How to Balance a Checkbook…

I once heard a joke that went, “The last check you ever write should be to the undertaker and it should balance.”  Of course, the joke is funny because doing so would be nearly impossible, if not irresponsible.  Since it is impossible to know when you will die, it is impossible to know exactly how much money you need to live.  However, the truth in the quip is that you can’t take your money with you, so you may as well spend some of it.

When planning an estate, we often talk about how to pay for your future medical costs and long term care and how to plan for a long retirement.  We speak about the legacy you will leave behind.  We also talk about how to avoid estate taxes and whether particular types of trusts, entities, or regular gifting would be helpful to preserving as much of your estate for your beneficiaries as possible.  These are, of course, worthwhile and important goals.  Avoiding leaving attorneys and the government as your primary beneficiaries is one of the primary functions of estate planning.  As such, your estate plan should not only help you avoid the need for probate but also avoid the potential for challenges in order to lower the costs of administering your estate.  Your estate plan should also allow as much of your funds as possible to be sheltered from the estate tax, when it applies.

However, it is important to remember that many roads may lead to the same destination.  Considering long-term care insurance and planning for government benefits such as Medi-Cal and VA Aid & Attendance Non-Service Connected Disability Pension, for example, could help you prevent your bills from burdening your family while preserving some of your assets.  Similarly, life insurance could help cover funeral and other administrative costs that result from your passing.  Over time, the premiums may be significantly less than what your beneficiaries ultimately receive.  Additionally, depending on the size of your estate, the payout will be tax-favored.

After full consideration of your options, perhaps you will decide to spend some of your money!  After a lifetime of saving for retirement, you might like to take an extended European vacation.  Maybe there is a dream car you have always wanted or some jewelry you have had your eye on.  Shifting your focus slightly from how your money will be spent when you are ill and how it will be distributed after you have died to how you would like to spend it can be an invigorating experience!  Particularly for individuals with taxable estates, it may be possible to “spend down” below the taxable threshold while preserving a sizable inheritance for your loved ones.
As with any form of financial planning, estate planning is about finding balance.  With a reasoned approach to your plan, you may find that it is better to spend some of what would be your children’s inheritance on a family trip, the memories of which will last long after you have passed.  Even though your last check may not balance, remember that your estate plan is about you and what you choose to do with your assets.  Enjoy them while you can!

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