2011 Lessons

Summary: 2011 was a banner year for …well, read on… What lessons can we dredge from this  stellar year?



Basketball Lock Out:2011 brought the 4th lockout in the National Basketball Association (NBA) history. The work stoppage ran from July 1, 2011, through December 15. For young players who haven’t accumulated much wealth, or older ones who’ve been imprudent (Scottie Pippen had lifetime earnings of $120 million and ended up broke, and sadly that’s common), that’s a long dry period. If NBA players need a budget and financial plan, don’t you? Many people who view themselves as “wealthy” think they’re immune from budget drudgery, but in reality have burn rates that will wipe them out financially while they may live much longer.  Finding wealthy retirees spending almost 10% of their capital is not rare.  Budgeting mistakes are common. Many people don’t factor in periodic costs.  If you own a home, every say 10 years they’ll need new appliances, perhaps an updated kitchen, etc. Too often people budget the costs of maintaining a car but not the cost say every so many years for a new car.  Don’t use rules of thumb when budgeting, unless its your thumb. Common assumptions can be a great simplifier, but if they don’t reflect your lifestyle they can be more misleading that even a bad estimate of your real expenses. Do the homework and figure out what is real for you. When many people analyze their finances they err on the side of dying too young, say life expectancy (1/2 the people living longer). When pushed to do estate planning the same people might defer planning as if they’ll live forever. The disjointed assumptions can be quite damaging. Do few people address plan “B” and plan “C.” If your main plan don’t work, what is your fallback position? What is your fall-fallback position?



Stuntmen Really Do Get Hurt:While filming a scene with an explosion on a rubber boat for the movie “The Expendables” one stuntman was killed, and another was left in critical condition. These are pros folks and with all the precautions they take, accidents happen.  The odds of disability are really high. An illness or accident will keep 1 in 5 workers out of work for at least a year before the age of 65. 1 in 7 workers can expect to be disabled for five years or more before retirement. Yet disability planning is often a 3rd stringer in most estate and financial plans. Evaluate disability income replacement insurance, overhead interruption insurance for your closely held business, disability provisions in employee and shareholder agreements, etc. Watch the lingo. Many clauses have short fuses before you’re tossed. Others ignore the entire concept of partial disability.



Demi and Ashton ooooh!Moore says she's ending her marriage "with great sadness and a heavy heart." A heavy wallet too at a purported $290M to haggle over. Prenuptial agreements, BDITs and other planning should be the rage in Hollywood and for you too! Parents leaving money should leave it in a lifetime trust designed to protect it from the kiddies divorce.


If you’re getting married, especially for the 2nd or later time (the divorce rate for second marriages is 67% for third marriages it’s 74%), backstop a prenup by transferring wealth to a domestic asset protection trust (DAPT) before the marriage, or a beneficiary defective irrevocable trust (BDIT) after.



Marathon Estate PlansMary Keitany of Kenya seemingly defied history and logic in the 2011 NYC Marathon, until she learned the age old adage about the tortoise and hare. Pace yourself. If you want to create and implement a complex financial and estate plan and attempt to do it all at one time, you’ll likely burn out like Mary. Tackle a couple of steps at a time. Persistence, not speed, will get you to the estate planning finish line.



9/9/9 Yes, sometimes you really do have to say no! Kid wants another loan? Nein, Nein, Nein.


Define Heirs How do you define who is an heir in your will? Is your definition as broad as Arnold Schwarzenegger’s? Most wills continue to use archaic definitions of heirs. Should children out of wedlock be treated as heirs? Up to what age should an adopted child be permitted to be an heir? What about a child born after your natural heir dies? How should reproductive contracts or frozen genetic material be addressed?

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