Asset Rich, Cash Poor

Spike Lee, by Merton Simpson

A portrait of Spike Lee, by Merton Simpson

Have you thought about paying for things after your death? Many of us assume our estate will cover the cost of our burial, but if your assets are tied up in real estate, retirement savings, businesses, or personal property, it might not. If you’re asset rich and cash poor, you could find yourself in the same situation as Merton D. Simpson.

A Cautionary Tale

When Mr. Simpson, an artist and collector of African art, passed away in 2013, he left a respected legacy and a trove of African art estimated to be worth millions of dollars. However, due in large part to expensive health care needs, Mr. Simpson’s estate contained so little cash that his family didn’t have enough money to properly bury him. More than three weeks after his death, his body was still stuck in cold storage at a funeral home. Meanwhile, his son was reduced to pleading with friends for donations to a PayPal account to cover burial costs. Mr. Simpson was finally laid to rest with a proper burial thanks to a grant from the Artists Fellowship.

Not surprisingly, Mr. Simpson’s surviving family members had significant difficulty agreeing with each other on how to proceed. A crippling cash shortage never fails to exacerbate already difficult emotional situations.

Necessary, but not Sufficient

“While my father had considerable assets, they are illiquid, and the family needs immediate financial assistance for a proper funeral,” Mr. Simpson wrote. “He deserves no less.”

Estate planning is more than just deciding who should get your assets when you pass away. Perhaps the most interesting twist to this story is that Mr. Simpson did have a Will. He clearly had put more thought into this than most people do, and yet the plan he came up with contained a fundamental oversight.

What We Can Learn

There are at least three lessons to be drawn from this:

    1. An estate plan is not just about what happens when you die.
      As the article notes, the tensions among family and friends, and, probably not coincidentally, the cash shortage, began to surface while Mr. Simpson was still alive, but too sick to manage his own affairs. Incapacity planning is an essential component of a good estate plan.
    2. A Will alone is not enough.
      While many people might think that “estate planning” and “will drafting” are synonymous, drafting a will is not the only component of an estate plan. It might not even be the most important. Confirming that you are properly insured, and that the people charged with overseeing your estate have sufficient liquid assets available to them to carry out your wishes, should probably be your first priority. Many people can find themselves asset rich and cash poor, particularly if you are relying on a salary or monthly stipend to pay your regular expenses.
    3. Estate planning needs to be approached holistically.
      As we’ve noted previously, if you haven’t planned an estate before, you don’t know what you don’t know. And there is substantial risk that you’re going to overlook something fundamental if you try to do this yourself. A beautifully drafted will can all be for naught if you fail to leave cash behind, forget to retitle your assets consistent with your plans, sign the document without adequate witnesses, or overlook any of the other numerous hoops you may have to jump through to have your plans properly carried out.

If you do proper planning, you won’t leave your family and friends stuck in a predicament like this. Do you want to go through this process with a knowledgeable attorney who can help guide you through potential pitfalls? Contact us and see why so many of our clients rave about our firm.

Dan McKenzie
Dan McKenzie
dan@themckenziefirm.com

Dan specializes in estate planning, estate administration, and small business counsel. He opened the McKenzie Law Firm in 2013, after spending 10 years as a litigator, seeing what can happen when people fail to carefully identify and mitigate their risks. He is pleased to be raising four kids in the same state where he grew up.