Three Primary Areas of Planning

• Estate Planning – What happens at my passing?
• Incapacity Planning – What happens if I get hit by a bus but survive? Who will take care of my affairs?
• Lifecare Planning – What happens to me from retirement to end of life? How do I make sure I will get good care, preserve my resources and everything in between as I get older?

What is an Estate?

Estates only occur when you die. Either you have an estate plan or you don’t. If you don’t have a plan the state legislature and Governor will make a plan for you. Dying without a will is called dying “intestate.”  The person in charge of the estate may be someone you’ve never met. The beneficiary may be someone you never intended. Or it may be someone you intended, but you may not have intended to give them this money while they were 18 years old.

What is a Will?

A will is a “testamentary” document. It does not have any effect until you die.  The last one you revise is the one that counts. A will can be changed and amended at any time to reflect changes in your life status.  As your life changes, your will need to be updated.

The will is a document that answers the following: “Who am I? Who is in charge when I pass? And Who Gets What?” The person in charge when I pass is called an Executor (male) or Executrix (female). This person is responsible for administrating the estate. You want someone who will do the work and make sure it gets done. You can choose successors as a back-up.  The beneficiaries are the people who receive the money or assets. If you’re in someone else’s will, ideally you’re the beneficiary and not the executor.

“At my passing here’s who’s in charge and here’s who gets what.”

Special situations: Minor children, substance abuse, spendthrift. You can select a trustee to oversee the money to provide money to these beneficiaries in an effective manner so the money is not spent immediately.

Name a guardian to minor children in a will. Who will be the surrogate parents of my children? If you don’t designate a guardian, the court decides. The will governs all assets titled under your name.

Other asset registrations not governed by the will include:

• Joint Tenants with Rights of Survivorship and Tenants by the Entirety.
• Insurance Policies with beneficiaries.
• Banking accounts have Payable On Death.
• Brokerage Accounts have Transfer On Death.
• 401k’s, Retirement Plans have designated beneficiaries.

These are planning options that can be utilized to avoid Probate, which is the arm of the court that retitles assets when somebody passes. Some people prefer to bypass this administrative process. Another way to bypass probate is to set up a revocable living trust. By titling all my assets into the trust, no assets at my death are in my name.

Some planning techniques to pass assets at death:

Incorporate into will or trust named beneficiaries, special needs provisions, spendthrift provisions.

Letter of Intent – tangible items. Ex. mother’s china goes to my sister. Silver to the son. Etc.

Federal Estate Tax

Not applicable to most people. Current law (through 2012) – first $5 mill in assets per individual/spouse is not subject to estate tax.

Incapacity Planning

If something happens to me and I am unable to oversee my financial affairs, another individual needs authority to takeover my affairs.  Guardianship is costly, cumbersome, and unnecessary if you draft a Financial Power of Attorney. The more specific and expansive they are the better they are. Ex. Ability to refinance or sell a home.

Healthcare Power of Attorney – non-terminal conditions. Headache to heart condition. Only in the event I cannot make an informed decision. Majority of medical decisions are covered. Name a person up to the task to make these decisions. Person should be comfortable with medical decisions and making decisions in general. This person will honor your desires and directives.

Advanced Medical Directive or Living Will – Permanent Vegetative State, Irreversible Coma, Terminal condition -  two doctors examine me and must confirm in writing one of these three states. Want artificial life support or not. Personal preference. The person is there to enforce the decision someone has already made. Wishes are clear. Party is authorized. No confusion.

Lifecare Planning

What happens from retirement to end of life?

How will I use my resources?

If I need care, where do I get it and how do I pay for it?

Proactive planning vs. reactive crisis management.

Many people want to stay at home. Convenient, familiar.

Cost of care is lowest at home.

Adding ramps, safety bars, moving bedrooms to upstairs,etc.

Ex. Aunt Betty lived in house for 40 years. Slipped and fell and broker her hip. But has dementia so can’t follow directions and unable to do rehab. Moved into skilled nursing facility. Suddenly it’s a crisis. What happens to the house? Who pays for bills?

First – decide where I want to live.

Stay at home? Many people want to stay home. But some surviving spouses say it’s lonely and want social interaction. There are independent living (condos, developments,/ continuing care retirement communities).

Independent living - Leisure World –. I can do everything for myself, but I’m tired of cutting the lawn and tired of making meals.

Lowest cost care – have someone come in (min. 4 hours a day) 9am to 1pm. At home.

At some point this doesn’t work.

Next option is Assisted Living. ex. Sunrise. Live in a facility. Need assistance with taking meds. Or need assistance with activities of daily living. 24/7. skilled nursing care available. $3k to $5k per month. Goal is to get the best care in the least restrictive facility.

“Guide to Retirement Living” – every facility in the (DC/Metro) area. Costs. What is offered. Make sure the care is good.

Best care involves friends, family and advocates. For example, bring in Krispy Kremes to workers. Become friends w/the staff. Social Workers can help be advocates. Involvement of all parties helps ensure better care for your loved ones.

Stay at assisted living as long as possible.

Next level is skilled nursing care.

Nursing home is last option. Very costly. $80k to $110k per year on average. Can quickly deplete a lifetime of savings/resources. 24/7 nurses and doctors available.

How to pay?

Long-term care insurance – in the event I need care, this policy will pay for it.

This information is intended for educational purposes and is not intended to provide specific advice. Please consult your estate attorney or financial adviser to determine the appropriate level of planning for your personal situation.

To talk to a financial adviser at Ariba, call 1-800-808-7488 or visit www.aribaasset.com