ISSUE #32

Author and retired Law Professor Stephan R. Leimberg, one of the country’s most well‑respected authorities on estate and financial planning, has said that

“The Only Difference Between An Old Woman and An Elderly
Lady is . . . Adequate Income!”

He is referring, of course, to the importance of knowing that you and those you love will, in the event of death, disability, or at retirement, be assured of a steady, dependable, and adequate flow of cash for as long as it is needed.

But Leimberg also stresses that proper planning isn’t only about having enough income and capital! Failure to properly plan for life contingencies such as disability and incompetency can result in disaster, no matter how successful you have been in your investments.

Here’s an example: Sam is a retired educator in Pennsylvania. He worked for 40 years for the school system. He did an excellent job, and the district rewarded him with a retirement income sufficient to enable him to maintain his lifestyle without having to cut corners or do without. Sam's wife died 10 years ago; they had no children. His closest relatives are his wife’s two nephews, both of whom live 3,000 miles away on the west coast. Practically all of his close friends have moved away, and there is really no one nearby with whom Sam has a close personal relationship. Sam's estate planning consists of a will prepared by the law firm that represents the school district. Under the will, Sam leaves all of his assets to his nephews in California and Washington, and has named them co‑executors.

In addition to Sam’s pension, he has managed to accumulate a fairly sizable estate by investing shrewdly over the years. Sam has a savings and checking account at a local bank with which he has been doing business for the past 30 years.

Fortunately, when Sam retired, he still enjoyed good health, and planned to continue his practice of taking one big vacation annually. One year, while traveling in Hawaii, he was hiking along a trail to get a close-up look at a volcano, and he tripped, receiving a severe head injury and a fractured hip. The tour director made certain Sam was properly hospitalized, but was never told whom to call in case Sam was injured.

Sam was eligible for Medicare, and had his social security and Medicare cards in his pocket, but there was no information in any of his belongings about anyone to contact in the event of an accident or illness. Furthermore, Sam's memory was seriously impaired, and he could not communicate well with his doctors. The hospital knew of no one to contact about Sam's condition or how to get money over and above Medicare benefits to pay for his treatment.

Unfortunately, since Sam had failed to take advantage of the various options available to him to plan for or protect his future security, he had unknowingly turned over the management of his affairs to the court system.

Sam’s situation is an example of what can happen if you fail to plan properly. Yes, Sam has a will which names his nephews as heirs and co‑executors; but he did not anticipate the need to plan for contingencies such as an emergency and incapacity, or to safeguard his own future. As a result of his accident and diminished capacity, Sam could not manage his own affairs, and someone had to be formally appointed to handle them for his benefit. Under Sam's estate plan, guardianship was the “default” and unfortunately, only option.

The exact nature of guardianship proceedings varies from state to state and sometimes from county to county; and even the title of the person or institution chosen to manage someone’s affairs, called a “guardian,” or “conservator,” or in some cases, “committee,” will differ depending on the jurisdiction in which the legal proceeding is instituted.

Guardianship is almost universally a proceeding to be avoided if possible. The effect of the proceeding is to appoint a guardian to whom (or which, if an institution) all powers with respect to the incompetent person’s life are transferred (at least temporarily). The court appointed guardian may not even know the incompetent person, much less his or her personal preferences or wishes. Likewise, the hearing judge may never have seen either the incompetent person or the guardian before the proceeding.

There are several planning options that Sam could have used to protect himself and that your clients should be considering. The decision as to which option to choose (or more often which combination of options) depends on many factors, including your present financial situation, whether you have one or more relatives or close friends available to lend support, whom you trust and who are willing and able to assist, your present physical and mental condition, and your personal feelings about managing your financial affairs.

TO DISCUSS THESE OR OTHER MATTERS OF INTEREST, AS ALWAYS PLEASE FEEL FREE TO CALL! YOUR INTERESTS ARE OUR CONCERN!

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This publication has been prepared as an educational resource to help the reader identify areas of potential concern. The publisher is not engaged in rendering legal, accounting or other professional services. The information contained in this publication should not be acted upon without first obtaining the advice of a professional advisor. Material may not be used without permission. Leimberg and LeClair, Inc.

You may wish to access NEW information this month at: www.ashland.edu/estate and “click” on “Planned Giving” in the left hand column.

Our planned giving director, Paul Ditlevson, can be of tremendous service in helping you integrate your giving goals with your overall estate plan. He can also help you prepare to visit your attorney. You can reach Mr. Ditlevson by calling 419-289-5090 or by email to pditlevs@ashland.edu or regular mail at 401 College Avenue, Ashland, OH 44805.