The Well-Planned Life: End of Life Planning
For all the complicated emotions that arise when one thinks of end-of-life planning, it's important to remember the goal of that planning—to reduce, as much as possible, the grief and stress your survivors will feel by making clear decisions about these matters now.
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If time and money are of the essence in dispersing your estate to family members, friends or charities after you’ve passed away, Conahan recommends revocable trusts instead of wills to her clients.
“There are two main areas of law that we’re dealing with, and the first is probate—a process you have to go through in the state of Hawaii if you own $100,000 in assets or you own any real estate.” This must be done with or without a will; it takes place in a courtroom with a judge and can take between eight and 10 weeks.
“It takes a long time, it costs a lot of money–not because the probate court or the probate court judge charges a lot, but because an attorney charges a lot, often $4,000 to $5,000.”
The second area of the law Conahan mentions is federal, which charges a 45 percent tax on estates that exceed $3.5 million. If your estate is worth less than $3.5 million, than you’re safe, at least for this year. This percentage changes every year and is controlled by the IRS. Next year the percentage will be at zero, and the year after that the tax credit will fall to $1 million and the tax percentage will rise to 55 percent.
For these reasons, a revocable trust may be the best bet to avoid a long process in probate court and the steep federal tax if your estate is worth more than the federal tax credit.
“I tell people to view it like they are a shell corporation, and you are the president and CEO while you are alive and have capacity [to make decisions],” Conahan says. For example, bank accounts, property and everything else of value goes into the trust. When the owner of the trust passes away, the trust can simply have a new head appointed, a family member, for example, which requires less time in probate courts and avoids federal taxes.
Pietsch points out, however, that it’s still a good idea to have a will. “Wills are necessary, so I wouldn’t avoid [getting] one,” he says. “[If you go with a trust] inevitably something may be left out of your trust and you’ll need a will as a backup.” He lists property, extra bank accounts and insurance policies as examples of things that can easily be forgotten during the planning process, but can throw a monkey wrench into the works if they are unaccounted for.
Your Rights When Funeral Shopping
EMBALMING A BODY IS NOT REQUIRED
Whether you plan on cremation or burial, embalming is not a legal requirement in funeral planning. It should be itemized on any general price list provided by the mortuary you plan on using.
GENERAL PRICE LISTS
Before discussing plans or costs of services with a funeral provider, it must provide you with a general price list that itemizes any and all costs of services it provides. It doesn’t matter if it provides caskets or headstones, the provider must show you a list. By law you are not required to pay for a service you do not want.
NOTHING WILL PRESERVE THE BODY
No matter what anyone might tell you, embalming or any type of casket will not preserve a body indefinitely, it only delays the effects of decomposition.
THE RIGHTS OF VETERANS
All veterans are entitled to a free burial and grave marker. Costs for transportation to the cemetery and other memorial services however, need to be covered. Visit www.cem.va.gov for more information.
Information provided by the Federal Trade Commission’s Web site. For more information on the subject, visit www.ftc.gov/bcp/edu/pubs/consumer/products/pro19.shtm.
Few people think about long-term healthcare (LTC) when planning for the end of their lives, but for people living long lives it is a must. If you don’t have enough assets to pay for the care yourself, which, according to Genworth Financial’s 2009 Cost of Care Survey, is about $123,000 for a bed in a Hawaii nursing home per year, there are several options that need to be considered to make sure you receive the care you need without burdening loved ones with the cost or stress.
Though most of her clients usually have enough to pay for their end-of-life care, Conahan suggests looking for a plan that will cover your needs.
“But you don’t want to start too early,” she warns. “Although premiums are lower (when you’re younger), you generally don’t use the service until much later, so it is wasted money.
And if you are too old, the premiums are too high, so it doesn’t make sense either.”
For example, a local mutual insurance company in Honolulu estimates that a healthy 50-year-old who takes out a plan providing $200 worth of care per day would pay an annual premium of about $1,400. A 70-year-old who wanted the same coverage would be charged more than $5,500.
“Like any insurance, it’s easy to get it when you don’t need it,” says Marcus Bolan, wealth management adviser for Northwestern Mutual Wealth Management Co. in Honolulu, who handles both long-term healthcare and life insurance policies. “But the cost of long-term care could definitely devastate a financial plan, especially if there are two individuals who need it.”
Bolan stresses that the worst thing someone can do is nothing when planning for long-term healthcare. “Sometimes when people see how expensive it is to cover it, they don’t want to do anything,” he says. “The best thing, obviously, is to get the best amount of coverage you need, but if you can’t afford that, then why don’t we do something that’s less rather then nothing.”