How a Serious Diagnosis Changes Estate Planning

A thoughtful conversation with Jonathan Clements, a long-time and well-respected personal finance reporter, appeared in a recent article on Morningstar, “How Illness Can Change the Way You Approach Your Finances.” Clements, who covered personal finance for The Wall Street Journal for decades, was diagnosed with advanced cancer and told he had about a year to live. He spoke with a reporter about his financial and estate planning decisions considering his illness.

Accelerated Giving to Children. Clements has been giving more to his children and funding 529 plans for grandchildren. He lives in one of the few states with an inheritance tax—Pennsylvania. His wife won’t have to be concerned with the inheritance taxes. However, his children will. The Keystone State puts a 4.5% tax on every dollar they inherit, regardless of whether they live in Pennsylvania.

Streamline Investment Accounts. Even before the diagnosis, Clements noted he had simplified his financial accounts. He’d had four credit cards and trimmed that number to two, learning that closing credit card and bank accounts takes a lot of time and effort.

Shred Outdated Records. Like so many of us, he had bank records going back decades. A shredder has been working overtime in his home, getting rid of bank documents and tax returns dating from 1986. Clements now has seven years of tax returns and supporting materials.

Powers of Attorney. Despite such a serious diagnosis, Clements admitted to not having a Power of Attorney until recently. He had moved from New York to Pennsylvania four years ago to be closer to his daughter and grandsons.  However, he had never gotten around to updating his POA. Sound familiar? If you moved and haven’t updated your POA, now would be a good time to do so.

The Problem with Inertia and Estate Planning. Clements is far from the only person to delay getting estate planning documents taken care of, readily admitting, “The cobbler’s children have no shoes.” Everyone should have an estate plan created by an experienced estate planning attorney, with adjustments made if they move, have children or grandchildren, divorce, or remarry. Many people fail to make these updates, and their loved ones are left to deal with the aftermath.

Talk With Your Family About Your Estate Plan, Finances and Wishes. After decades of writing on personal finance, Clements is well-versed in all personal finance matters, investments, and how they impact estate planning. However, when he sat down to speak with his family after the diagnosis to talk about his estate, what he thought was simple and straightforward wasn’t clear to them.

Beneficiary designations, last will and testament, investments, how wills go through probate, and how some assets pass through probate, and others don’t were second nature to him but not to family members. The initial family meeting was followed by countless conversations with his two adult children and his wife to clarify things like probate, Roth IRAs versus traditional IRAs, and how assets are passed.

Having a conversation with your loved ones and meeting with an experienced estate planning attorney should be done before a terminal diagnosis arrives. It takes time to work through the details, and family members will need more than one conversation to fully understand your wishes. Leaving behind a well-organized estate is leaving a gift to loved ones.

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Reference: Morningstar (Oct. 20, 2024) “How Illness Can Change the Way You Approach Your Finances”