Sharing Your Wisdom

Have you ever noticed how the older you get the less intelligent those around you seem to be? You look at some of their actions or statements and just shake your head. But when you open your mouth to offer advice what happens? Usually you’re ignored at best, or, at worst, you’re shut down.

There’s actually something to this phenomenon.

As we age, we accumulate valuable lessons. Life experience. Some call it “The School of Hard Knocks” which is more difficult and valuable than anything taught at the university. Looking back, I’d venture to say that the most valuable lessons occurred, at least for me, when I failed.

I tried something and it didn’t work.

At the time, I may have been upset with myself or sometimes I became angry with others, or at the circumstances. Reflecting on those occasions my anger was directed elsewhere, I realize that I was often the true culprit. Despite the blame game, I still picked up golden nuggets that would become useful at some point in the future.

I’m sure this resonates with you too, doesn’t it?

My children are now at the ages where they’re invincible. My three daughters are 25, 23 and 19. The oldest is out of college having earned her master’s degree and is in the workforce. The middle is in the physical therapy doctorate program at the University of Florida while the youngest is a college sophomore.

They know it all.

Except they don’t.

They haven’t been through some of the trials and tribulations that my wife and I have experienced. We hope that they avoid some of our most challenging obstacles. The problem is, when we shield our children from those same challenges, we deny them the very life lessons, the wisdom earned, that enabled our success.

How does one therefore share one’s wisdom in such a manner that our loved ones will openly listen, yet not try to overly manage their lives? The most effective strategy I’ve come up with is to share my life experiences as they happen. Including the failures. Patti and I have shared our ups and downs around the dinner table since the kids were young.

We were careful not to share stories or events that weren’t age appropriate. I believe over the years, our open communication helped. I’ve noticed how our daughters, when describing their current challenges to us, often analogize those same dinner time conversations to their situations.

But what to do when they leave the nest? Does this end our opportunity to share wisdom?

It certainly gets more difficult. Yet, have you noticed that as your loved ones age, and they get knocked around a little bit by life, don’t they seem more open to your suggestions?

How does all of this fit into your estate plan? You knew since I write this estate planning column, I had to bring it back here at some point, right? Let’s discuss managing the inheritance that you leave your loved ones.

First, realize that your estate plan is dynamic, not only because tax laws change, and the estate and trust laws change.

No, an estate plan is dynamic mostly because your loved ones change!

If your children are close in age to mine, you probably want to impose a third-party trustee like a bank or trust company to help manage the money and investments if your loved ones inherit while still young. They might be the most honest, smart and careful young adults, but they still don’t have the life experience that you have.

Don’t get caught in the “curse of knowledge” trap. In other words, just because you learned something as a life lesson doesn’t mean that your adult children have.

For example, is it possible that your children make bad investments with a friend who states that he has the next big software app that will earn millions? All he needs is $100,000 of the inheritance your daughter just received, and they’ll both become the next Bill Gates.

It’s better to impose a wise, learned hand for a few years. Your will or trust can be drafted so that at some point, say, for example, when each beneficiary reaches age 40, your adult children can take full control over their own investments. It can also be drafted so that they can change who the trust company is, so they’re not trapped with an underperforming, overly expensive institution.

There are many options available to you and your loved ones. This goes to the skill that your attorney has not only with his own practice experience, but in translating your life experience to your plan.

This is far from boilerplate.

Having a third-party trustee isn’t a bad idea for some of your older beneficiaries as well. Those who don’t ever seem to make wise life choices, are spendthrifts, or who have dependency problems all are candidates to have a helping hand once you aren’t around anymore.

This should all come out in your initial client interview.

The key, just as what my wife and I did around the dinnertime table, is to share your wisdom with your loved ones and to share your concerns with your estate planning attorney.

In my firm’s Elite Client Care Program, for example, we offer our clients the opportunity to meet with us and their children (over video conferencing if the children aren’t all local) to discuss these important issues together. I’ve found that having the attorney translate how the plan works once constructed, provides a level of clarity and comfort that otherwise might be unattainable, and the plan is consequently more readily accepted.

Share your wisdom. Help guide, but don’t overdo it. And make sure your estate plan keeps up with the changes that constantly occur within your own family.

Now that’s wise.

© 2019 Craig R. Hersch. Originally published in the Sanibel Island Sun.

Other Side of the Desk

Throughout my more than thirty years of practice, there’ve been times that have illuminated my understanding as to what it feels like to be “on the other side” of my desk.

I’ve written before, for example, about my mother’s battle with leukemia, and the resulting (and surprising) difficulty when acting as my parents’ trustee during their time of need. See the preface to my book, Selecting Your Trustee, for that story.

I’ve also written about my experience when I was nearly killed by a hit and run driver while bicycling, leading to my firm’s Client Care Program that makes your health care surrogate, living will and other important directives available 24/7.

Very recently, in fact, I received another important lesson. On my 30th wedding anniversary date at age 55 I underwent a triple bypass open heart surgery. All this despite my normal weekly workouts consisting of 100+ miles bicycling, 6000 yards+ swimming and three separate one-hour circuit training sessions.

Three years ago, I even underwent a complete cardiac check-up including a nuclear stress test prior to competing in an Ironman distance triathlon race. “You have the heart of a 35 year old,” I was then told.

Luckily, I heeded warning symptoms and got to the ER before suffering a heart attack. So all of my heart tissue is fine, and my prognosis is great. I’m off work for another couple of weeks but will be back soon.

I frequently lecture others how important it is not only to have an estate plan, but to keep it up to date. There are too many individuals who consider themselves young (isn’t 55 still young?!) but who have never completed their estate plan. An equal number of individuals signed a simple will 20 years ago when their children were young but haven’t updated since.

Bad idea. The doctors tell me that I’m lucky I didn’t have a major incident from my condition before it was discovered and corrected. Apparently, God didn’t think it was my time yet. We’ve all heard of luminary figures like Jim Fixx, the marathon runner, who appeared to be in perfect health yet dropped dead from undiagnosed heart disease.

Worse, I’ve had clients come to me even after suffering a major illness or setback, only to let drafts sit on their desks for weeks or months before coming in to review and sign the documents. A new estate plan isn’t valid until it’s been properly signed and funded, even if you’ve clearly expressed your wishes to your estate planning attorney.

Know also that Florida does not generally recognize handwritten wills as valid testamentary documents, or notes written in the margins or your will or trust as valid. There are definite rules Florida law imposes upon any document that contains a testamentary (after death) disposition of assets or property.

A final thought on ignoring symptoms related to heart attacks. For weeks during my workouts I experienced short periods of tightness in my chest and/or shortness of breath. “I’m just out of shape,” I’d explain to myself or, “I’ve been traveling a lot,” were common self-justifications.

The day I finally went to the ER something completely different occurred. First, I had an incident during my morning work-out. Then, for the first time, I experienced chest tightness and pain in my left jaw while working in the office, and not exerting myself. That was the day I finally made it to the ER and discovered a life-threatening condition.

At the first sign of something odd, get it checked out.

As I said earlier, the great news is that I’m fine, recovering completely and the docs expect me to enjoy a full life expectancy. I have many more years to work and to serve my clients, which I am very much looking forward to.

Take care of yourselves and God Bless.

©2019 Craig R. Hersch. Originally published in the Sanibel Island Sun.

Sin Taxes We Could Have

We all know the government taxes everything that it can – and even imposes additional taxes on those indulgences that aren’t good for us. Common examples of such taxes – known as “sin taxes” are the Mafioso-style usurious tariffs on cigarettes and alcohol.

The government searches for more and more revenue given the state of our current economic climate.  So I thought that I might suggest (tongue in cheek, mind you) several other sin taxes that, as far as I know, haven’t been imposed…yet.

Over Procreation Tax – The biblical adage to “be fruitful and multiply” can be taken too far. Case in point – the Duggar family (those of 19 kids or is it 21?) who lead me to wonder – when in the world is Michelle Duggar finally going to go through menopause? Or another question – how in the world can one couple give the requisite love and attention to that many kids? So to discourage such behavior I suggest the imposition of an “Over Procreation Tax.” For each child over four – starting with the fifth child a couple has – the government imposes an annual tax equal to the cost of that child’s public education – currently around $6,500 annually.  (Disclosure – this columnist has three children! In true Congressional form – set oneself outside the boundaries of any new tax that one suggests…)

Crying Baby in Restaurant Tax – For those parents who don’t get the idea to remove their lovely bundle of joy from the restaurant within five minutes of it hitting 140 decibels (equal to the sound of a jet engine taking off) a tax equal to the cost of all other restaurant patrons’ meals is imposed. This is similar to the age old golfer requirement that whoever hits a hole-in-one must buy a round of drinks for everyone in the bar – but without the joy of accomplishment.

Speedo/Waist Ratio Tax – While Europeans might be disproportionately affected – I suggest a tax be imposed equal to $500 for every inch a man’s waist exceeds his Speedo swimsuit’s waist size. Proceeds used to supply those men with a government paid gym membership and board shorts swimwear of proper size.

Tattoo/Tooth Ratio Tax – If the ratio on any one person of tattoos to teeth exceeds 1:1 then a tax equal to the amount of laser tattoo removal surgery is imposed. The tax is imposed at the time the tattoo is applied, but the funds from the tax are then invested until the tattoo becomes an unrecognizable dark blue blob – at which time the government pays for its removal. Additional amounts may be imposed for proper dentures.

Thump Thump Thump Tax – Police would be encouraged to pull over and ticket those annoying drivers who blast their car stereos to the point that all nearby vehicles rattle to the bass beat.  Fines of $500 per incident should quiet the roads a bit.

TMI Facebook Tax – For those who post their every move on Facebook – I suggest a “Too Much Information” Tax equal to $1 per post multiplied by that person’s number of Facebook “friends”. For some – many of whom friend everyone from all of their former third grade classmates to the waiter who served them at Perkins last Sunday morning – that could amount to thousands of dollars per day.

Too Long at Checkout Line Tax – This tax will be levied on those men and women who wait until after the clerk rings up ALL of the groceries before they realize that they actually have to pay – and only THEN do they begin to take out their checkbook (and who pays by check anymore?!). These people usually have unusually long names such as Mary Joyce Simpson McGuillicuddy – which they take great pride in signing neatly and clearly  – and oh so very slowly – in perfect Palmer Method cursive.

Gullibility Tax – Speaking of grocery store checkout lines – a Gullibility Tax should be imposed on all of those checkout line “newspapers” such as the Enquirer and Globe – proportionately related to the number of times the words “Elvis” “Alien” “Abduction” and “Baby” appear in print.

©2019 Craig R. Hersch. Originally published in the Sanibel Island Sun.

The Often Misunderstood Nuptial Agreement

James and Roberta recently married, the second time for each.  James has three adult children from his previous marriage, and Roberta has two adult children from hers.  When they arrived at my office to discuss updating their estate plans, James and Roberta verbalized some very specific and defined goals.

“We keep our finances separate,” Roberta told me, “and we want to keep it that way.  So no matter who dies first, then that person’s estate will immediately go to his or her children.”

It was apparent from their financial statements that they didn’t need each other’s money to survive during retirement.

“So what you want,” I asked, “is to keep your estates forever separate? So James’s will one day goes to James’s three children and Roberta’s will one day goes to Roberta’s two children?”

“Exactly!” they both affirmed.

“Do you have a nuptial agreement that affirms this understanding?” I asked.

“No we don’t, nor do we want one,” James replied. “We trust one another and didn’t want to throw water on our relationship by engaging lawyers to argue over a document that contemplates divorce.”

“I understand those feelings,” I began.  “But you need to know that a nuptial agreement doesn’t necessarily need to address divorce issues. A nuptial agreement, however, might also be crucial to protect your estate planning intent and to make sure that what you want to have happen in your estate actually happens.”

“What do you mean?” Roberta asked.

“As married persons, when one of you dies, the other has certain rights conferred by the law in the other’s assets.  If, for example, you haven’t updated your estate plan between the time of your marriage and the time of your death, then the surviving spouse is entitled to an ‘intestate share’ of your estate.  In other words, there is a presumption that the decedent spouse would have left the surviving spouse a portion of his or her estate equal to what he or she would have received had the spouse died without a will. This may occur even if that presumption is untrue and can be rebutted by testimony. Under Florida law, that would mean that the survivor of you would be entitled to fifty percent of the deceased spouse’s estate, even if the will doesn’t provide the surviving spouse anything.”

“What happens if your plan has been updated? We are working now to update our estate plans, so we each plan to sign a new will which is obviously after our marriage.” James asked.

“Just because you have updated your estate plan doesn’t end it.  The surviving spouse still has an ‘elective share’ available which would roughly give him or her thirty percent of the deceased spouse’s estate, even if the surviving spouse is excluded in the will.” I answered. “A nuptial agreement waiving these rights is the only legal way to foreclose this possibility.”

“It sounds like the survivor of us would actually have to do something proactive to take from the other’s estate,” Roberta pointed out.  “And we trust each other not to do that.  So is a nuptial agreement really necessary?”

“Not if the survivor of you doesn’t make the election,” I confirmed. “But imagine a scenario where the survivor of you has dementia and that spouse’s adult child who holds a durable power of attorney makes the election on behalf of their parent.  The adult child would have a vested interest to do so since he or she would inherit more.”

“Well I would tell my children not to make that election,”  James said.  “But I see where the trust that Roberta and I have with each other sometimes might not be enough.”

“I haven’t even discussed the Florida homestead issue,” I continued.  “The home is in James’s name,” I said, “so where would Roberta reside if James predeceases her?”

“I want my will to give a life estate to Roberta and then at her death the house would go to my children. They’d probably sell it and divide the proceeds.”

“Unfortunately without a nuptial agreement waiving Florida’s ‘descent and devise’ rules that provision in your will would be considered invalid,” I counseled.

“Really? I can’t do what I want with my home?” James asked.

“What would happen when your will contains an invalid devise is one of two things. Roberta could elect to take one-half of the residence as her own as tenants in common with your children, or she could take the life estate.”

“So it could work out as we want?” Roberta asked.

“It could, but there are no guarantees.  If you both didn’t want James’s children involved in decisions regarding the home before you both were deceased, having a nuptial agreement would go a long way to solving that problem. Many married couples also want more flexibility than Florida law provides, such as giving the surviving spouse the right to sell the home and move to a different home.”

So one can see that a nuptial agreement may actually serve to ensure a married couple’s wishes are carried out without having to rely on the goodwill of other family members. A nuptial agreement need not even contemplate divorce but instead could be used as a useful estate planning tool.

©2019 Craig R. Hersch. Originally published in the Sanibel Island Sun.

The Generational Finance Gap

I’ve been asked a lot throughout my career, and increasingly more lately, about how much a parent should gift to bail out a child who is in financial distress. This is a tough call for many retiree parents, who have accumulated some savings, but have to live off the income that those savings generate in a very low yield environment.

When an adult child cries out in financial distress, there’s that tug of war between the concern for what he or she may be facing against the worry about whether you’ll have enough to last for your own golden years. What do you tell your adult child who asks for money when they are facing a home foreclosure, or paying high medical bills or educational expenses for their own children as today’s tuition rates are sky high?

I would suggest that part of the problem lies in the very divergent ways that today’s group of retirees lived during their working and childrearing years compared to that of today’s childrearing generation. Without overgeneralizing, my take is that today’s retirees weren’t eager to take on debt – whether to finance the purchase of a home, a car, or even educational expenses for their children.

They lived in more modest, smaller homes than do today’s generation. When I was a child growing up my family of four resided in a small home where much of the common space was shared. Somehow, we all survived that while my sister and I were both teenagers.

Today’s retirees largely drove cars that were often fully paid for, and didn’t borrow money to drive expensive luxury models. When I was growing up there were only a few luxury automobile brands – Mercedes, Cadillac and BMW come to mind – as opposed to today’s ubiquitous luxury dealerships in almost every city and town.

I don’t remember my parents carrying balances on their credit cards.  In fact, they wrote checks for most things. Today we swipe our cards without thinking twice.

In fairness to today’s generation, everything seems to cost a lot more now. While federal income tax rates are arguably the same or even lower – state, county, sales and property taxes take a much larger chunk than at any time in the past. For those of us living on the Florida coast, insuring our homes from windstorm and flooding is often as expensive or more expensive than the property taxes.

But when you compound the enormous levels of debt that seem so commonplace today, it’s no wonder that when a job is lost, illness happens or some other financial setback occurs, families are much closer to the line than they were a generation ago. There doesn’t appear to be a cushion of savings that prior generations amassed for the proverbial rainy day.

So what does today’s retiree do when they get that call? There’s no easy answer. The first thing that I would suggest is to meet with your financial advisor to determine if you have the ability to gift any money without suffering a lifestyle change of your own – or jeopardizing your own ability to meet your expenses. If you simply don’t have the resources, you can’t say yes. Honest communication about your abilities is important.

Your adult children also may have other options available to them. When asking for large gifts when in financial distress, I would think that an adult child has an obligation to disclose the big picture. How deep in debt are they? If you make the gift to them, will the gift only postpone the inevitable? If this is the case, I would think that the children have a duty to meet with a bankruptcy attorney to review all possible courses of action.

Other avenues might be explored. Would it be more helpful for the parent to help pay for health insurance premiums or some other means of support that ultimately bridge the gap from today’s problem to a more secure future?

Finally, I urge caution when a parent believes that a loan to the adult child is the answer. Promises to pay back loved ones are often neglected, leaving hard feelings and dashed expectations. Even if you decide to loan the money, you should be in a good enough financial position that if the dollars were never repaid it would not adversely affect your future financial security.

No one enjoys being in this situation – parent and adult child alike. But when confronted with these weighty issues, good communication between everyone involved is paramount to getting through it not only financially, but emotionally.

©2019 Craig R. Hersch. Originally published in the Sanibel Island Sun.