We’ve all read or heard the stories. Someone passes away without a will, and potential heirs sharpen their knives in a free-for-all that can take years to play out in court. The emotional toll is immeasurable, with relationships incurring irreparable harm that can last generations. Still, you may still wonder what the big deal is. Why is an estate plan so important?
Or, as highlighted recently in the Wall Street Journal, “The Brady Bunch Breaks Down: Estate Fights Tear Stepfamilies Apart—In Standard Estate Plans, a Surviving Spouse Often Has No Legal Obligation to Stepchildren,” failure to plan adequately can lead to devastating consequences for blended families.
“The default rules are out of touch with today’s family structures,” according to Danaya Wright, a University of Florida law professor. In T.V. land, Carol would not forsake Mike’s three boys if her beloved husband passed first. Even their housekeeper, Alice, who became part of the family, would have been cared for. But T.V. and real life don’t always line up. In today’s world, Greg, Peter, and Bobby could be left high and dry without a concrete, written plan. The implications are real and immediate. Without a will or trust, the state chooses how your estate is divided and who will care for your minor children.
According to a new survey from Senior Living Referral Service Caring.com, only one-third of Americans have a will or plan to distribute their assets after they die.But, you may ask, the wealthy make up a small percentage of those with significant assets, right? The wealthy hire the best and brightest to manage their affairs, right?
Well, not always. According to a recent Charles Schwab survey, one in five Americans with investible assets of $1 million or more doesn’t have a will.
Legendary talk show host Larry King purportedly wrote a short, handwritten note with typos to update his will, leaving all his funds to be divided evenly among his children.
That’s a recipe for a long and drawn-out court battle.
Whether young or old, the famous have passed on without written plans, including Aretha Franklin, Prince, Michael Jackson, Bob Marley, Jimi Hendrix, Sonny Bono, Kurt Cobain, and Amy Winehouse. Even Abraham Lincoln, a lawyer, didn’t have a will. Valued at $80 million, the fight over Hendrix’s estate lasted over 30 years. Without a clear plan, your heirs could quickly turn to lawyers and the court.
Dying intestate—without a will—will have consequences no matter where you live. How your affairs are settled depends on the state in which you reside.
But it is challenging if there are unmarried partners, stepchildren, and even a parent’s own child who may lose an inheritance.
Stop procrastinating
Estate planning requires us to do something today that hasn’t happened yet.
Without a plan, your family must guess your intentions against the backdrop of an already difficult situation. Even if potential heirs are on good terms, money has a way of creating divisions.
Key takeaways
- Common estate planning documents include powers of attorney, living wills, and trusts.
- No matter how small their estate, everyone can benefit from a will.
- Online estate planning services offer basic packages.
- Estate planning attorneys are invaluable when constructing estate plans in more complex familial situations.
- After significant life events, estate plans must be updated.
What is a will? A will is a legal document that states the format in which you wish to have your assets aftered by your executor after you die.
Your estate will go through probate, the legal process for reviewing the assets of a deceased person and determining who inherits what, whether you have a will or not.
It ensures the executor will honor your wishes if you have a will.
A will lists your assets, bank and brokerage accounts, property, and more. Without a detailed document, potential heirs may be forced to search for assets spread across states and even countries.
Do you have designated beneficiaries for various accounts, such as IRAs? The beneficiary designation trumps the will.
What is a living will? It is a written legal document stating your preferences for medical care if you are unable to make decisions.
What is a trust? A trust is a legal contract that allows the trustee (another individual or entity) to hold property for the grantor (you).
What is a living trust? You create a living trust to hold assets before and after your death.
What is a testamentary trust? It is a trust created by the will and only becomes effective after the grantor’s death.
Power of attorneys
A durable power of attorney enables your agent to act on your behalf if you become ill or cannot make decisions. For example, a durable financial power of attorney allows your agent to manage your financial affairs if you become incapacitated or cannot make decisions independently. A durable medical power of attorney allows you to appoint someone to decide life-prolonging care, treatment, services, and procedures.
Prepare your Heirs
You don’t have to divulge the details, but informing beneficiaries opens the financial lines of communication, reducing the odds of a contested will. In addition, it promotes family unity at a time that can be exceedingly difficult. Surprises may breed resentment, and resentment may lead to unwanted consequences.
We recognize that estate planning is a personal process. We aim to initiate a dialogue, assist you in developing a plan, or motivate you to revise an existing one if needed.
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Farther-FamilyVest is your Fiduciary Financial Advisor in Destin and 30A.