Don’t Leave an Estate Planning Mess for Your Children to Fix

The best description for the legacy plans of most Americans ages 55 and over is NOGO.

The acronym stands for “not in good order” or simply “not good.” It is a phrase often used by estate and financial planners to summarize the state of the financial and estate plans of new clients. Most people know the legacy they want to leave. They know how they want to live and be cared for in their later years, if care is needed. They also know what they need to do to ensure these wishes are fulfilled. But they aren’t taking those important steps, according to a recent study conducted for Bank of America Merrill Lynch. Their estate and legacy plans are NOGO, though they know how to put them in good order.

The good news is that most people understand that leaving a legacy is not all about money and wealth. At least equally important to many people is passing on values, life lessons and family history

Protecting loved ones financially also is a priority for most of those age 55 and over, and about three quarters of respondents in the survey said that passing away without having one’s affairs in order is either irresponsible or inconsiderate. But they aren’t following through with the steps needed to provide that protection.

About 45% of the group didn’t have even a will. Of those with wills, 23% knew their wills were outdated. I’d wager that the percentage with out-of-date wills is higher, but most don’t know their wills need revisions.

Only 18% have the minimum pack-age of Estate Planning documents: a will, advance medical directive and power of attorney. Of course, most people should have more, such as a living trust (and perhaps one or more other trusts) and updated, accurate beneficiary designation forms.

Having your estate plan in good order is as much for you and your security as for your heirs.

An estate plan gives you more control over the difficult late-in-life actions and decisions. This is particularly important if you are concerned about memory problems or chronic pain. In the advance medical directive, you decide who will make medical and health decisions when you aren’t able to do so. You can name an individual or several people to make the decisions. You also have the opportunity to discuss with them ahead of time your wishes and expectations regarding care. Plus, you can leave some written guidance either in the document or separately.

Having the advance medical directive also reduces family turmoil and conflict, because you decided who will make decisions and gave them guide-lines to use. Otherwise, there are likely to be extended, emotional arguments about what dad or mom really wanted. A power of attorney names the per-son or people who will manage your non-medical affairs when you aren’t able to do so. Without the power of attorney, simple tasks such as paying the bills can be a difficult process for your family. It will be very difficult for your loved ones to take more substantive actions, such as selling some investments to pay medical or long-term care expenses or simply because it’s a good idea to sell them. The combination of an advance medical directive and power of attorney has another benefit. They ensure

you have an advocate or advocates to look out for you as you age. About 43% of the survey respondents said they are concerned they lack someone to be their advocate as they age. Having the documents in place and talking to the agents you appoint-ed in the documents goes a long way to solving that problem. You’ll have someone who agreed to be your advocate and take important actions when needed. The will, living trust and other documents each have several benefits.

Of course, the documents deter-mine how your major assets are to be distributed among loved ones. Proper documents also accelerate the process of settling the estate. But they do more. Having the essential estate plan documents in good order can reduce conflicts and anxiety over funeral arrangements and other end-of-life matters. They also can establish a process for how personal items and family heirlooms are to be distributed. These details often lead to conflicts and other emotional unpleasantness among family members when guidance isn’t provided.

Having your estate plan in good order is especially important when you might have a surviving spouse. A ma-jor goal of most estate plans is to en-sure the surviving spouse is taken care of sufficiently. The Census Bureau says about 78% of the adults who live their last years alone are women, and other data show financial security for many of them declines as they age alone.

The survey also revealed that 65% of respondents want to give away some of their wealth while they are alive instead of waiting to distribute all of it through their estates. That’s a step I’ve recommended for both financial and nonfinancial reasons. See our January 2019 issue for details. (Remarkably, about 8% said they want to give away all their wealth while they’re still alive. I’m not sure they thought through the consequences of that.)

But to do this, you need an estate plan and a retirement plan. You need to know how much you safely can give away without putting your standard of living at risk. You also need a plan to deal with any long-term care you might need, because the cost of long-term care can diminish your estate quickly.

Not having your estate plan in order is likely to diminish your legacy. There will be a lot of confusion about what you own and what should be done with it. The whole process will take longer than it should have and probably will cost more. Family conflicts and arguments are more likely. Some families never recover from estate settlement disputes. Many people put a legacy plan in place as they approach retirement, because it is a natural time to consider these issues. Yet, they often don’t revisit the documents and have them updated.

The unfortunate truth is that most of the people who do have all their documents in order and up to date are those who’ve had someone close to them die or become seriously ill. They have firsthand experience with the negative consequences of having a NOGO plan. The survey indicates the most likely group of people to have their plans in order are those who’ve been widowed. In the survey, those with at least the three essential documents in order reported several ancillary benefits.

They also are likely to have in good order additional documents that make a complete legacy plan, such as funeral arrangements and documents that make processing the estate easier, such as ownership papers. They also are confident they are more in control of future medical care, costs and other matters. Perhaps most importantly, those who have complete plans believe there is an advocate for them, and they are more likely to initiate discussions about their preferences for the future.

The bottom line is they are secure that all of their affairs are in order and they will be taken care of well. Don’t put this article aside without making an action plan. The survey shows that most Americans know what they need to do to establish the legacy they want, but they aren’t taking the needed actions. Plan to meet with an estate planner, put the documents in order and discuss the important matters with family members and friends.