As part of JLP’s October Project, I am reviewing chapter 22, Passing it on When You Pass On, of The Bogleheads’ Guide to Investing. The great thing about this book is the writing style is like having a conversation with someone who knows the subject and can put it into a format that is easily digested. I would recommend this book to those people who do not take a keen interest in finance, but would like to know more since it is serves as a nice introduction to a variety of topics.
In this 8-page chapter they lay out the basics so you have enough information to seek the next level of learning. Each chapter begins with a quote:
Rich people plan for three generations. Poor people plan for Saturday night. – Gloria Steinem
This chapter does not provide legal advice (that’s what estate planning attorneys are for), but points out considerations when estate planning. In order to make sure that our assets go to those we choose and done so in a timely manner, we need to have the following documents in place:
- A will – it goes through probate, which can prolong the distribution of your assets
- Living Trust – does not go through probate, financial affairs are kept private, does not exempt you from paying taxes
- Power of Attorney – 2 types: for finances and for healthcare
- Advance Healthcare Directive – directs your wishes for specific medical personnel regarding certain medical treatments and life-prolonging efforts when you’re unable to communicate your wishes to them. Also known as a living will (not to be confused with a living trust). The authors remind us of Terry Schiavo.
Table 22.1 lists the estate tax schedule and points out that because of the estate tax laws, if a person dies in 2010 there is no estate tax, but it would be 45% for 2009 or 55% for 2011. This was an odd part for me until I flipped the page and realized what they are saying is if you’re a high net worth individual who could be on life support around 2010, that’s the year you want to pass.
The second-half of this chapter outlines other tax considerations, gifting to reduce the size of your estate and a letter of instruction, which outlines your wishes for organ donation, funeral arranagements or cremation.
The chapter ends with a reminder that the authors are not dispensing legal advice but have provided topics for further explanation from an attorney.
With the gift giving season approaching, keep this book in mind for the usual suspects who like personal finance books, but also college students, new graduates and for those gift exchanges where you have to get something applicable for men and women aged 22 to 65 that is not wine or liquor.