Estate Planning

Putting your affairs in order can be even more daunting when you have real wealth to bequeath to successors.

Illustration by Stephen Sauer

The smashed-in front door of this rural general store and the vacant paper mill across the river are an indication that luck doesn't visit here often. When it does, it's cause to celebrate.

On this day the store, which caters mostly to customers' desire for beer, cigarettes and lottery tickets, has pushed aside the few tables, where customers usually congregate, to make room for the crowd. Three television crews and a few more print journalists are wedged together near a single table in the front and behind them huddled together are group locals and the soon-to-be famous man's family.

A wall of balloons hide the walk-in beer cooler, where the lucky man waits to be unveiled like a bride. We'll call him Rich because he doesn't want his name used and he will soon be handed an over-sized check for $12.5 million - the state's largest single lottery jackpot. The giant check is perhaps a reminder that the scale of most things in Rich's life, both financial and personal, is about to increase exponentially.

Charlie McIntyre, who looks more like movie star than the state's top lottery official, begins his spiel. "Your life as you know it is over," he starts, "You have an orchard now. Live off what it produces; don't cut down the trees for firewood."

"No one is born knowing what to do with that kind of money."

Rich, a shy 52-year-old factory worker, listens intently. Somewhat of a recluse, he lives alone (he's never been married) just a short distance away in a well-worn trailer. He spends his free time ice fishing or hunting.

"No one is born knowing how to deal with that kind of money," McIntyre said. But Rich's caution serves him well; he got paired up with a local attorney and a financial planner and waited for several weeks before coming forward. His new advisors helped him slowly untangle the realities of his new life.

His financial counselor Bruce McLaren, of Littleton, says that Rich's immediate goal was to clean up his credit. McLaren reminded him "you don't need credit anymore."

McLaren, a fee-based financial advisor with Community Financial Services Group LLC, which offers trust and investment services, quickly became Rich's financial soulmate - helping him purchase a modest house, nice fishing boat and manage his $5.1 million after-tax, lump-sum windfall.

Rich had little knowledge or experience with money, says McLaren. "Most people accumulate wealth over time and gradually learn" about money and estate planning. Rich had to learn fast, but his estate was simple - no spouse, children or businesses. He only had worry about himself - stretching his money to meet his life span.

Most people have more complicated situations. A businessperson with a young family needs to insure against death and prepare a contingency plan to keep the business going. An older person needs to measure the impact of an inheritance - so it doesn't soften initiative or turn families against each other.

Jill Boynton, a financial advisor with the Newington-based Cornerstone Financial Planning, says free or unearned money can be hard to hold. It slips away - to binge spending, money-hungry friends and families and little planning. She notes that often "there is guilt around inheriting money [and] the pressure to do the right thing can be paralyzing."

The key, she says, is to come to terms with it. "What's the purpose of the money?" should be the guiding question, she adds. And it's also a great starting point whether you are a millionaire or a working person, says Heidi Barrett-Kitchen, an estate planning attorney at the Concord-based firm of Shaheen and Gordon. People have very diverse views of money, risk and life, but everyone needs to plan for tomorrow. She knows this first-hand as she teaches a financial planning class through her church.

"People are dynamic and very different," she says. "There is no road map." But all roads lead to the same place - death. Estate planning is essentially about putting your affairs in order. It's about "planning for unfortunate circumstances," Barrett-Kitchen says. "It's best to do it when you're healthy" and alive. If you don't at least have a will, probate court will have to sort out your intentions and this takes a long time and isn't cheap. And it's a totally public process.

"Estate planning is not just about wills, advance directives and medical releases," she adds. It often includes strategies to avoid taxes, pass on wealth and to dictate the future use of that wealth.

It's a daunting realm of law that must span generations with careful preparation. Fortunately, there are experienced advisors with tools to assist. The most obvious tool is an education trust for young children or creating legal entities to hold and then pass on assets while shielding liability. Putting assets in a trust offers the added benefit of protecting the owner's identity.

Barrett-Kitchen advises clients to put together a team - a lawyer, accountant and financial planner - and together they'll devise a plan that accomplishes the necessary goals.

A year has passed since Rich won the lottery. McLaren reports that his client is doing fine and made the adjustment without many difficulties. He doesn't fish or hunt as much as he would have thought and on a recent visit with him he was surprised when Rich bent his bulky frame down to the pavement to pick up a penny. His circumstances have changed but he hasn't.

You have to remember, McLaren says, "He didn't have a lot and he doesn't need a lot."

What you need to know

  • Estate planning is for everyone, not just the wealthy. It's easy to put off, but it's at your own (and your family's) peril. Just get going - a will is the first step.
  • Build a team of advisors - a lawyer, accountant and financial adviser. They'll cut through the emotions and help you put your plan into action.
  • Be clear and talk about your intentions with your family. Determine how your estate will be divided and what, if any, money will go to charities.
  • If you are leaving a non-liquid asset - family home or business- to more than one person, understand their financial and personal commitment to the asset. These things require time and money - and a whole multitude of decisions. If not properly planned, these gifts can become divisive burdens.
  • Build and guard your nest egg and hopefully your heirs will learn from you.
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