if you become unable to do so. Discuss your preferences and values with this person.
   • Defining Your Healthcare Preferences: Document your healthcare preferences, including end-of-life medical treatment decisions, resuscitation preferences, and organ donation choices.
   • Setting Up Advance Directives: Advance directives outline your medical treatment preferences. Consult an attorney to create these legally binding documents.
6. Establish a Power of Attorney: Designate a trusted individual to manage your financial affairs if you become incapacitated. There are different types of powers of attorney, so consult with an attorney to determine the best fit for your needs.
7. Create Trusts if Necessary: Trusts are legal arrangements that allow you to transfer assets to a trustee for the benefit of your chosen beneficiaries. Trusts can provide specific instructions for asset distribution and can help avoid probate.
8. Plan for Taxation: Depending on the size of your estate, estate taxes may apply. Consult with a tax professional to develop strategies to minimize estate taxes while still achieving your goals.
9. Review and Update Regularly: Life circumstances change, so it’s essential to review and update your estate plan periodically. Major life events such as marriage, divorce, birth, or death should trigger a review of your plan.
10. Choose Beneficiaries and Ensure Proper Documentation: Clearly specify who your beneficiaries are for each asset, and ensure that beneficiary designations are up to date for retirement accounts and life insurance policies.
11. Communicate Your Plan: Make sure your family and loved ones are aware of your estate plan and where to find important documents. Open communication can prevent misunderstandings and conflicts.
12. Seek Legal and Financial Advice: Estate planning can be complex, so it’s advisable to consult with an estate planning attorney and financial advisor. They can provide guidance tailored to your specific situation.
13. Organize Your Documents: Keep all your estate planning documents in a secure and accessible location. Consider creating a detailed list of where these documents are stored and who has access.
14. Plan for End-of-Life Care: While not strictly part of estate planning, consider documenting your preferences for end-of-life care, such as resuscitation and organ donation, in an advance directive.

Frequently Asked Questions (FAQs)

End-of-life planning is an act of love and responsibility towards yourself and your loved ones. By following this comprehensive checklist and timeline, you can ensure that your wishes are respected, easing the burden on your family during difficult times.

Remember, the key to successful end-of-life planning is taking action today, no matter your age or current health status.