Wisdom and Rubies
Wisdom is better than rubies. —Proverbs 8:11
It was easy for Solomon to opine about the value of knowledge, experience, and good judgment. He was not worried about the source of his next meal, a safe and comfortable place to lay his head, clothing to keep him protected from the elements, or the cost of college for Rehoboam. It is good to be the king. As for the rest of us, wisdom may be better than rubies, but wisdom will not pay the rent.
That is the inspiration for this column, and in the paragraphs which follow here (and in the months ahead) it will be my intention to inform, encourage, and perhaps occasionally entertain you as I share my perspective on preparation for an unpredictable future. We are going to die—all of us—and what we do between now and then will have a lasting impact on everyone we leave behind. What will be your legacy? A well-planned exit with an intentionally seamless transition of your worldly belongings to the people and causes most dear to you, or a thoughtless departure necessitating the mother-of-all scavenger hunts to find your stuff and likely ending in its haphazard disposition?
The wisdom of prescient decision-making should not preempt collection and use of the rubies required to get the job done. Professional assistance in sorting out your affairs and putting your material house in order is well worth the cost. Your loved ones, your congregation, your alma mater, your community—those “objects of your bounty”—will thank you for it, and best of all, you can revel in the confidence that you had the final word and circumvented a legal feeding frenzy.
Here are some simple suggestions to help you get started...
Identify your objectives
You spent a lifetime working to accumulate what you have. Deciding where and to whom you want it to go and on what terms is not a task to be taken lightly. Think carefully about your ultimate goal. Families are complicated, and the death of a beloved member can be traumatic. Worthy objectives might include multi-generational preservation of assets, minimization of tax consequences, and elimination of strife among relatives after you are gone. (Note to self: Be the beloved member who is dearly missed and charitably remembered… not the sorry, selfish SOB whose seat is subject to a bidding war at the next family reunion.)
Inventory your possessions
Take stock of what you own. Only then can you decide who is to get what. Your “estate” includes it all—real property (land and improvements to it like buildings and fences), personal property (clothing, jewelry, furniture, vehicles, bank accounts, and investments), and intangible property (patents, copyrights, licenses, and other rights generally difficult or impossible to physically hold). Do not be offended that what you might consider to be an “heirloom” may not be cherished nor perceived as such by others.
Assess your values
Just what is it you wish to accomplish with your plan of disposition? Is there a particular impact you wish to make or memory you wish to preserve? Some people place a priority on providing educational opportunities, while others may choose to focus on home ownership. What do you value most and how might you want to make that available to those you leave behind?
Behold your beneficiaries
Should you choose not to make an estate plan, know that the state wherein you reside when you depart the premises will make one for you. Each state has its own “statute of descent and distribution” which prescribes your “heirs at law” and then dictates how your estate will be divided among them. So long as you are satisfied with that determination, there’s nothing more you need to do. If that is not acceptable, you must take affirmative action to name those parties (persons and programs) you wish to benefit from your estate and in what amounts or percentages.
Use your tools
This is where the rubber meets the road, and the estate plan comes into existence. Most often the plan includes one or more of a Will, a Living Trust, and beneficiary designations on life insurance policies, retirement plans, or financial accounts. Additional legal instruments which offer valuable estate and health care assistance are powers of attorney for both business and medical purposes, living wills or directives to physicians, and declarations of guardians in the event of future need.
Know your resources
If all of this is beginning to sound a little daunting, well, it is. Do not make the mistake of being penny-wise and pound-foolish. This is where your rubies will mean the most, and finding competent and compatible professionals—financial and legal—to guide you through the process will determine your degree of success in attaining exactly what you want to accomplish. Getting the right advice at the right time can help you avoid unintentional and unanticipated tax consequences, preserving your estate for those whom you truly intend to benefit (and pencil whipping the government—legally, of course—can also provide a unique sense of achievement if not unmitigated joy).
Reevaluate your plan
Completing your estate plan can be a fulfilling and relieving experience, but it is not something you can set and forget. Periodically, you should revisit it to confirm that it continues to comport with your goals and desires. In any event, you should always review and reassess your plan whenever you experience (i) a material change in the value of your estate; (ii) an interest in changing your beneficiaries or any parties nominated to serve as personal representatives of your estate, trustees of any trusts, attorneys-in-fact, or health care agents; or (iii) a major change in the applicable tax laws.
History reflects that Solomon’s legacy was not exactly what he expected. The author of “spare the rod and spoil the child” did not necessarily heed his own advice. When Rehoboam assumed his father’s throne, his behavior resulted in a rebellion so severe the kingdom was divided, and the future Solomon envisioned for his son and the monarchy was irrevocably changed. No amount of wisdom—or rubies—could reverse the damage.
Planning for an unpredictable future, first with us and later without us, could not be more important. Good stewardship demands it, and our families deserve it. Acknowledging that wiser minds have failed at what we now seek to do, I suggest you hold on to your rubies. Keep them close and be prepared to use them generously when the opportunity arises.
Freddy is an Assistant Professor of Accounting at Texas A&M University-Texarkana and an attorney Board Certified in Tax Law and in Estate Planning and Probate Law by the Texas Board of Legal Specialization. His practice is limited to matters of federal and state taxation, wealth transfer and asset protection planning, probate and the administration of estates, and the formation and operation of business, professional and nonprofit entities. You may find him at www.nortonandwood.com.