Newsletter Articles

The Best Way To Blow Up A Family? Die Without A Will

By: Neale Godfrey ,

Elder Law Associates Newsletter dated November 14, 2017

April 21, 2017 marked the one-year anniversary of the death of a music icon. Prince died tragically and unexpectedly; there are still lingering questions surrounding his estate. By now, we all know that he left behind no plan for his death and no will has been uncovered.

If you haven’t planned for your own death, the gift you are leaving your loved ones will be a big mess.  Maybe you’ve uttered the phrase, “I’m way too young to think about death” or “I’ll worry about that some other time” or even “I don’t have enough money to worry about a will; that is for rich people.”

No one wants to deal with death.  It’s death; your ultimate demise.  Yet, we must plan for what we know will happen.  And, like it or not, death (and taxes) is in that category.

How Do You Want Your Loved Ones To Remember You?
I’m guessing that the answer may not be; “Having your kids trying to figure out what you wanted?” Or, worse yet, “Being the cause of a great family divide.”  Well, you may be setting your family up for a messy situation.

As your estate reaches the $5 million mark, you will need to get more sophisticated advice.  As I write this article, the stage is also set for changes to estate and tax laws under the Trump administration. The President has discussed repealing the estate tax in some form. I’m not going to focus on the tax issues here of trusts and other nuances of estate planning, I’m going to cover the basics.

Grow Up And Deal With Death
BMO Wealth Management, a division of BMO Harris Bank, released a BMO Wealth Institute report, “The family conversation you should not avoid: How to discuss your legacy,” that was based on a survey they conducted.  It really hit home with me.

“Benjamin Franklin said ‘By failing to prepare, you are preparing to fail.’  This statement continues to hold true as many families have direct experience with the reluctance of a parent to effectively plan, prepare and communicate their estate plans.  So often this unwillingness to plan is increased by a lack of information about the parent’s wishes, especially when it leads to ongoing hostility over items that represent memories beyond their monetary value.”

The BMO report found that, “… almost half (44%) of people surveyed recognized that one of the most important reasons for having a will is to prevent family disputes.”

Do Millennials Really Have To Worry About Dying Without A Will?
Dying without a will is called, Dying Intestate.  What does really mean? It means that each state has its own laws governing this and they will decide how your property is distributed.  Also, if you own real estate in a different state, the intestate laws where the property is located will govern.

I was intrigued with this situation and reached out to Rick Kollauf, VP & Director of Wealth Services at BMO Wealth Management.  He gave me a scenario for a Millennial and how the lack of planning could impact the family.  Rick explained this hypothetical story;

“John is a Millennial, age 23 who had a car accident. He was in a coma for one month, on life support.  He then died. John had one child, John Jr., with Jane.  John and Jane were not married.  The consequences of John’s accident are tragic on many financial levels:

  • Without a will, state laws of intestacy will dictate to whom and how John’s assets will pass. Jane, his significant other is not an heir under laws of intestacy.  Also, without a will, John and Jane have not appointed a guardian for John, Jr., their son.  While Jane, as the other parent will likely become the guardian, grandparent custody/visitation rights are not clear.  Also, if Jane had been in the car with John and died also, and no guardian had been named in a will, the court would be forced to make a decision on the appropriate guardian.
     
  • Without a living revocable trust, John’s assets, including his bank and investment accounts that were not joint, would most likely have to be probated – a public court process that usually involves attorney and accountant fees, court fees – not to mention a delay in distributing assets to Jane for their child in the near term following his death.
     
  • Without a durable power of attorney – for the time John survived until his death—he had no valid agent to handle his financial affairs. If he were incapacitated for an extended period of time before dying, this could have been a serious issue.
     
  • Without an advance medical directive – also for the time John survived – it is unlikely Jane would be involved in any health care decision making.” 

Where Do You Start If You Have Children?
You can start by thinking about what you want your children’s lives to look like if you and your partner are not there.  Make a specific list and then put yearly costs by each item.  Some things to consider are guardianship, living space, schooling (private or public, college), extra-curricular activities (i.e., owning a horse), special needs, religion, pets, and more. Essentially, you need to assess the costs of your current lifestyle and how you would like your children to live beyond your passing.

If you know that there will be an extra financial burden for the guardian, this is the time to buy an insurance policy with the guardian named as the beneficiary. Let your kids know about your plans.  They are aware of tragedies that can happen.  Don’t scare them; just let them know what will happen to them if something happens to you.

Make a will and designate a guardian for your children. If both parents die together without a will which names a guardian for your surviving child, those kids may be placed in foster care before the next of kin is located. Make sure that you discuss this with the designated guardian as soon as you have children. Get an attorney; do not try this at home.  You can look at document templates online, but this is too important to mess up.

These are the basics that anyone needs.  We never know what will happen and we don’t want to leave our loved ones holding the financial bag when they also must deal with an emotional tragedy. It may not seem like a fun conversation, but it can be the greatest gift you leave.

Article Source: Forbes