Estate Planning Reality: Where There’s No Will, There are 500 Relatives
Estate planning isn’t usually a favorite topic to discuss. But it’s an important one. And a smart one to examine as we start a new year. Especially this year.
With a turbulent 2020 in the rearview mirror, many people’s New Year’s resolutions revolve around finally getting their estate planning in order, or at least updating their plans and making sure their beneficiaries are up-to-date. In our 50 years of experience at Linscomb & Williams helping clients with these often-uncomfortable situations, we see clients sense a feeling of relief when they go through this exercise and know that things are in good order and no longer a stressful point of unfinished business.
Last year reminded us all that life doesn’t always go as planned. When you’re not prepared for the unexpected, it can make navigating difficult times, such as the loss of a loved one, even more devastating, for ourselves and our loved ones. Estate planning remedies this.
There are some very well-documented cases of celebrities, usually extremely wealthy, who procrastinated on this very important part of their financial lives, and the results were tragic.
One of the most recent cases was that of the very famous singer known as Prince. Prince died in 2016 without even a basic will. He died almost five years ago now, and the fight over his estate is still far from over.
While most of us don’t have an estate like Prince’s, we can all learn something from this sad situation. As you consider your own estate plan, we want to offer some insight that can help you avoid some of what went wrong.
How to Start the Estate Planning Conversation
One of the best pieces of advice we can provide is to work with a manageable timeframe. It’s very easy to get stuck in trying to think about how things will unfold over a long period of time. If you start to think too long-term, especially when it comes to the future of your minor children or your grandchildren, estate planning can become overwhelming very quickly. The truth is, there are an infinite number of possible paths their lives can take, and therefore, just as many ways you can help them that are beneficial.
The good news is that unless you’re getting into the more complex aspects of estate planning, anything you put down today is really something that can be changed later down the road with relatively little effort.
If you’ve ever had a friend or a family member who unfortunately passed away without a will or you heard about the famous celebrity cases like Prince’s, you know that having something in place is far better than not having anything in place, even if your plan is not perfect. Again, you can always make adjustments or start over from scratch if you ever want to make changes. What you can’t do, is go back in time and do it sooner.
We advise clients not to look more than five years down the road. In our experience, five years tends to be a very workable timeframe. Beyond that, there are way too many what-ifs, and the process can really start to bog down. Don’t obsess over trying to figure out the rest of your natural lifetime and the lifetime of all your beneficiaries at one time.
In the case of Prince, this has actually been identified as one of the reasons he didn’t have a will in place – he “never had the time,” as it seemed too intimidating to invest the time to write a plan. The result of that is that now there’s a Minnesota probate judge who is trying to basically decide what to do with his assets. That can obviously cause a lot of stress, both financially and emotionally, on a family. What if your family depended on the money from your estate and it was tied up for five years?
Another unfortunate reality is that when you die without a will, you might find relatives coming out of the woodwork who claim to have a legal right to your belongings. In Prince’s case, there have been quite a few.
Simply getting the conversation started is key!
What to Consider First
Many clients we work with have a pretty good sense of what they want to accomplish with their estate plans, to whom they want to leave their assets, and how their assets should be divided. Where they often seem to get stuck is deciding who will be their key appointments (executors, trustees, guardians, and powers of attorney).
- Who do you want caring for you, if you become incapacitated?
- Who do you want taking care of your minor children, if you pass away unexpectedly?
- Who do you want taking care of your financial affairs?
These are big, important questions, and sometimes making a decision is a struggle because the ideal situation may not be there. This can really delay the process and cause you to drag your feet. But a decision is vital.
For married couples, a spouse is likely appointed, but what’s the backup plan?
What if you don’t have family or close relatives around?
Talking with a financial advisor and creating a master list for you to reference at any time can be a big help.
Making important appointments can be a roadblock in the process, and often times, family dynamics can as well.
What if you have multiple children or grandchildren, for example? Do you give equally to your children, or do you give different amounts based on their roles or income levels? This can be a very complicated issue to address.
What about your in-laws?
Second marriages and blended families add another layer to the difficulty. Do you treat your “bonus children” the same as your biological children?
The bigger your family, the more complicated the process can be.
Working with a financial advisor can help. Not only can an outside advisor take part in your complicated decision-making, but the advisor can also serve as a buffer when discussing your plans with your loved ones. Once your decisions have been made, it can help to discuss them beforehand instead of finding out about it after a death.
We have lived through many of these situations through the years with clients. Having discussions with an outside person like a financial advisor can help you discuss some of the issues you have and make the overall process easier.
Remember, not doing anything isn’t a plan. The more money you have, the more money you can lose.
Key Elements of a Sound Estate Plan
A well-prepared estate plan should include, at the minimum:
- A well-drafted will
- A Healthcare Power of Attorney
- A Financial Power of Attorney
- A living will directive
- HIPAA authorization (This element is often overlooked. Establishing authorization early on will make sure the people you put in place have access to your records, which can be difficult in times of need. Authorization is also important to establish for guardians you want to care for your children.)
Another element you may want to consider is a revocable trust. Discuss this option with your financial advisor.
Why a Financial Advisor is So Beneficial
When it comes to estate planning, you will need to work with an attorney to make sure everything is filed correctly. However, your financial advisor is another key person to involve, as he or she should be aware of your financial situation and long-term goals.
A fiduciary financial advisor can be a great resource. At Linscomb & Williams, we can make recommendations to help you create a sound plan.
Work with a financial advisor to create a master list of accounts and contacts that your family will need to have if you were to become injured, ill, or pass away unexpectedly – and make sure your family knows where this list is! Include all real estate, retirement accounts, and bank accounts – really any account your family may need to access, close, or handle for you.
As mentioned, a financial advisor can be a huge help in getting the conversation started. An outside, trusted individual can help keep the discussion on track.
If your New Year’s resolution is to get your estate plan in place, contact us! The team at Linscomb & Williams has more than 50 years of experience helping busy families plan for the future. Schedule a no-obligation conversation to see how we can help you, too.