A number of surveys over the last few years report that between 55% and 70% of adults in the United States don’t have an estate plan or have a plan that is outdated. The reasons given for their failure to plan and/or update their estate planning documents are myriad, and include, 1) I don’t have the time, 2) my estate isn’t large enough to worry about, 3) planning is too expensive, 4) I don’t like to think about my death and, my favorite, 5) there’s no estate tax so I don’t need an estate plan. Brilliant.
While it is true that some estates are larger than others, and require more sophisticated planning, everyone needs an estate plan. As the adage goes, failing to plan is planning to fail. To drive the point home, here are some real examples of what you may be truly leaving to your heirs if you should pass without a well thought out estate plan.
Death causes sibling in-fighting:
“One client was a business owner with a $3 million estate. He passed away at age 62 with no will, no spouse and no kids. Nine siblings were left to fight over his assets. The family of siblings was probably dysfunctional before, but this brought out the worst in all of them. The whole process was ugly and it took 18 months to close the estate.” –David Jackson, CFP, Kansas City, MO
Children get nothing, new wife gets everything:
“I had a friend whose father had remarried years after his first wife had passed away. The father had just retired when he suddenly required hospitalization. A week later, he died. He had no will, and at that time in Massachusetts, the default was that the current spouse got everything. The children were left with nothing—the new widow was nervous about having sufficient assets for the rest of her life, and so would not disclaim any of the inheritance. As a result, the widow and the children didn’t speak to each other for years.” –George Gagliardi, CFP, Lexington, MA
Life partner left without legal standing:
“My maiden aunt lived, worked and died about 25 years ago in another state without leaving a will. I know her intentions were to leave her assets, including their home, to her life partner, but she never did the paperwork. It took three years to settle everything because her siblings and parents had passed and the nieces and nephews were scattered all over the country. Imagine the heartbreak for her partner of having to sell the home and move since she could not afford to buy the house from the estate. All the funds were eventually disbursed to 11 others after time spent gathering death certificates and piling up legal fees.” –June Ann Schroeder, CFP, Elm Grove, WI
Life insurance ends up in the wrong hands:
“I had a client who was a married couple with two young children. The husband was my primary contact and, eventually, he became completely unreachable. After several months, I lost total contact. Eventually I found out the husband ended up addicted to gambling and alcohol. They divorced and he committed suicide. His life insurance named ‘spouse’ as beneficiary, but she was no longer his wife. It ended up going to ‘next of kin,’ which was their children. Sounds great, but since they were minors and there was no will that established a trust, the state stepped in to manage the money. The mother had to go back to work and hire a nanny for the children. She asked the state if she could take the money that she was paying the nanny so she could stay at home with the kids. The answer was no.” –Clark Randall, CFP, Dallas
Heirs are left trying to find everything:
“As wise as my own father was, he never got around to creating a will, or documenting his assets and their locations. He died one day before 9/11 and all these years later, I am still trying to finish up his estate. It was a monumental detective work just to try to figure out exactly what he had and where. To make matters worse, the assets were in multiple countries, and continents.” –Kashif Ahmed, CFP, Woburn, MA
Partner owes enormous taxes on property:
“I had a new client come to me to file a tax return including the sale of the home she had occupied for 30 years with her late common-law husband. Not having a lot of assets, he never felt the need to draft a will; and in order to take care of his common-law wife, on his deathbed, he sold her the house for $1. Unfortunately, this state does not recognize common-law marriage, so she did not receive a step up in basis and was liable for capital gains tax on the entire sale, less the commission and $1 basis.” –Nathan Zielonka, CFP, Newton, MA
Process is time consuming and expensive:
“I had a client who had been married to his wife over 35 years. His wife passed away in California without a will or trust, which meant court filings and probate, just to get him named as the rightful sole beneficiary of her assets. It took us quite a bit of legwork to get his wife’s assets transferred into his name, even once the court approved it. In the meantime, she had assets that we could not touch or manage. Her own death was an untimely accident, and she probably expected to live much longer than she did, but given the assets she and her husband had, not having an estate plan caused unnecessary expense and lost time.” –Juan Ros, CFP, Thousand Oaks, CA
Many, if not all of these situations, could have been avoided with some basic estate planning. So, before you put off your personal estate planning any longer, ask yourself, “If I die today, have I left my family in a financially sound, predictable situation?” If the answer is “yes,” then I applaud you. If, the answer is “no,” then don’t delay any longer. Take the time to seek professional estate planning advice and get your affairs in order. Your family will thank you for it.