Tuesday, June 02, 2009

On Preparing for a Reasonably Easy Passing

June 1, 2009

Some thoughts on making death somewhat easier for both the deceased and the surviving heirs/executor. 

First, let me extend a very sincere thank you to all you who were kind enough to send your personal condolences regarding the passing of my father. It is much appreciated. He was quite a character, amusing and frustrating by turns. The value he passed on to us is entirely internal in nature, and thus cannot be taken from us.

Subtext note: this also means I remain a poor dumb writer.

As a result of the seven straight 14-hour days my stepmom, sister, wife and I put in mounting a public memorial service, a private graveside service, the working through of several hundred details and decisions regarding a knotty financial history, various meetings with funeral directors, CPAs, realtors, etc. and conversations with various cousins and other interested parties, I offer a random assortment of observations which might ease the various difficulties of passing for both the person who is preparing for his/her passing and his/her heirs/executor.

For the person who will die and leave something to somebody, i.e. all of us:

1. Do not stuff important financial documents unopened in obscure files unless you harbor an especially malignant hatred of your heirs/executor.

2. Prepare a will even if you prefer to believe death is for other people. If you have a complex and well-funded estate, by all means hire a competent attorney who specializes in estate and tax planning and perhaps trusts if you're really bucks-up. For mere mortals like myself who own but simple assets, then Quicken WillMaker Plus 2009 is perfectly adequate for preparing a will at home. The software costs about $40.

3. Pay your taxes on time. Or, failing this, leave funds to pay the taxes in an account which is accessible after your passing to the executor (or spouse if you file jointly, etc.)

4. If you really object to paying taxes, then please be consistent: sell all real estate and holdings in the U.S., close all accounts in U.S. institutions, earn no income in the U.S., hold no assets in the U.S. and then move to another nation with tax laws which align with your beliefs and values. Otherwise, just pay your taxes like the rest of us.

5. If you're not going to give anything to your heir/heirs upon your death, tell them in advance of your passing. It will minimize the angst, fuss and muss often associated with being cut out of the will/passed over in favor of Fluffy the dog, The Clinton Library, etc.

6. Simplify your finances. While creating needless complexity via multiple bank accounts, brokerage accounts, ignored tax liens, lapsed or lost insurance policies, etc. might well offer you endless hours of amusement, rest assured your heirs/executor will probably not find untangling the thicket all that enjoyable, unless your estate is paying them $200 an hour to do the untangling.

7. Choose the lowest-cost, easiest-to-manage tax shelters. A trust may well offer significant tax savings if you own millions of dollars in real estate purchased long ago, but if you're not a Moneybags then simple shelters like the $500,000 primary residence shelter may well do the job. Research current estate/inheritance tax laws; the size of the estate exempted has risen in recent years. As always, do due diligence (check references, etc.) of any attorneys you may hire for advice/estate planning/trust preparation. Be forewarned that trusts are separate legal entities like corporations and thus they require their own tax return filings, filings which can easily cost $5-$10,000 for "simple" trusts. (That's a joke, heh; there are no simple trusts.)

8. If you have heirs (i.e. children, nephews/nieces, etc.), make sure you leave them some of your estate upon your death, especially if you have remarried. Legally, they are generally entitled to the assets you owned prior to your second or third marriage.

Interestingly, assets have a funny way of falling to zero at unexpected times. Thus the assets you left your second or third spouse for their use during their lifetimes have a peculiar knack for disappearing before they pass to your offspring.

Bereaved people often find solace and profound love with someone your children consider a gold-digging stranger. Leaving what you want them to have of your estate at your death simplifies things considerably.

9. Be wary of purchasing so-called high-yield, "safe" assets prior to your demise. That real estate investment TIC (tenancy in common) you thought was so nifty because it deferred your capital gains on investment property via a 1031 tax-deferred exchange turns out to be highly illiquid (i.e. it cannot be sold except at a stupendous discount). Even worse, such real estate TICs have a nasty tendency to stop paying the juicy promised monthly returns on short notice, like overnight, at which point they become essentially worthless.

Your $250,000 asset thus falls to $0 value. Even worse (yes, it gets worse), since you cannot sell the TIC it is difficult to record the loss for tax purposes.

If you are fortunate enough to have $250,000 to leave your heirs, you might be wise to avoid real estate TICs, Lehman Brothers bonds, General Motors stock and other "safe" investments which have an uncommon propensity for falling to near-zero at the most unwelcome moments. Although gold and oil leases may or may not return 7% annually, it is unlikely they will fall to zero overnight. Cash is generally welcomed by most heirs.

10. Be aware that two-legged sharks, opportunists and those eager to get a piece of the action will quickly mobilize their forces upon sniffing out your demise. If you have property to sell, choose your realtor/broker ahead of time and make sure your heirs/executor know of your choices in writing.

11. Write down your account PIN numbers, log-in names and passwords and tell your executor/heirs where the list is stored. (A physical written list, not one stored on a computer where it might get hacked.)

12. If you are a military veteran, please place your discharge documents with the above financial account information.

13. If you attend a place of worship and want to have your service there, write out the exact hymns, psalms, scripture passages, etc. that you want. If you do not know the current pastor/priest/minister, jot down a few notes about what you would like him/her to say on your behalf.

My father was very active in his church, not just in the congregation but in various committees and as a donor of time and money. Thus the pastor knew him well and could speak movingly of him. Not everyone has such felicitious circumstances, and having names mis-spoken, etc. during the eulogy is something to be avoided if at all possible.

My father specified the Navy Hymn ("Eternal Father, Strong to Save") in honor of his service to the nation in World War II. (His flat-bottomed LST almost broke up in a typhoon and the welder on the crew was lashed to the deck to keep from being washed overboard while he welded plates over the buckling deck. I imagine it was a moment where atheists rapidly became few and far between on the crew.)

14. If you want to be interred, by all means choose the funeral home, casket, etc. if you have the mobility and presence of mind to do so. Funeral societies offer low-cost alternatives to traditional funeral homes and are something to research/explore.

15. If you belong or belonged to organizations, leave the contact names and emails along with PIN numbers, etc. so your executor/heirs can quickly notify your colleagues/friends of your memorial service or graveside service.

16. If your family is multi-ethnic, be aware that various ethnicities and religions have different traditions and expectations. Thus some ethnicities expect to gather for graveside ceremonies while others consider those private.

17. If your Great American Novel/song/symphony is collecting dust in a closet, assign the global rights in all media to somebody in your will. You never know, your genius might be discovered after your passing.

18. If you want to leave your body to organ donors or for medical research, find out how the process actually works. Unbeknownst to the family, your body may be kept in cold storage for months before it can be interred/cremated; in some cases, it may be kept indefinitely. Do your research. It is a noble thing to donate one's body to science/donors but not all families want their loved one uninterred/uncremated for months.

19. Talking about your preparations for passing makes it easier for everyone to accept the passing when it does come. 

For those handling the arrangements:

1. Thank everyone. People didn't have to come or help; recognize their graciousness, generosity and in the case of funeral directors, CPAs, etc., their professionalism. Consider a donation to the church and pastor/priest/minister above and beyond the fees involved.

2. Buy thank-you cards. Send them as you can.

3. Make short-term and long-term lists to organize the tasks ahead. Prioritize.

4. Make home-cooked meals, eat well.

5. Humor is appropriate and welcome among the inner circle who knew the deceased well. Those not in the inner circle will be relieved to find you telling fond stories and jokes. The grief and loss are understood and will come of their own accord.

6. The American Way of Death is awkward. Ease everyone's awkwardness whenever possible. We all know death comes to us all, and if we are fortunate enough to live long enough, then it inevitably looms as release.

7. Try to sleep even if it's sporadic. Take naps.

8. Just get through it one hour, one day at a time. Though this is obvious, it remains somehow comforting to remind oneself of this truism.

Thank you, Kenneth R. ($25), for your very generous contribution to this site. I am greatly honored by your support and readership. 

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