Sunday, May. 10, 2009

Planning for death makes living easier

No one likes to talk about dying — especially when you’re 26.

Unfortunately, Mary Beth Henry has experience with it.

The West Columbia apartment manager’s mother died of colon cancer when she was 16. And just three weeks ago, her father died from brain cancer.

When Henry sought help with ending her cycle of living paycheck-to-paycheck, her lack of estate planning weighed on her because she wants her children, ages 2 and 5, cared for.

“I didn’t know where to start,” she said. “It probably should have kept me awake at night now that I know what I needed to do.”

Her father, Jesse Eudy, died without a will, though he planned for much of his estate to go to Henry, a single mom who was his main caregiver.

“I have a lot of people in my ear telling me what to do,” she said while meeting with a financial planner and an estate lawyer last week.

Sorting out much of Eudy’s estate should pose few problems — despite no will, said Columbia attorney Erin Cook, who works with Neil Brown, the West Columbia financial planner helping Henry manage her money.

Henry shares the deed to her father’s West Columbia home with survivorship rights, making it easier to transfer ownership. The family has agreed to split his personal possessions, and Henry was the sole beneficiary of her father’s $100,000 life insurance policy.

Still, the lack of a will means some inheritance issues that Eudy decided before his death must be resolved in probate court.

Ownership of Eudy’s bright green 2001 VW Beetle, which he planned to give to Henry because she paid it off, will likely be split among all four of his children. Then Henry’s sisters and brother can give her their ownership stakes in the car as a tax-free gift, Cook told her.

The court also will have to distribute the $1,000 left in Eudy’s bank account among his children, which were his wishes.

And while Henry owns the house and makes the monthly payments, the $75,000 mortgage with 6 percent interest is in her father’s name.

Henry could try to refinance the mortgage to get it in her name, Cook suggested. But she said her poor credit history from credit-card charge-offs prevents that.

Henry said she would prefer not to have one of her siblings co-sign the loan. So it’s most likely she will follow her father’s wishes and use the life insurance proceeds to pay off the mortgage.

After paying for about $13,000 in funeral costs, she will have a little more than $10,000 left over — and a debt-free house in her name.

Brown, the financial planner, told Henry last week that was the safe bet in a volatile investment market.

“There’s no way to take (that money) and put it in anything that guarantees 6 percent return,” he said. “The way to guarantee that 6 percent is pay down the mortgage.”

MARY BETH GETS A WILL

A week before he died, Cook visited Henry’s father at his home to craft a will and powers of attorney for the former beverage salesman.

He didn’t get a chance to sign them before he died.

If Henry dies without a will, her estate would go to her young children, forcing her family to petition the court for control of the money and assets, said Cook, who owns Estate Planning of S.C.

So Henry faced all the “what if” questions about dying as she planned her estate with Cook.

Who would take care of the kids?

Who should control her inheritance?

Who should decide whether she receives medical care if she’s seriously ill?

The fathers of her children likely would take custody if she died, Henry said.

But Cook suggested Henry designate relatives in case they couldn’t. Henry chose her older sister followed by her younger sister.

Henry’s older sister also would get the proceeds from a $150,000 life insurance policy if Henry and her children died, and make decisions about Henry’s finances, medical care and children if she became severely ill.

“There’s always that one person they can lean on,” Cook said of her clients.

Cook suggested she set up a trust fund for the children from the life-insurance proceeds that her older sister would administer if Henry dies.

This would prevent the estate being run by probate court, which would be both costly and time consuming. Family members would need to get the court’s permission to spend any of the money and pay court fees for the privilege, Cook said.

Cook said Henry’s older sister could use money from the trust account to pay for the children’s health care and education costs. Any remaining money would be disbursed to her children at three intervals in their 20s and 30s.

This could help prevent the children from spending all their inheritance at once. “This allows them to blow the first (part) and then figure out how to handle the rest,” Cook said.

In case Henry could no longer care for herself, Cook set up durable power of attorney and health care power of attorney documents naming her older sister as caretaker of her affairs.

In those documents, Henry could issue instructions for the care she wants her sister to follow.

Though the health care power of attorney covers Henry’s wishes, Cook also drew up a living will that she said “takes the burden off on the decisions” for the family.

Still, doctors would likely consult with relatives before following the living will’s directions, which can be applied only in a narrow set of circumstances, Cook said.

Now that she’s settled what will happen in death, she wants to tackle how to handle day-to-day life.

“I feel like I’m gaining knowledge about getting certain things in order,” Henry said. “But I still need work on saving money.”

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