Estate Planning for Kidney Cancer Patients: Finding Joy and Opportunity in the Midst of Challenge
Wealth Transfer Planning Expert Ray Odom of the Northern Trust offers advice on how to avoid estate pitfalls that can lead to family friction – both before and after death
Your mother was diagnosed with kidney cancer six months ago and now she is terminally ill, with her doctors saying she is not likely to survive for more than a few days. For months, your life has been a blur as you and your family have dealt with the emotional burdens of this terrible turn in your lives.
But now you have an additional problem: It was only recently that you began talking to your mother about her estate and her wishes after death, and what you have learned is murky at best. Her financial records are scattered and disorganized, and as a result of her cancer progression, treatment side-effects and terminal condition, she is now confused and unable to speak coherently. She has no will, and she has made conflicting statements to your siblings in recent years about how she would like her property to be handled after her death.
A difficult path lies ahead as you and your family deal with both the grief of losing a loved one and the challenges of sorting out her financial affairs.
Unfortunately, this scenario is not unusual: A 2007 Harris Poll found that 55 percent of American adults have no will, and many have never discussed their end-of-life plans with a loved one. When they delay this vital step too long, they run the risk of creating extreme challenges for their heirs – and potentially creating friction among siblings and other family members, as well as unneeded legal and financial complications.
For kidney cancer patients in particular, the lack of estate planning carries unique risks. It’s not uncommon for kidney cancer to metastasize to the brain, making cognitive decline a possibility – and that means sound decision-making about matters of one’s estate is less likely. Even without metastatic cancer, estate planning while weakened by illness is not optimal.
But wealth planning expert Ray Odom of the Northern Trust says these scenarios can be avoided if individuals and families use the diagnosis of cancer as an urgent catalyst to plan ahead and follow a few basic ground rules. Odom, who has been counseling families about end-of-life planning for more than 30 years, says the process can only begin when the individual faces the inevitability of mortality and its consequences for property and personal relationships.
“Although estate planning involves a transfer of assets after death, financial wealth is constantly transferred during our lives. Recognizing that everyone has established patterns of wealth transfer during life can take some of the anxiety out of estate planning,” he says. “One key to effective estate planning is to project forward based on the past priorities of your life without getting stuck on the feelings related to the finality and certainty of death.”
Many financial planners believe that the most basic estate planning step for individuals to take is to simply put their end-of-life wishes in writing. More importantly – discuss those wishes with your loved ones during informal family gatherings and at meetings specifically called for this purpose. By taking these vital steps, you can clearly communicate what you want, and your written estate plan will be bolstered by your prior verbal communication. This helps minimize the chance of misinterpretation later.
“The best estate plans have no surprises,” Odom says. “After you die, members of your family often quote your gift intentions based on their memories, memories that are colored by their individual interests. So the best approach is to discuss your wealth transfer intentions clearly, consistently, repeatedly and in writing.”
When should these conversations begin? Start planning as soon as you have a positive net worth and a desire to benefit individuals and/or charities with some portion of that net worth, says Odom. A recently diagnosed kidney cancer patient certainly must begin an estate-planning process, if he or she hasn’t already. Even if the prognosis is good, the diagnosis can often serve as a practical reminder of one’s mortality – and the need for all of us to get our affairs in order.
A well-written will (and/or trust) created by an attorney is the core tool of estate planning, according to Odom. If a person dies without a will, their assets will be disposed of according to state laws, a process that may cause delays and unnecessary financial costs. Additionally, without a written estate-planning document the individual has no direct control over who receives his or her assets.
“You should meet with an attorney who focuses on estate planning, so that she or he can prepare a plan that expresses your intentions,” Odom advises. “Do-it-yourself legal forms may appear inexpensive but the preparation of a binding legal document that effectively reflects your personal wishes is challenging even for a qualified attorney.”
Among the other fundamentals of good estate planning, according to Odom, is determining exactly what you own and who your property and assets should ultimately benefit (i.e., the beneficiaries). Who are the beneficiaries of your estate, and why did you choose them? For many, the answer will be simple – all assets will be left to a single person (such as a spouse) or split evenly among children. But according to Odom, many individuals may wish to benefit extended family members or important friends and acquaintances after death.
To determine your beneficiaries, think of who is important in your life, and how you want to benefit them after you are gone. What do you own that might have a unique relevance to someone you want to influence? Visualize how your assets might be used by that person, and discuss your plan with them while you are of sound mind.
For the purposes of estate planning, your assets fall into three categories: real property, tangible personal property and intangible personal property. Real property includes land and improvements on land (such as a house), along with oil, gas, and minerals that are accessible from the land. “Tangible personal property includes all of your physical personal belongings that often have high sentimental value, including things like cars, furniture and recreational items,” Odom explains. “Intangible personal property includes everything else that can be owned by an individual, including financial instruments, stocks, bonds, checking accounts, cash and even unpaid compensation.”
Some forms of intangible personal property are controlled by contractual arrangements rather than by the individual’s will. These “non-probate assets”, such as life insurance and IRAs, go to the beneficiaries named in the contract.
According to Odom, tangible personal property such as jewelry, art and antiques can cause conflict that is dramatically disproportionate to its dollar value. These specific items of personal property should be discussed with the individual beneficiaries and the family to avoid misunderstandings.
Some types of intangible personal property can also become a source of conflict, according to Odom. A prime example, he says, are insurance policies and other non-probate assets with beneficiaries that were designated long ago and then forgotten.
“As an example, some people sign group insurance policies in the workplace when they are young and single, and designate ‘mom and dad’ as the beneficiaries,” he says. “Years later, they are married, have kids, are still working for the same company and don’t realize that their spouse and children will not get any of the insurance proceeds because the policy is payable to the parents.”
Estate planners say it is a good idea to be extremely diligent in identifying every contractual agreement that might eventually pay out money to a beneficiary – from IRAs to clauses in contracts for time-share property. Be comprehensive; keep these policies and documents accessible and review them periodically.
A second common problem for families dealing with estate plans, according to Odom, is joint accounts. Typically, an older parent will set up a joint bank account with an adult child, for example, so the child can help manage the parent’s day-to-day finances. But upon death, complications may ensue – ranging from ownership issues with other children who were not included on the account to various taxes that the account may be subject to. Rather than joint accounts, Odom recommends that families establish a Durable Power of Attorney with a designated child as agent. This authorizes the child to make withdrawals or deposits to the individual’s bank account without the need for joint ownership. Some joint accounts may make sense, he says, but as a part of a comprehensive approach to estate planning, they should be carefully reviewed – and closed if necessary.
A third problem to be aware of, say estate planners, is the handling of what Odom calls “digital property” – that is, passwords and other information about an individual’s online activities, ranging from online brokerage and banking sites to social media, such as Facebook.
All of your key online password information should be kept secure but available, and as a part of your estate planning you should ensure the passwords are accessible by someone with legal access to the account upon your death – the executor of your will, for example. Lack of access to digital information can create significant hurdles for families trying to close out the legal and financial affairs of a deceased loved one. Odom advises his clients to consider some of the new services that are now becoming available, which organize and store such online data in a secure environment.
A related step is ensuring that your family has a well-defined process to access other vital information – from accountant’s records to legal or medical information. This step may be as simple as introducing your family to your attorney and CPA, but may require filling out proper statutory forms to allow access to all your medical records.
Also of importance in your estate-planning conversations is reviewing the enforceability of all life insurance policies. Be sure to read the fine print and understand exactly what your policies cover. Moreover, Odom suggests, review payment history with the insurer to verify that all premiums have been paid and will continue to be paid on time. “Families sometimes find out the hard way that insurers will use recent non-payment of premiums for longstanding policies as grounds to avoid payment,” he says.
How do individuals successfully plan their estates?
In his more than three decades as an estate planner, Odom says several characteristics come up over and over in families in which an ill individual – such as a kidney cancer patient – has begun the process of getting his or her affairs in order:
- The individual begins the process early, while he or she is clearly competent and has not been cognitively impacted by treatments or disease progression.
- The individual considers estate planning as an opportunity to help others and advance the goals and purposes of his or her life, thereby turning a potentially negative experience into one that has positive meaning.
- The individual speaks openly and candidly about family topics that may be sensitive and may have been avoided for years. “The approach of death is a time to forgive and heal family wounds,” Odom says, “and taking these relational steps helps the administrative process of settling an estate work much smoother for everyone involved.” When there is family conflict over allocations of property or money, the root cause can sometimes be an underlying emotional disconnection.
- The beneficiaries and heirs in a well-planned wealth transfer don’t have a sense of entitlement, but what Odom calls a “sense of endearment.” They set personal expectations aside and work together to bring joy and honor to the memory of the deceased loved one.
Proper estate planning should be a part of every adult’s life, but it is of particular importance for newly diagnosed kidney cancer patients. It can actually help ensure positive end-of-life outcomes on many levels. Most importantly, at a time of unprecedented sadness and confusion, successful estate planning can provide the peace of mind that you have put your financial affairs in order.
Raymond C. Odom CFP ®is Senior Vice President and Director of Wealth Transfer Services at The Northern Trust Company in Chicago, Illinois.