8 Reasons Why You Have to Create an Estate Plan Now

 

What Is Estate Planning?

Estate planning involves formally making a note of what you want to occur after you pass away. This is typically achieved using wills, trusts, advance regulations and beneficiary designations on accounts.

 

Communicating your final desires can be emotionally draining pipes, and lots of people are reluctant to get going. It prevails to feel frightened by the complexities of estate planning and required to make difficult decisions prior to you are ready.

 

Reasons that to require to produce estate plan

To lower or get rid of estate taxes

 

While it is an obstacle to prepare for transfer taxes (estate and present taxes) at the present time since the existing tax provisions are arranged to alter, it is still important to plan and to utilize techniques that might minimize or get rid of those taxes. The existing federal present and estate tax is just effective until completion of 2025. The federal present and estate tax exemption– the overall amount you can pass to others tax free (besides a partner or a charity) during life or at death– is $11.58 million (in 2020). Unless Congress alters the law, the federal present and estate tax exemption might return to $5 million plus inflation on January 1, 2026.

estate plan

 

To plan for the management of your affairs in the event you become incapacitated

 

A file called “resilient power of attorney” will allow you to select a trusted relative or buddy to handle your monetary affairs and make essential healthcare choices if you are not able to do so.

 

To select the person who will wind up your affairs after your death

 

If you do not designate an executor or individual agent, any interested person, including a creditor, can petition the court for consultation, and the court will decide among contending petitions.

 

To prevent household arguments over who will have custody of your minor children

 

If you do not select a guardian, any relative can petition for appointment. A court fight might take place if 2 or more family members apply. Under extraordinary situations, a court may select an unassociated individual to serve as guardian.

 

Minor children

 

Who will raise your kids if you die? Without a plan, a court will make that decision. With a plan, you have the ability to nominate the guardian of your choice.

 

Passing away without a will

 

Who will acquire your properties? Without a plan, your properties pass to your successors according to your state’s laws of intestacy (passing away without a will). Your relative (and maybe not the ones you would pick) will receive your properties without advantage of your instructions or of trust security. With a plan, you choose who gets your properties, and when and how they receive them.

 

Blended families

 

What if your household is the outcome of numerous marriages? Without a plan, kids from various marriages may not be dealt with as you would wish. With a plan, you determine what goes to your existing spouse and to the kids from a previous marriage or marriages.

 

To avoid a public probate proceeding

 

If you want to prevent having your will end up being a public record in a court file, you can utilize a revocable living trust as your main estate planning file.

Raise Billions From Billionaires? Tax Experts Say It’s Not That Simple

One of the signature initiatives of Elizabeth Warren’s presidential campaign is a wealth tax that, she says, would pay for many of the programs she proposes, like government-paid health care and free college tuition. Bernie Sanders, one of her opponents in the Democratic race, has proposed his own version of a wealth tax that would collect, according to estimates, about $4 trillion over a 10-year period, or $500 billion more than Senator Warren’s plan.

But here’s the big question: Would the proposals, elegant in theory, work in practice?

Lawyers and advisers to the wealthy say there is no way the wealth taxes would collect anything close to the estimates, and they cite ample evidence of taxes that are reduced or eliminated through extensive and sometimes aggressive strategies.

“I’m not saying if it’s a good or a bad thing, but it is hard to implement,” said Eugene Pollingue Jr., a partner at Saul Ewing Arnstein & Lehr in West Palm Beach, Fla. “It sounds simple: Just pay X percent on your assets every year. But it’s not simple to determine the value of those assets.”

Gabriel Zucman, an economics professor at the University of California, Berkeley, who was one of the lead advisers on the Warren and Sanders wealth tax proposals, begs to differ. He said in an interview that he had solutions for many of the concerns and criticisms of the plans, including how to value private companies and illiquid assets.

“The I.R.S. already collects a lot of information about wealth, as it does with income,” he said. “That could be extended. They could look at the wealth of the richest Americans and say your net worth is $100 million.”

History is on the side of the tax minimizer. Last year, in fact, the 400 wealthiest families in America had a lower tax rate — 23 percent — than almost anyone else, according to data in Mr. Zucman’s new book, “The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay,” which he wrote with Emmanuel Saez, another economist at Berkeley. Taxes that hit the wealthiest the hardest, like the estate tax and corporate taxes, have fallen over the last few decades, the economists found, while tax avoidance has become more common.

Name a tax and there’s a way to reduce it, delay it or not ever really pay it, if you have the right adviser.

Upset that the 2017 tax act took away your deduction for state and local taxes in New York? Change your residence to Florida, as President Trump recently did, and those taxes are gone.

Don’t want to pay capital gains tax? Well, you can decide when to sell those investments. If you need the money, you could borrow against the account and leave the capital gains taxes for another day. And if you die still holding those securities, your heirs get them with any tax on the capital gains erased.

If it’s a big income year and your tax bill is going to be huge, you can always put years’ worth of charitable giving into a donor-advised fund: The tax write-off is yours today, but you can make donations whenever you feel like it — or leave it to your children to decide.

Listen to ‘The Daily’: A Broken Promise On Taxes

FedEx pledged investment in exchange for a tax cut. We look at what the company has done with a tax bill of $0 — and billions back in its pocket.

0:00/23:20

transcript

Listen to ‘The Daily’: A Broken Promise On Taxes

Hosted by Michael Barbaro; produced by Rachel Quester and Jonathan Wolfe; with help from Neena Pathak; and edited by Lisa Chow

FedEx pledged investment in exchange for a tax cut. We look at what the company has done with a tax bill of $0 — and billions back in its pocket.

michael barbaro

From The New York Times, I’m Michael Barbaro. This is “The Daily.”

Today: As they lobbied the Trump administration for a $1.5 trillion tax cut, corporations promised that they would invest the savings right back into the U.S. economy. Jim Tankersley investigates whether that actually happened.

It’s Tuesday, November 19.

archived recording (donald trump)

To all Americans, I say it’s time for change and time for leadership. Just think about what we can accomplish in the first 100 days of a Trump administration. We’re going to have the biggest tax cut since Ronald Reagan, even —

jim tankersley

Throughout the 2016 presidential campaign, Donald Trump had promised he was going to cut taxes.

archived recording (donald trump)

We are proposing major tax relief for the middle class and lowering the business tax from 35 percent all the way down to 15 percent.

jim tankersley

Big tax cuts for individuals, and especially for businesses, which he said was going to revitalize the American economy as a big part of his economic program.

archived recording (donald trump)

And you will see companies expand, companies come back into our country, companies not leave our country anymore because taxes and regulations are so onerous.

jim tankersley

It’s one of his top priorities. He gets into office. His team starts working on it. But it’s not what they do first in Congress.

michsel barbaro

Mm-hmm.

archived recording (donald trump)

Finally, we want a very big tax cut, but cannot do that until we keep our promise to repeal and replace the disaster known as Obamacare.

jim tankersley

What they try to do first is repeal Obamacare.

archived recording

This morning, Republicans are fighting to pass a new health care plan. Right now, House Republicans just don’t have enough votes to pass the replacement to Obamacare.

jim tankersley

And in the spring of 2017, that effort is not going well, and neither is Trump’s tax plan.

[music]
michael barbaro

Why not?

jim tankersley

Well, the version of the tax bill that Republicans are working on has some big opponents in the business community. And there’s a real question over whether they can actually craft a bill that passes muster with enough folks in Congress, and with the business community, and makes it all the way to President Trump’s desk, and he’ll sign it.

michael barbaro

Right. I remember this feeling like a perilous moment for this young presidency. It’s struggling to repeal the Affordable Care Act, and it is struggling to convince people to support its tax cuts.

jim tankersley

Right.

archived recording 1

There is a lot of discord within the Republican Party as to what works when it comes to tax reform and when it comes to health care.

archived recording 2

Six months into his term, he has exactly zero big legislative accomplishments to boast about.

jim tankersley

If there’s one thing you would have expected a Republican president with Republican majorities to be able to do, it’s pass a big tax cut.

michael barbaro

Mm-hmm.

jim tankersley

And yeah, we’re at this moment in the spring when that looks like that might not happen. And into the breach of that steps Fred Smith.

michael barbaro

And who is Fred Smith?

jim tankersley

Fred Smith is a former Marine who went to Yale and wrote a famous paper in a class that imagines a new type of company that is so wild in its imagination that he gets a C on the paper.

michael barbaro

[LAUGHS]

jim tankersley

But he turns around and takes the basis of what he has sketched out on the paper into a company, and builds it into FedEx —

archived recording

America, you’ve got a new airline. There’s no first class, no meals, no movies — in fact, no passengers, just packages.

jim tankersley

— this enormous, multinational shipping conglomerate and delivery company.

archived recording

Federal Express, a whole new airline of packages only.

michael barbaro

And how exactly does the founder of FedEx, Fred Smith, get involved in this?

jim tankersley

Well, he has been an advocate for lower corporate tax rates for a really long time. And now he sees this opportunity with President Trump, a real ally of corporate tax cuts in the White House, to push this plan he’s been working on for years. And he does something more than just push the idea of tax cuts into the public discourse. He and his team at FedEx actually write their own plan —

michael barbaro

Wow.

jim tankersley

— their own tax proposal.

michael barbaro

And what’s in this Fred Smith plan?

jim tankersley

The FedEx plan is really centered around a big cut in the corporate tax rate, from 35 percent to 20 percent, and some extra carrots for businesses to be able to write new investments off their taxes right away, so two things that Fred Smith and a lot of other executives say are going to spur a renaissance of business investment in America.

archived recording (frederick smith)

The fundamental problem with the U.S. tax code is that it punishes investment.

jim tankersley

The argument is that the United States was being held back in its economy by a lack of business investment —

archived recording (frederick smith)

And at the end of the day, investment is what produces high-paying jobs.

jim tankersley

— that companies just weren’t spending money that they were sitting on, basically, and they weren’t spending it on capital spending that economists see as very important to economic growth.

archived recording (frederick smith)

If you make the United States a better place to invest, there is no question in my mind that we would see a renaissance of capital investment, a growth in G.D.P. and an increase in an income for our blue-collar workforce in the United States.

michael barbaro

What kind of investments is Fred Smith talking about? When we talk about capital investments, what do we mean?

jim tankersley

We’re talking about plants. We’re talking about equipment. In FedEx’s case, we’re talking about airplanes or a transportation hub or new technologies that can help to deliver or sort packages faster. So something that can help you make your business run more efficiently — that’s the kind of thing that economists think of as big, productive capital investments.

michael barbaro

Got it. And the reason that would help the rest of the economy is someone has to build that plant, someone has to build that plane. It just ripples across.

jim tankersley

It ripples across for a couple of reasons. One, it creates demand for those products that are being invested in, which, yes, need to be built, and need to be installed or flown or whatever. But the other real argument is that having these new technologies put in place helps workers do more.

archived recording (frederick smith)

Investment is the only way to make blue-collar workers, people that don’t have college degrees, more productive and have more income. So you can hire six people to move a pile of dirt, or you can hire one person with a bulldozer. The difference is the bulldozer. The bulldozer driver makes a lot more money than the people with the shovels.

jim tankersley

And the argument was that companies weren’t doing that because their profits were taxed too heavily. And it was more profitable for them to invest in other countries than in the United States because America’s tax rates weren’t competitive.

archived recording (frederick smith)

It’s just like us playing basketball. And on our end of the court we’re playing with a 12-foot basket, and everybody else that we compete with around the world is shooting on a 10-foot basket.

jim tankersley

Fred Smith makes this very clear promise, saying, if we cut corporate tax rates, businesses are going to start investing again in America, and the economy is going to grow faster. And that’s going to help workers and everyone.

michael barbaro

Jim, how skeptical are people of the Fred Smith school of thinking here, that big corporate tax cuts will lead to big investments in the economy and to a lot of growth in the U.S.?

jim tankersley

Well, a huge part of Washington is not skeptical at all. They are pushing this. The Trump administration, Republicans in Congress, many sort of economists who support tax reform are arguing to one degree or another that there will be more investment, lots more, if you just cut the corporate tax rate. There is, though, this dissenting group, including a lot of Democrats and liberal economists, who make the argument that, hey, companies have a lot of money. They don’t need lower taxes to have just a little bit more money to invest it. If they want to invest it, they can. It’s sitting right there on their balance sheets. And cutting their taxes is not going to dramatically increase investment because that’s not what’s holding them back.

michael barbaro

And I’m curious, Jim, how much was FedEx paying in corporate taxes at the time that Fred Smith was making this argument?

jim tankersley

So throughout the time that he’s making this argument, FedEx is paying what it calls in its financial filings an effective tax rate of about 33 percent or 34 percent, which is a lot. In just the fiscal year 2017 alone, it paid more than $1.5 billion in taxes.

michael barbaro

So that’s a meaningful tax bill.

jim tankersley

It’s a meaningful tax bill. And it’s close to the top corporate tax rate in America, which is 35 percent before the Trump tax cuts passed.

michael barbaro

So what happens to the Fred Smith tax plan?

jim tankersley

The tax plan arrives in Washington and gets a warm reception, and it injects energy in what had been a little bit of a stalled process.

[music]
archived recording

Brightening prospects of a major tax cut, especially for corporations.

jim tankersley

And it helps open the door again for all of the champions of tax reform to work together for a new bill.

archived recording (donald trump)

And as a Christmas gift to all of our hardworking families, we hope Congress will pass massive tax cuts for the American people.

jim tankersley

So Republicans get back on track on the tax bill, particularly spurred on by the fact that they fail completely to repeal the Affordable Care Act. So now this is it. The business community is back on board, they’re lobbying hard. The Trump administration is working key details out with congressional negotiators.

archived recording

President Trump is heading to Capitol Hill today to boost momentum for the tax reform bill that could become his first legislative victory.

jim tankersley

We enter the fall. The House passes a version of the bill.

archived recording

Debate is still happening on the Senate floor. But this bill does appear to be gaining momentum.

jim tankersley

The Senate narrowly passes a version of the bill, with no Democrats supporting it. And then they put them together, and the final proposal includes the really big corporate rate cut. Basically, just like what Fred Smith and FedEx have proposed.

michael barbaro

Mm-hmm.

jim tankersley

And it includes a bunch of other incentives for investment, also like FedEx had proposed.

michael barbaro

And then, of course, the bill passes.

jim tankersley

The bill passes. I do vaguely recall in my fever dreams from that time period of working 20-hour days that the bill did pass.

michael barbaro

[LAUGHS]

jim tankersley

And the president did sign it into law.

archived recording (donald trump)

The corporate tax rate, as you know, will be lowered from 35 percent to 21 percent. That means that more products will be made in the U.S.A. A lot of things are going to be happening in the U.S.A. We’re going to bring back our companies. They’ve already started coming back. I think they had a certain confidence in me. They figured we were going to get this done.

jim tankersley

This law includes individual tax cuts. It includes some other provisions. But the centerpiece, the thing it was sold on, was the idea that it would reinvigorate economic growth in America. And it would do that by supercharging business investment. It’s almost hard to understate just how often and vocally Republicans and the president made that case to voters, that this is what American business and the American economy needed for more domestic investment.

michael barbaro

So once this bill passes, what is FedEx’s tax bill? How much does it save?

jim tankersley

So the bill passes. And FedEx files financial statements for the fiscal year 2018 at the end of the year. And it shows that rather than paying $1.5 billion, like it paid the last year, it actually was owed money by the government. It has a negative effective tax rate.

michael barbaro

What?

jim tankersley

Yeah, negative 5 percent.

michael barbaro

So less than zero.

jim tankersley

Less than zero.

michael barbaro

Wow. And how much of that savings, $1.5 plus billion, is attributable to this tax bill?

jim tankersley

All of it. Over the first two years after the tax law, we can count $1.6 billion.

michael barbaro

Hmm. So that’s a pretty staggering figure. But then again, we know that FedEx plans to use that money to reinvest in the American economy.

jim tankersley

So that’s the story that FedEx told before the law passed.

[music]

But the story that played out is different.

michael barbaro

We’ll be right back.

So Jim, what happened with all this money that FedEx saved from this tax cut that it played such a huge role in shaping?

jim tankersley

FedEx had said, up to the eve of the bill being signed, that they were going to use the money to increase investment. But they didn’t. Investment actually went down compared to what they had projected. And then the next year, it went down again.

michael barbaro

Hmm. So what did FedEx do with these savings if they were not investing it in the kind of things that we all thought they would?

jim tankersley

Well, it largely rewarded its shareholders. It increased dividends, which is the money it regularly pays people who own its stock. And it bought back shares of that stock, which has the effect of pushing up prices of the stock for the people who own it. Now, to be clear, it did some good things for its workers, too. It accelerated some raises. It increased the size of its workforce. It made a large contribution to its pension plan. But the big winner were shareholders. And that’s a group that is largely, if you look at who owns stock in America, skewed toward the very wealthy.

michael barbaro

So the promise that FedEx made, that they would invest much of the savings from this tax cut into the kind of projects that would benefit everyday workers across the economy — instead, the benefit of the way they used this money really went to people who are largely already pretty well-off.

jim tankersley

In the short term, that seems very clear.

michael barbaro

Why do you think that FedEx did that?

jim tankersley

I had a lot of questions for FedEx about how they spent their tax money. I tried to ask some of the executives over a period of a couple months. I was never granted an interview with an executive. I sent very detailed questions, including one very similar to the one you just asked. Most of them went unanswered. I would love to hear FedEx’s explanation of how it has made the decisions it’s made with its tax cut windfall.

michael barbaro

Hmm. Jim, how typical was this for companies that received these big savings from the tax cuts, that they did not use it to invest, and instead they used it to buy back shares or pay dividends?

jim tankersley

It was very typical. My colleagues and I did a few different analyses to sort of demonstrate just how widespread this type of behavior was. And here’s a few ways of looking at it. One is that companies increased share buybacks and dividends by about triple as much as they increased investment following the tax cuts.

michael barbaro

Wow.

jim tankersley

Another is that investment has now grown more slowly since the tax cuts under President Trump than it grew before the tax cuts under President Trump.

michael barbaro

Which is another way of saying that the central claim of the tax cuts, and how they would be used, and how it would benefit the economy, that has just not come to pass.

jim tankersley

It is not.

michael barbaro

Jim, if these companies were to call you back, and you were able to ask what their thinking was, would there be an argument from a company like FedEx about why the way it chose to use this money is wise and will benefit the American economy?

jim tankersley

Absolutely. The argument goes like this. First off, rewarding shareholders is just another way to increase investment. Because those shareholders will use that money to invest in different companies, who will use that money productively. The other argument is that it’s just too soon to tell the effects of tax cuts on investment, that basically what changes for companies when you cut their tax rate is not, oh, they get a bunch of money today. It’s that investments tomorrow pay off even more. Because the profits you get back, you pay less taxes on. And so we would expect over time to see more investment, not right away.

michael barbaro

Is there any truth to that? Are these arguments from the companies about how they use this money accurate, that it eventually will really help the economy?

jim tankersley

I think there are mechanical truths that you can see to those arguments. But it’s also true that this is all really complicated, and that this was sold as a very simple relationship. Cut the taxes, investment will increase. And just the fact that we’re not seeing that happen right away flies in the face of the arguments that were used to sell the bill. I think that’s really important here, is that, yes, it may be true that investment over time is slightly more competitive in America because of a reduction in marginal business tax rates. But that was not what President Trump stood up at rallies and talked about. He talked about growing the American economy by 3, 4, 5, 6 percent a year because of all this flood of investment coming back to the United States. And we just don’t see it.

michael barbaro

Jim, why is this important, at the end of the day? I mean, these companies successfully lobbied for a tax cut. They got it. It’s their money. Theoretically, can’t they just do what they want to do with it, whatever that is?

jim tankersley

I think it’s important to hold politicians and their supporters accountable for the promises they make, particularly when those promises have real-world implications. The economy is not performing as well as we were promised it would when the tax cuts were passed. It’s not growing as fast. It doesn’t have as much investment. And if you believe the arguments that were made to sell this, that’s hurting workers. Because slower growth is keeping their incomes from rising as fast as they should be. So real people are suffering from not having that additional growth that they were promised they would have and now don’t. A then there’s this one last thing, which is this all comes at a cost. It’s not free to just give money back to corporations by cutting their tax bills. Despite what the proponents said, which was that the law would pay for itself — the additional growth — what we’re actually seeing is a massive, hundreds-of-billions-of-dollars-a-year effect to grow the federal budget deficit. And last year, that deficit came very close to topping $1 trillion.

michael barbaro

And how big a role is the tax cut playing in that ballooning deficit?

jim tankersley

It is the primary driver of additional deficits beyond what we had already before the law was passed.

[music]
michael barbaro

Jim, thank you very much.

jim tankersley

Thank you.

michael barbaro

In a statement, FedEx criticized the Times reporting about its tax savings and investments, but offered no specific factual objections. In the statement, the company’s founder and C.E.O., Fred Smith, challenged the publisher of The Times to a public debate about federal tax policy in Washington. In response, a spokeswoman for The Times dismissed the request as a stunt and a, quote, “effort to distract from the findings of our story.”

[music]

We’ll be right back.

Here’s what else you need to know today.

archived recording (mike pompeo)

The establishment of Israeli civilian settlements in the West Bank is not, per se, inconsistent with international law.

michael barbaro

On Monday, the Trump administration declared that the U.S. does not consider Israeli settlements in the West Bank to be in violation of international law, reversing four decades of American policy.

archived recording (mike pompeo)

We’re not addressing or prejudging the ultimate status of the West Bank. This is for the Israelis and the Palestinians to negotiate.

michael barbaro

The Times reports that the new policy would likely doom any peace talks between Israelis and Palestinians by legitimizing Israeli settlements on West Bank territory that Palestinians have demanded for a future state. And —

archived recording

[GUNSHOTS]

michael barbaro

— in a closely watched showdown, police in Hong Kong have surrounded nearly 500 student protesters on a college campus, threatening them with gunfire and tear gas unless they surrender. The standoff has turned the college campus into Hong Kong’s latest battleground over democracy and the influence of China. The students there have used homemade firebombs, slingshots and bows and arrows to defend themselves against the police, but now appear to be cornered.

archived recording

[YELLING]

michael barbaro

That’s it for “The Daily.” I’m Michael Barbaro. See you tomorrow.

Image
Credit…Ian C. Bates for The New York Times

The list of ways the wealthy can reduce their taxes goes on. The tax most similar to a wealth tax is the estate tax, which values your entire estate and taxes it. Few people pay the estate tax these days because the exemption level is more than $22 million for a couple. But for those who do, reducing the value of what might one day be taxed is like a game of chess, with the financial adviser as grandmaster and the tax auditor as novice player.

Would an annual tax on wealth, targeted at the same people who use the best tax advisers to reduce their estate tax, somehow be free of loopholes?

“With the wealth tax, there are plenty of people who can access top-tier advisers and come up with creative ways to avoid it,” said Kimberly Clouse, founder and chief executive of Via Global Advisors. And she said those wealthy people were just doing sophisticated tax planning, and not what she called “intergalactic Isle of Man-type planning,” where assets are held offshore and owned by a web of corporations that obscure their owner’s identity.

The senators’ proposed wealth taxes seem straightforward, with the rates rising as the wealth rises. Senator Warren’s version has just two brackets: 2 percent for assets over $50 million and 6 percent over $1 billion. Senator Sanders’s plan is more graduated, like the income tax: It starts at 2 percent for assets over $32 million and hits a maximum of 8 percent over $10 billion.

In addition to raising revenue, the senators are aiming to use their plans to reduce income inequality. Several calculations show how much less wealth billionaires would have had this tax been enacted in the 1980s. Bill Gates’s wealth would be about one-seventh of what it is today, while Jeff Bezos’ fortune would be about a third. Both, though, would still be billionaires.

Professor Zucman said a wealth tax would be different from other taxes that have been skirted. He envisions a way in which the Internal Revenue Service would prepopulate the tax return with an estimate of the person’s wealth.

Tax advisers disagree. The values in an estate tax return are almost always contested by the I.R.S. “We file something as thick as a phone book with all these valuations, and then the I.R.S. fights us over it,” Mr. Pollingue said.

Take a commercial building, which has a fixed value only when it is sold. Since an estate is valuing it, not selling it, the estate is submitting an estimate. What the estate’s appraiser says it’s worth and what the I.R.S.’s auditor says it’s worth aren’t always the same.

“Valuations can differ greatly,” said Jared Feldman, head of the private client group at Anchin, a tax advisory firm. “Who does them?”

The homes of the very wealthy are not standard ranches or center-hall colonials. “These families have distinctive homes,” so there are limited comparable properties, Mr. Feldman added. “So how does that work?”

Professor Zucman had two responses. First, he said his research with Professor Saez found that some 70 to 80 percent of the wealth of the 0.001 percent was in listed securities, which have a daily market value.

He said that property like jewelry and art could be valued through an insurance policy and that insurance companies would report the values to the I.R.S.

But the tax advisers said any attempt to use insurance values for taxation would be challenged in court. The insured value of a piece of jewelry is what it would cost to replace if it was lost or stolen. That is generally higher than what the jewelry is worth.

Professor Zucman has an unorthodox solution for individuals who can’t assign a value to their ownership stake in a private company or who claim they don’t have sufficient liquid assets to pay the wealth tax. They could pay the tax with shares, which the government would sell to determine their value.

“The idea is not for the government to become a shareholder in a private business,” he said. “It’s for the government to immediately sell the shares and create the market that is missing.”

Families would probably balk at this alternative. The whole idea of a private company is to keep it private — or, at the least, carefully select the people who can own part of it.

Selling shares could disrupt how these families run their businesses. Additionally, Mr. Feldman said, families whose wealth is tied up in real estate “struggle to pay the estate tax upon death because of so many illiquid assets.”

Of course, these same families are able to borrow against their real estate to, well, buy more real estate. Presumably they could borrow to pay their taxes as well; they just may not want to.

But valuing privately held companies — the issue that opponents to a wealth tax frequently raise — also presents a question of fairness. After all, the person with real estate holdings or a private business is relying on someone else to value it, while the person with easier-to-value assets like securities is paying an exact amount.

“What’s close enough?” Mr. Pollingue asked. “Would it be fair to make the people with liquid assets pay accurately and the nonliquid people to pay an estimate? You know the nonliquid estimate would be far lower.”

Professor Zucman said given the relatively small number of people who would be subject to a wealth tax — about 75,000 families — the I.R.S. could hire more inspectors. And those extra employees would be worth the cost: One estimate put Mr. Gates’s wealth tax bill at $6.379 billion next year.

Dear Mom and Dad: Are Your Finances Ready for Retirement?

Cameron Huddleston was 30 years old when she initially suggested that her mom look into getting a long-term care insurance coverage. Her mom was divorced, and Ms. Huddleston, a monetary reporter, understood that a long-lasting care insurance policy could assist balance out the cost of any future care that may be needed. Eventually, her mom could not get coverage due to the fact that of a pre-existing health condition, and the conversation just abated.

“What I ought to’ve done was sit down with her and state to her, ‘Mom you can’t get long-term care insurance, so let’s look at your properties and see what type of care you ‘d want,'” Ms. Huddleston stated. “It didn’t even cross my mind to ask her that question.”

Four years later, her mother began exhibiting signs of amnesia. When Ms. Huddleston was 35, her mother was informed she had Alzheimer’s, at the age of 65.

Ms. Huddleston immediately entered into preparation mode when her mom started having lapses in memory– so by the time the Alzheimer’s medical diagnosis came, the household had actually looked after the legal paperwork and laid the monetary foundation to ensure her mom would be well cared for.While Ms. Huddleston’s experience might appear an outlier to numerous, the requirement to discuss your moms and dads’futures with them, particularly before a prospective crisis or inciting event, is true for all. [“It’s pretty brutal:”The sandwich generation pays a cost.] Initiating the discussion “It can take place naturally. As naturally as premeditated can be,”said Ms. Huddleston, who wrote the book

“Mom and Dad, We Need to Talk” to help others browse this potentially tough transition.How should you bring it up naturally? Ms. Huddleston recommends using

Some families may want to choose a spokesperson to lead the discussion. “Problems end up being exponentially more complex if kids don’t interact well with each other and do not provide a unified strategy about how best to support Mom and Dad, socially, environmentally and possibly financially,” Ms. Hurme said.Timing is a big consideration if all the brother or sisters are going to be included. There is, however, one time you must avoid: the vacations.” Yes, everybody might be together, however they can be together by Skype and other methods,”said Carol Levine, a senior fellow at the United Hospital Fund in New York.

“These are festive times and great times, kids are around; do not muddy it with all these hard discussions.”Do your moms and dads have sufficient money?The supreme goal of the retirement conversation is to identify whether your parents have enough possessions to sustain

a comfy way of life.”Most people do not strategy and simply eyeball what’s being available in from Social Security and look at their 401(k) balance and wing it,

“stated Liz Weston, a certified financial organizer and personal financing writer for the personal finance blog NerdWallet.A preliminary method to prevent winging it is to utilize one of the numerous online retirement calculators. Ms. Weston recommends AARP’s for the Social Security benefits and NerdWallet’s or T. Rowe Price’s retirement

we’re stressed over you. You can’t do as much as you think you can,’and it’s everything about removing their freedom, “stated Lisa Cini, president of Mosaic Design Studio, which supplies style services for senior living, long-term care and health

care organizations.”I think that’s the exact wrong method. You need to move them from fear to freedom, not the opposite way. “Ms. Cini moved her

grandmother and her parents into the house she shared with her spouse and teenage children, which she information in her book “Hive: The Simple Guide to Multigenerational Living.” Instead of utilizing scare strategies, Ms.

” Another consideration is ensuring both moms and dads know how to access all the legal and monetary paperwork and pay all the home bills. Ms. Weston suggests using a service like Everplans to digitally save all the important documents as well as passwords.If your parents keep withstanding For some adult kids, their moms and dads will consistently shut down efforts to speak about retirement and estate planning. It

Thinking About Giving Money to Adult Children? Think Again

When Thomas Gilbert Jr. received a 30-year sentence in September for killing his father over a money dispute, it ended a four-year-long case that sent a chilling warning to any parent who ever considered giving money to an adult child.

Mr. Gilbert, the son of a Manhattan hedge fund manager, was raised with a silver-spoon lifestyle, attending the elite Buckley School for boys in Manhattan, the exclusive Deerfield Academy in Deerfield, Mass., and Princeton University, but he had trouble holding down a job after graduation. So his parents gave him a monthly allowance, in addition to covering the $2,400-a-month rent on his apartment in Manhattan’s Chelsea neighborhood. When his father cut the allowance, an outraged Mr. Gilbert, then 30, took a gun and fired it into his father’s head at point-blank range.

“You want to support your child, but if your child is just serially not self-sustaining, what do you do?” said Christina Baltz, partner in the private client and tax team at Withers LLP. “It’s a real dilemma.”

While the Gilbert case is an extreme example, it speaks to a common dilemma for parents with money to spare: When and how much should they give to an adult child who comes asking for money — especially one who is able-bodied and well-educated? How long should any financial help last? And should it be a gift, loan or advance on an inheritance?

Legal experts and estate planners caution parents to carefully scrutinize the need for the money and how it could affect the child’s long-term ability to live, work and succeed in the world.

“Money is a metaphor for love and control,” Ms. Baltz said. The biggest challenge is providing enough money to help a child through a challenge, but not giving to the point where it kills the person’s motivation to work and succeed.

If money is needed for an urgent matter — like emergency surgery, medical bills, a lost job, house foreclosure or costly divorce — it’s a no-brainer: Experts say parents should help in such situations as long as they can afford it.

“You’re rescuing them temporarily; you’re not indulging them forever and putting them on your payroll,” said Susan Covell Alpert, author of “Later Is Too Late: Hard Conversations That Can’t Wait” and “Driving Solo: Dealing with Grief and the Business of Financial Survival.”

But even then, parents should do a little due diligence first.

“You have to be careful not to be taken advantage of by a child,” said Les Kotzer, a wills and estates lawyer at Fish & Associates in Thornhill, Ontario, and co-author of four books and an audiobook on wills, including “The Wills Lawyers: Their Stories of Money, Inheritance, Greed, Family and Betrayal.”

In an interview and in his book, Mr. Kotzer recounted the story of an older couple whose only child had a college degree in geology but struggled to find work. Even after taking a job in a small mining town hundreds of miles away, the son continued asking his parents for money to cover housing costs, prescriptions for illnesses he said he and his wife had, and bills related to their disabled child.

But years later, when the elderly parents were finally able to make their first — surprise — visit to the town, they were shocked to discover a lavish, well-furnished home, shiny new cars in the driveway and a live-in nanny, who told them the couple was in Puerto Rico for a 10-day cruise. The young parents were healthy, both had high-paying jobs and their child was not disabled. The parents felt duped and immediately cut their son out of their will, Mr. Kotzer said.

Experts see some needs, like education, as a compelling area for giving money to children. Paying for college tuition can be an investment in a child’s long-term employment future, Mr. Kotzer said.

But how should parents handle the growing number of young people, especially millennials, who are staying home longer, marrying later — if at all — and relying on their parents for free rent, food and car insurance?

“It is creating a dependency,” Ms. Baltz cautioned.

Experts advise parents not to allow their adult children to live rent-free without any deadline and not to pay an allowance without any strings attached.

“Like Tommy Gilbert, do you want to keep him on an allowance for the rest of his life and never have to get a job?” Ms. Baltz said.

Image
Credit…Jefferson Siegel for The New York Times

Generally, parents making bad money decisions fall into one of two categories, experts said: hoarders and cash cows.

Hoarders take “tough love” to the extreme: They refuse ever to give an adult child money, insisting that the child work multiple jobs to pay for college or medical bills. Then, when they die, they leave their entire estate to an adult child who might no longer need it.

Mr. Kotzer recalled a client who came in to pick up a check for the $1 million his mother had left him in her will. It was a classic hoarder story, he said: The client’s parents refused to have a dentist fix his crooked, discolored teeth as a child, making him feel self-conscious, and wouldn’t spend a dime to help with college, his wedding or the purchase of his first home.

“‘When I really needed the money, it was never there for me,’” Mr. Kotzer said the son told him. “‘What the hell does she want me to do with this now — I’m 70 years old.’”

Experts recommend that parents give their children monetary gifts while they’re alive, rather than leaving everything in a will. This helps adult children when they need it most, and it can reduce inheritance taxes when a parent dies.

Right now, estates valued higher than $11.4 million face a 40 percent federal tax, said Sarah Wentz, a partner at Fox Rothschild in Minneapolis. (State inheritance taxes are separate and have different rules that vary from state to state.) But I.R.S. rules allow people to give a tax-free gift of up to $15,000 per person per year to as many people as they want.

On the flip side are cash cows: These are the parents who, because of pressure or guilt, hand over money every time an adult child requests it — even if it’s for frivolous reasons, like taking a trip or buying the latest high-tech gadget, and even if they can’t afford it.

“Don’t give anything away that you are going to miss, can’t afford, may need or puts you into poverty,” said Jeffrey Condon, co-founder of Condon and Condon law firm in Santa Monica, Calif., and co-author of “Beyond the Grave: The Right Way and Wrong Way of Leaving Money to Your Children (and Others)” and “The Living Trust Advisor.”

About 90 percent of liquid assets are spent during the last 10 percent to 20 percent of a person’s life, largely because of medical expenses, Mr. Condon estimated. He recommends that parents never give away more than 10 percent of their liquid assets.

Sometimes a loan, rather than a gift, is more appropriate.

Experts recommend that parents draw up a promissory note that complies with I.R.S. rules — rather than relying on a handshake — when offering a loan. Otherwise, the loan can quickly be deemed a gift if it isn’t repaid, Ms. Alpert said.

Gift or loan, there’s no guarantee that children will give money back if a parent later needs it, Ms. Wentz cautioned. She recalled one client who gave $150,000 to each of the couple’s five children, with the understanding that if the parents ever needed money for medical care, the children would give the money back. But when the surviving spouse incurred medical conditions that required round-the-clock care, two of the five children refused to return the money to allow their father to receive care in his home. They said it would be cheaper to put him into a nursing home.

Giving a child money for certain milestones, like college graduation, marriage or the birth of children may seem like a good idea on paper. But it can stoke feelings of anger and resentment in children who don’t marry or can’t have children.

Experts recommend that parents be open and fair when giving money to adult children. If money is given to one child, the other children should be informed and promised similar monetary gifts either now or at the time of inheritance.

Most children keep a scorecard — even if parents don’t. “And if that scorecard of lifetime gifts isn’t roughly equal at the time of the parents’ death, then there’s a problem,” Mr. Condon said. “Not a legal problem — a family problem.”

Ms. Wentz recalled a couple’s cutting their daughter out of their will because they felt she didn’t need the money —  she was married to a man with more than $80 million. The decision caused considerable hurt and anger from the daughter.

“In her mind, it had nothing to do with that money,” Ms. Wentz said. “It was: Does my dad love me the same as everyone else?”

When U.S. Citizenship Starts Looking Like a Bad Deal

When Donald J. Trump was elected president in 2016, some people, many of them Democrats, talked about renouncing their United States citizenship and moving abroad as a political protest. But now, a different group of Americans say they are considering leaving — people of both parties who would be hit by the wealth tax proposed by two senators seeking to oppose Mr. Trump in his race for re-election, Elizabeth Warren and Bernie Sanders.

Wealthy Americans often leave high-tax states like New York and California for lower-tax ones like Florida and Texas. But renouncing citizenship is a far more permanent, costly and complicated proposition.

Many who do so to save on taxes and free themselves from American financial regulations and filing requirements are also making a larger statement.

“America’s the most attractive destination for capital, entrepreneurs and people wanting to get a great education,” said Reaz H. Jafri, a partner and head of the immigration practice at Withers, an international law firm. “But in today’s world, when you have other economic centers of excellence — like Singapore, Switzerland and London — people don’t view the U.S. as the only place to be.”

According to the United States Treasury, which publishes figures on expatriation, 231 Americans renounced their citizenship in 2008; the next year, 742 did. By 2016, the number hit 5,411, up 26 percent from 2015. It was roughly the same in 2017 before dropping to 3,983 last year.

Immigration lawyers said the numbers would be higher if embassies had the staff to accommodate the volume of requests. David Lesperance, a Canadian immigration lawyer living in Poland who specializes in helping American citizens expatriate, said many embassies around the world had backlogs in making appointments.

“The current reality is that an American who wants to renounce needs to first book an appointment in a processing system that has reached capacity — as evidenced by the significant backlogs in the granting of interview slots,” Mr. Lesperance said in an email. “In fact, the backlogs have grown so bad (up to and sometimes over a year) that most of the U.S. missions no longer publish the appointment date information online and haven’t been doing so since the system appeared to reach capacity a few years ago.”

Once that appointment is secured, the process seems to have sped up. Mr. Jafri said he had clients who waited over a year for the letter confirming they were no longer American citizens. Now, he said, that letter can come in two weeks.

“Somewhere in the system, the decision has been made to issue these more quickly,” he said. “We haven’t seen any slowdown in renouncing.”

Historically, the bulk of expatriates fell into two categories: older, wealthy people hoping to save on taxes and the “accidental Americans,” who were born in the United States but lived and worked abroad or who were born abroad but lived in the United States long enough to come under the Internal Revenue Service’s taxing authority.

Now many inquiries are also coming from younger entrepreneurs upset about the political situation in the United States and from people who want to operate their businesses overseas and not be subject to American financial reporting requirements.

“That younger person is also thinking of it as impact citizenship, like impact investing,” Mr. Jafri said. “They don’t want to be American. They’re not happy with how we’re perceived overseas.”

Mr. Jafri said he had been hearing of several other reasons, too. There are people motivated by fear. “We have people who are totally spooked about the prospect of a Warren presidency and a wealth tax,” he said. “And there are people who are equally spooked about a Trump re-election.”

There are also businesspeople who either don’t want to be subject to I.R.S. scrutiny or believe that the annual Report of Foreign Bank and Financial Accounts has become too time-consuming or costly.

“I’ve never seen this before,” Mr. Jafri said. “People used to say, ‘If so-and-so becomes president, I’m moving to Canada.’ Well, no one did.”

But now, the price may be right to leave. While the cost of expatriating varies depending on a person’s assets, the wealthiest are betting that if a Democrat wins next year, leaving now means a lower exit tax.

For anyone with assets below $2 million or an average salary over five years of about $165,000, there is no exit tax. For everyone else, the exit is calculated on a person’s assets, as if they were sold on the day of expatriation. Someone with a portfolio of appreciated stock, for example, would be taxed at the capital gains rate.

Where it gets tricky is when people own private businesses that have to be valued. Even if they’re not selling the business, they have to come up with tax money to pay the I.R.S. But as with the tax on estates, there are ways to reduce the value of the business, including the argument that a closely held family business lacks marketability.

Mr. Jafri said he had a client who just paid a $58 million exit tax, though it had been 40 percent higher before a valuation company took various deductions.

The wealthy who are considering renouncing their citizenship fear a wealth tax less than the possibility that the tax on capital gains could be raised to the ordinary income tax rate, effectively doubling what a wealthy person would pay, Mr. Lesperance said.

“I have a client, a relatively young guy, who made a lot of money as a founder and is just not bullish on the U.S. long term, but the thing that is getting him to lock in and renounce now is he did the numbers,” he said. “He said if the least of the Democratic plans come in — taxing capital gains like ordinary income — it makes sense to renounce now.”

Image
Credit…Wei Leng Tay/Bloomberg

Regardless of wealth, anyone looking to give up their American citizenship needs to have fully complied with all tax forms for the past five years. That is one of the main stumbling blocks, said Jerald David August, chairman of the international taxation and wealth planning groups at the law firm Fox Rothschild.

“The prototype is a U.S. citizen living overseas who is tired of paying worldwide tax twice,” Mr. August said. “The specter of this five-year look back and the awareness there wasn’t total compliance can be intimidating. I’ve had situations where clients, after they’ve been fully advised, have decided not to push forward with an expatriation.”

Had they done so, without having spotless tax returns, they could have been forced to amend tax returns or, worse, be audited for tax evasion.

Even if their returns are compliant, any money they leave to their children who are still citizens will be subject to a 40 percent inheritance tax.

“If someone never stepped foot in the U.S. and died and left $100 million to someone’s children who moved to the U.S., the children wouldn’t pay the tax,” Mr. August said. “But if they left with $10 million, the U.S. retains jurisdiction to tax the person who migrated.”

Those who leave also need to consider their reputations since the Treasury Department publishes a list of people who are expatriating.

When Eduardo Saverin, a founder of Facebook who was born in Brazil but educated in America, renounced his United States citizenship shortly before the social network went public, he was criticized for avoiding taxes. But his spokesman said he had been living in Singapore for several years. Either way, several estimates said that renouncing his citizenship before Facebook went public saved him $700 million in taxes.

Battle Over a $9 Million Will Rests on Just One Clause

Jill Morris and Joan Anderson met decades ago in New York City and were romantically involved for close to 20 years. Ms. Morris, a psychologist, died in 2016 at age 84 after suffering for years from cancer. Twelve days later, Ms. Anderson, 76, died of a stroke.

For Emlie Anderson, the loss of her mother and her mother’s partner so close together was devastating. She had moved from Texas to New York to help her mother care for Ms. Morris, she said.

But their deaths weren’t the end of a tough time in her life. They turned out to be the beginning of an estate battle that has pitted Ms. Anderson against three nonprofit organizations that argue that Ms. Morris’s estate, valued at about $9 million, should go to them, not her.

The legal argument centers on the nature of language in Ms. Morris’s will, specifically a sentence in one subsection that treats her common-law wife the same as a dozen friends receiving smaller bequests. But the estate battle has also raised the issue of whether a heterosexual couple, together for the same 20 years, would face the same type of inheritance issue.

“At a minimum, the will’s ambiguous,” said Rick Scarola, the lawyer representing Ms. Anderson and her mother’s estate. “The law in New York says a will should be construed for people who are spouses. But the Surrogate Court said they’re not married, so that doesn’t apply.”

Mr. Scarola has argued that not only is the will ambiguous, it is poorly drafted.

Image
Credit…Jeenah Moon for The New York Times

What the two sides agree on is that Ms. Morris, who had a doctorate and worked as a psychoanalyst, was an intelligent and charitable woman. (She also seemed to have an eye for buying properties in the right place at the right time.) They also agree that she and Ms. Anderson, who worked in sales, had a long-term relationship.

But that’s where the agreements end. The nonprofit groups say that the will must be followed and that Ms. Morris did not marry on purpose — which she could have done after 2011. The other side argues that the pair were common-law spouses and should be accorded the same rights as a heterosexual couple.

The dispute rests on one article in Ms. Morris’s most recent will, which was executed shortly before she died. The article distributes various pieces of personal property as well as real estate and money. One friend gets a single glass marble sitting in an end table. Others get five-figure checks. An artist gets three of her own paintings.

The same article of the will also gives Ms. Anderson far more valuable things: $100,000; a townhouse in the West Village worth more than $4 million; a beach house in Water Mill, N.Y., that is on the market for about $750,000; the contents of Ms. Morris’s safe deposit box at a bank; a carousel horse; and several paintings.

But the distribution of these bequests comes after a clause that says Ms. Morris makes these gifts to each individual “provided that he or she survives me by 30 days.”

Other articles make specific gifts to friends without this 30-day clause. And as in any will, there is a residual clause, which sweeps up whatever is left and, in this case, leaves it to three charities.

The three charities — the Natural Resources Defense Council, Doctors Without Borders and Save the Children Federation — with the State of New York joining them, contend that since the elder Ms. Anderson did not live 30 days after Ms. Morris died, she did not fulfill the requirement of the bequest and so what was meant for her goes to the charities.

Ms. Anderson’s daughter and her lawyers contend that this is a misreading of the will’s intent. The lawyers note that by law you cannot disinherit a spouse. Depending on the state, a spouse is entitled to some percentage of the estate, at a minimum. That Ms. Morris and Ms. Anderson were together for so long would make them like spouses, if they were a heterosexual couple. Therefore, they argue, Joan Anderson should not be cut out of the will because she died just 12 days after Ms. Morris, and her daughter should inherit the money.

The charities’ lawyers said Ms. Morris had chosen not to marry and had also been specific with the drafting of the will and the naming of three charities she supported during her lifetime.

Credit…Jeenah Moon for The New York Times

Judge Nora Anderson of the Surrogate Court of New York ruled in March in favor of the charities. She wrote that there was no question that the two women were together romantically for a long time but said that they had chosen not to marry and that the court was guided by how the will had been written.

Sharon Klein, a trusts and estates lawyer who is the president of family wealth in the eastern United States for Wilmington Trust, said that some wording in the will was ambiguous but that she understood the court’s ruling.

“It’s just a poorly drafted will, with the 30-day survivorship clause in some places but not others,” Ms. Klein said. “You can make arguments on both sides. I’m sure the decedent wanted to benefit her life partner. The question is, did she want to benefit her life partner’s daughter? That she didn’t nominate Joan’s daughter as a beneficiary is pretty telling.”

Emlie Anderson has appealed the ruling, with briefs delivered this month. The appeal is based in part on how a surviving spouse would have been treated in a will as well as on how the will was revised.

Wills are meant to be interpreted in their entirety, not clause by clause, Ms. Anderson’s lawyers argue.

A lawyer had created the original version. But Ms. Morris revised the will a few months before her death with the help of a friend, Charlie Martin. He had been the common-law husband of Ms. Anderson’s other daughter, Kimberly, who died several years earlier. Mr. Martin has no legal training; before getting into webcasting, he was an engineer and a promoter for rock bands.

Mr. Martin said in an interview that the couple had regularly gone to him for help on things like shoveling snow or winterizing the beach house. And they asked him to look at Ms. Morris’s will because he had the software to open the file. He said he had sat with Ms. Morris as she revised the amounts she wanted to leave her friends.

“I made the changes in the file and went along my merry way,” he said. “Then the will was contested, and all of these people came out of the woodwork that we never saw. I don’t think Joan had seen most of these people in many years, if not decades.”

Mr. Scarola, the lawyer for the Anderson estate, said: “One of the reasons the will is a mess is Charlie Martin, who isn’t a lawyer but is quite computer savvy, sat with Jill some months before she passed away and took a version of her will to hear what she wanted to change.”

The lawyers for the charities cited previous versions of the will to buttress their claims to the estate.

Credit…Jeenah Moon for The New York Times

There’s another twist. The elder Ms. Anderson was named the executor of the will. When she died, that responsibility passed to Sue Renee Bernstein, a longtime friend who represents artists.

But Ms. Anderson and Mr. Martin have questioned Ms. Bernstein’s motives. Under New York State law, an executor is entitled to a percentage of the estate as payment for managing the transfer of the estate. If nothing is sold and the assets just pass to an heir, as would have been the case with the two homes, their value does not count toward calculating the fee. But if they’re sold, their value goes toward the executor’s fee.

Given the estimate of the estate’s value by the lawyers for Ms. Anderson, the executor’s commission if they were sold would be about $200,000.

Ms. Bernstein declined to address her compensation as executor and defended her connection to Ms. Morris.

“I was a friend of the deceased, Jill Morris, for approximately 30 years,” she wrote in an email. “She entrusted me to execute her will. I take that responsibility seriously.”

The lawyers for the charities pointed to their appellate briefs, agreeing with the judge’s ruling.

The younger Ms. Anderson said the case was about more than the will. It was about validating the longstanding relationship between her mother and Ms. Morris.

“I’m telling the story the way it was,” she said. “I feel like something should count for the relationship that they had. If they weren’t gay, I don’t think this would be happening.”

The appeal will be heard this winter.

With Adult Children Home, Now’s the Time: Talk About Your Money

For far too many families, financial planning is akin to scheduling dental surgery. The prospect of pain and discomfort prompts many to put it off — or not do it at all.

During the pandemic, however, a mortal urgency has forced the issue. Will dependents and heirs be provided for? What about funding a dignified retirement? Fortunately, with many families still sheltering together, the different generations can sit down and address these subjects openly. Key questions can be fielded and discussed.

Rosemary and Jeffery Harris started extensive planning about 13 years ago during another crisis. It was the height of the housing bubble, which burst — leaving them worried about protecting the equity on the home they bought in 2007. They approached a financial adviser in Glen Allen, Va., for a comprehensive financial plan, wanting to sketch out a secure retirement and provide an inheritance for their three daughters, who are in their 30s.

Although they had thought ahead and made portfolio and estate plan adjustments, the coronavirus crisis has put a finer, more immediate focus on the Harris family’s financial future. The couple lost a relative to Covid-19 and wanted to take the opportunity of having time with their daughters to nail down the details and keep them informed.

The Harrises also are focused on their own retirements. Mr. Harris, 62, a wholesale area manager in the oil industry, is on the cusp of leaving the work force while Ms. Harris, 65, is a retired school principal with a pension. Mr. Harris doesn’t have a pension, so his adviser, Aaron Smith of A.W. Smith Financial Group, set up a portfolio that would provide long-term retirement income.

“It’s a scary time, and we’ve been blessed,” Ms. Harris said. “But we were concerned about the pandemic. I wanted to pull out of the market. Aaron advised against that.”

As many families have discovered, it can be uncomfortable to involve children in discussions of how to handle estates after parents die.

“I don’t want to minimize the crisis,” Mr. Harris said, “but we had to sit down and have a broad discussion with our daughters. We told them, ‘Here’s what we have, the value of our insurance and the location of our trust.’”

Their oldest daughter, Ashley Perry, 37, agreed that the discussion was an awkward prospect. “Of course, no one wants to think of their parents dying,” she said. But she knew her parents had planned ahead, Ms. Perry added, so “it makes sense that they would have their finances in order.”

“They taught us how to be financially responsible,” she said. “I feel very grateful.”

If there’s something positive about the pandemic, it’s that it has strengthened some family ties, though not always happily.

In an Edward Jones/Age Wave study, two-thirds of Americans said the pandemic had brought them closer to their family, although only 28 percent of those over 65 “have yet to begin discussing their end-of-life care preferences with anyone at all, including their family.”

With the U.S. economy shrinking by nearly a third and more than 185,000 Americans dying in the pandemic, the sheer grief of the current situation can be overwhelming. It’s arduous for many people to move ahead and process all of the potential effects on families — but for many, the impact on their general prosperity and later years will be profound.

A study in July by the Brookings Institution said that, while the full effects of the pandemic weren’t yet known, the impact was likely to transform retirement for “years, if not decades.”

An extended slump could reduce stock market returns, retirement savings and income, and force many Americans to work longer. “This is the biggest labor market shake-up in a century,” said Ben Harris, a co-author of the Brookings report and a professor at the Northwestern University Kellogg School of Management. “Some 30 percent to 40 percent of lost jobs may not be coming back. What if breadwinners can’t go back to work?”

In addition to the labor market damage, there’s little question that the pandemic has already hurt retirement savers in the past year. More than 60 companies employing more than 100 people have suspended their 401(k) contribution match since the pandemic began, affecting more than a half-million active participants, according to the Center for Retirement Research at Boston College. Many of them are large employers hit particularly hard by the crisis, including Best Buy, Dell Technologies and Kelly Services.

Not surprisingly, the social disruption — aggravated by job losses, halts in retirement savings and health-related employment interruptions — has created a great deal of financial stress. In a survey published in April by the National Endowment for Financial Education, 88 percent said the crisis was stressing their personal finances. The top three stressors, respondents said, were lack of emergency savings, job security and income fluctuations.

Adding even more urgency is the fact that some people are much more vulnerable than others to getting seriously ill and dying from the virus. Those with asthma, diabetes, obesity and compromised immune systems had a higher likelihood of dying, and federal data shows that African-Americans and Latinos are disproportionately affected by the virus.

Granted, all of these concerns are nettlesome subjects for an intergenerational kitchen- or dining-table discussion. Many families don’t discuss money, and even more don’t get into the weeds on mortality issues such as long-term, end-of-life care and estate planning.

Mr. Smith advises families to start by discussing their priorities. Is independence in retirement important to them? Leaving an inheritance?

“Start with what is valued by your family,” he said. “What is your health care coverage? How will you manage retirement income?”

Since the Harrises placed a priority on leaving an estate, for example, Mr. Smith advised them to buy a variable universal life insurance contract, which had an investment component and tax-free benefits for beneficiaries. They also set up a revocable living trust two years ago, naming their daughters as co-trustees. Access to these documents was streamlined: Now everything important about their portfolio and estate plan is on a thumb drive.

Another essential approach is to take an inventory of family assets. Families can focus first on real estate wealth and Social Security benefits, said Martin Baily, a senior fellow at Brookings and a co-author of the July study.

A reverse mortgage, for example, is worth considering to tap a home’s equity to provide a monthly payment based on the home’s value. Although it’s a loan you don’t have to pay back, it’s complex and often expensive, and could compromise your estate plan.

Mr. Baily said many families might feel most comfortable talking about money issues in the context of long-term care. What if parents need additional assistance or become disabled? Who in the family can provide in-home care? What if they need institutional care?

“Would they be comfortable in an institution?” Mr. Baily said. “Most would say no, but you will need a plan in place.”

Perhaps the hardest of family discussions addresses end-of-life issues. That involves drafting essential documents such as living wills and powers of attorney that empower others to make decisions in the event of severe physical or mental disability.

“Have you reviewed these end-of-life decisions over the past three years?” asked James Brewer, a financial planner with Envision Wealth Planning in Chicago. “Who will make decisions on your behalf?”

“The Covid crisis has created a perfect storm that prompts families to do comprehensive financial planning,” he said. “Many, I think, are warming to that conversation.”

Mr. Brewer also suggested that families review their emergency reserves and any debts, such as student loans. A realistic evaluation of health expenses during retirement is also important.

“What recalibrations do you have to make now?” Mr. Brewer said he asked his clients. “What financial risk will you face? Will you need to cut back expenses?”

Although many of these conversations will be difficult to jump start, keep in mind that planning and organizing now will make matters easier for children and grandchildren in the future. Holiday or family gatherings may provide a good setting for initial discussions.

Ms. Harris, who had a grandmother who lived to be 100, said it had been hard to track down her grandfather’s essential papers when he died. “He was secretive regarding his financial affairs. Without that knowledge, it made it very difficult to settle his estate.”

She said she wanted things to be much easier for her daughters, though. “We want it to be seamless.”

The Importance Of Estate Planning

Thats due to the fact that the main element of estate preparation is designating recipients for your homes, whether its a summer season home or stock portfolio. Without an estate strategy, the courts will generally choose who gets your properties, a procedure that can take years, acquire costs, and get ugly.

.

Relative have battled in court for several years, and things can generally get ugly. By having an estate plan to designate who inherits what, you and your relative can avoid a possible mess by leaving things as much as chance in the court system.

What is associated with estate planning? It varies for each individual. A bachelor who leases a home and doesnt have children will likely have an easier estate strategy than a remarried person who owns 2 homes and has kids from both marriages. As a result, the treatment of estate planning for each will likely be considerably numerous. However going through that procedure may be just as vital for each likewise.

Even if youre just leaving a 2nd home behind, if you do not choose who gets the house when you pass away, you will not have any control over what strikes it.

.

As we mentioned, estate planning isnt simply for the wealthy. Most– if not all– families will have some things to leave as part of their estate. Whether that be your family home, a second rental property, stock portfolios, property investments, and even your most valued personal belongings, there are several things you may own that will fall under what is considered to be your estate.

These products must be acquired by the successors you designate if something takes place to your family breadwinner or income manufacturers plural. In the absence of an estate strategy, it is usually left roughly the court to choose who gets your possessions. And while it might resemble a simple and apparent procedure– it generally isnt.

An estate plan is a collection of legal documents that state how you desire your ownerships dispersed when you die, and how you desire people to manage health and monetary decisions if you are unable to do so on your own throughout your lifetime.

If estate planning was as quickly as considered something that just high net worth people required, thats altered. Nowadays numerous middle-class families require preparing for when something takes location to a households income producer (or breadwinners). You do not have to be super-rich to do well in the stock exchange or property, both of which produce assets that youll wish to pass on to your followers.

.

What is estate preparation, and why is it important? Estate planning is laying out in writing what you desire to take place to your homes after you pass away. Its likewise taping who you want to make vital medical and financial choices for you during your life time if you cant make them yourself.

.

.

A thorough estate plan can assist you feel more confident about the future, knowing your enjoyed ones will be cared for which the custom you leave behind is the one you want. Thoughtful planning now can help lower taxes and probate costs, and guarantee your household will have less to stress about when you are gone; however, quiting working to make prepare for your estate can result in unanticipated concerns for your descendants.

.
What Is an Estate Plan?
.

Making a formal plan and making certain its enforceable with lawfully legitimate files indicates that you get to pick what happens to your possessions and your person. If they had to make these choices without your input, it can similarly significantly lower the distress your family may experience.

.

Estate planning is laying out in composing what you want to occur to your properties after you pass away. As an outcome, the procedure of estate preparation for each will likely be markedly various. If estate planning was as soon as thought about something that only high net worth individuals required, thats changed. Thats due to the fact that the primary part of estate preparation is designating beneficiaries for your homes, whether its a summertime house or stock portfolio. As we pointed out, estate planning isnt simply for the wealthy.

.