How Estate Planning Failed the Baby Boomer Generation, 01-01-2009
We’ve all seen the statistics and had Paul Revere-like advanced notice of the aging of the baby boomer generation. As this generation has gotten older, governmental agencies have fretted and planned for how to handle the wave after wave of older workers and retirees. Businesses have changed their plans to take advantage of the opportunities created by an aging population. But estate planning attorneys continue to use the same planning techniques that have been used for generations. Some things stay constant among generations, like death and taxes. But the needs of the boomer generation are unique in many ways.
In this article, we’ll look at how the baby boomer generation differs from prior generations and how the resulting issues might best be addressed. And while addressing the needs of boomer clients is of particular importance to estate planning professionals, it should be at least as important to members of the Arizona bar who do not practice in the area of estate planning but who themselves are baby boomers.
Needs of Baby Boomers
Because of increased life expectancy, boomers are more likely to experience a period of incapacity than their ancestors. Extended life expectancies, coupled with rising long-term care costs, combine to place extreme financial burdens on boomers and their families. Due to the enactment of the Employees Retirement Security Act (ERISA) in 1974 which permitted the self-direction of retirement plans in 401(k)s, IRAs and other qualified retirement plans, boomers are the first generation to have accumulated a significant part of their personal wealth in these types of retirement plans, an aspect of traditional estate planning largely ignored. Also, because of societal changes, boomers are more likely to be in blended or non-traditional families than their parents. The traditional focus of estate planning is ill equipped to deal with the complexities caused by non-traditional family relationships. These same societal changes, and our increasingly litigious society, make planning for the intended beneficiaries of boomers more difficult.
While death is a certainty, the possibility of becoming incapacitated is not quite so sure. Although traditional planning focuses on what happens to a person’s affairs after his or her death, estate planners recognize the need to plan for a person’s potential incapacity. This planning has traditionally taken two approaches. First, planners have relied on the guardianship and conservatorship process of the probate court to address the needs of an incapacitated individual. In a guardianship proceeding, another person can be appointed by the probate court to oversee the personal affairs of another, similar to the relationship that a parent would have to a minor child. If the incapacitated individual has assets that need to be protected, a conservator could be appointed by the probate court to manage the incapacitated individual’s financial affairs. To plan for this potential court involvement, it is typical to include a provision in a person’s estate plan nominating the potential guardian and conservator prior to the actual need for appointment by the court.