How to Avoid the "Hurry Up and Die" Syndrome

A reader from Texas writes:

On the issue of estates and killing off the old farts, I think that this is the tip of the iceberg.

I watched (in 1985, when oil went to $12/bbl) people who really should have known better lose pretty much everything, in many cases businesses that their parents and grandparents had built from the proverbial garage and horse cart. That was amazingly stupid and was as much a result of bad planning as the economic crash.

As that generation is getting older (and many have made money again) and their parents are hitting their 80s (and many are still around), I continue to be struck by how few of them actually bother to do estate planning. I hear this a lot from my age cohort (their children) who are saving every penny because they trust their parents about as far as they can spit a rat and (I hear this *all* the time) most would put even odds on their parents winding up broke and moving in with them.

My age cohort (at least the ones I know) are structuring their estate now and most of them have been pushing their parents and grandparents to do the same, and they won't or can't be bothered, guaranteeing a major tax hit and a decent amount of confusion in probate.

Not retirement planning -- estate planning, to leave estates that will survive you more or less intact, which includes life insurance to offset taxes; long term care insurance that was, pre-AIDS, reasonably cheap; shifting assets, sub rosa or not, into the hands of their children and grandchildren, and so on. Trusts are your friend here, as is planning that spans multiple generations and has mechanisms to disinherit junkies, drunks, and idiots.

It amazes me that so many people (and I am sure that it is a horrifying number across the US given that I know a strata of people who really should have this nailed down and generally don't, despite being the perfect candidates) have never structured their affairs to do anything but drop a lump sum of net assets on their children, especially when you have a lot of your net worth bound up in a single thing (like property, as you pointed out, or stock options in a single company or ownership in a single company) and you will die (comparatively) cash poor and asset rich.

I think that you will see a lot more suspicious deaths, a lot more people moving the elderly out of managed care to have them croak three weeks later, and a lot more documented abuse cases as the children start to deeply resent their parents living on and using up money that the kids have earmarked for things.

I have seen this done well (and am a beneficiary of it being done well) and I have seen it done poorly, resulting in people never speaking to siblings again and substantial parts of estates being consumed in attorneys' fees. Doing it right is a lot less painful and in the same way that good manners makes social interaction less stressful, good estate planning makes long term financial security less stressful. And financial stress can make people crazy.

Crazy enough to kill their parents.

By the way, under the current estate tax law pushed through by the Bush Administration in 2001, the inheritance tax drops from 45% to 0% on January 1, 2010, then rises to 55% on January 1, 2011.

That sounds less like a carefully-considered law than like a high concept black comedy movie pitch: Potential heirs spend 2009 desperately trying to keep rich old Granny alive, then spend 2010 desperately trying to kill her. The script writes itself.

My published articles are archived at iSteve.com -- Steve Sailer