Despite having an estimated net worth of about $250 Million, it has been widely reported that Prince died without a will. In other words, Prince did not make it clear legally who should inherit his considerable wealth and valuable stuff when he died. As a result, who ultimately receives his money will be tied up in court for years and years.
Now, in his defense, he may have had the same fear my wife jokes about. Maybe he thought if he wrote a will it would pave the way to his death. “You can take me now, everything is taken care of.”
Estate planning, determining who should get your money and possessions and who should take care of your minor children, isn’t a pleasant topic. So, think about it as a kind and loving gesture to those potentially left behind when something happens to you. Because, even without Prince’s wealth, dying without a complete estate plan causes turmoil to your loved ones when they are already grieving over your loss. Don’t make it worse on them.
So, here is what you should consider before getting legal help with your estate plan:
Probate: I start with probate because this is what you want to avoid as much as possible because a long, drawn out probate process – the legal process of settling debts and transferring property to your heirs – costs money and takes time. The probate process can be made easier with some simple steps. Primarily, titling your property – your money and your stuff – so that it automatically transfers outside of your will is preferable to transferring property through a will, when possible. Your 1978 Camaro is probably best left to your brother through your will. Your retirement account, however, is best transferred to your spouse or children by naming them as beneficiaries.
Who takes care of your children?: For Lisa and me, this was probably the most emotional decision we made during our estate planning process. If something happens to both of us at the same time, my brother and sister-in-law would be the legal guardians of our son. Our daughter is older than 18 so, legally, she would be on her own. Choosing the right people involves asking several questions: are they capable, are they willing and, of course, are you confident they will raise your children the way you want them raised?
For those with children with special needs, this discussion is even more critical as they may require assistance and income for the rest of their lives.
Where do you want your money to go when you die?: This is definitely a conversation worth having before you run to the attorney’s office to start drafting documents. Should it all go to your children? If your children are grown, should some go to them and the remaining amount go to your favorite charity?
Designating Beneficiaries: Much of your financial assets can be transferred automatically, outside of probate and outside your will. Take some time to make sure you have designated beneficiaries on the following: workplace retirement accounts like your 401(k) or 403(b), IRA’s, life insurance, other investment accounts, pensions, etc. This will simplify the process for your loved ones greatly.
Your Will: As I noted earlier, not all property can be transferred via a beneficiary designation, some will transfer through your will. Non-financial assets such as your cars, art, collectibles, your baseball card collection, will transfer through your will. The more you can transfer in a way other than your will, the less hassle and expense there will be for your heirs.
Trusts: Lisa and I established trusts for both the kids if something happens to both of us at the same time. That way our son’s guardian has assets and instructions on how to take care of him financially. Our daughter would also have assets to take care of her and instructions appropriate for her circumstances. Trusts are also good tools for distributing your assets and avoiding, or shortening, the probate process. In simple terms, the assets you designate would move to the appropriate trusts upon your death. It isn’t uncommon to think of a trust as something only very wealthy people have, but it is a common and effective tool for transferring property in a simple and direct manner.
There are a myriad of types of trusts that will have to wait for a blog post in the future.
The estate planning process can be quite simple or quite complicated, depending on your personal circumstances and needs, but it is important. This post merely scratches the surface of the important topics you should consider as you begin to plan. For more help, a comprehensive financial planning firm – hey, I know one – often helps their clients prepare their thoughts for the attorney who will actually complete the legal documents necessary to carry out their wishes.