Everybody I talk to seems to have a Prince story…except me. I couldn’t identify “Purple Rain” even from a video of Prince performing his most recognized hit. Maybe his style or culture didn’t mesh with mine. My taste in music runs more toward John Denver, as I’ve written before. I suppose Prince and I just didn’t have much in common.
Sadly, there is something Prince had in common with over 60% of Americans and 55% of Americans with children—regardless of their age or musical preferences.
He left a legacy of music, but he died without a Will. It’s difficult to imagine that a man with such wealth and a deep commitment to supporting charities had done no planning to transfer his assets. Prince had no spouse and no children, so his fortune will likely be divided among his sister and half-siblings, and they’re already in disputes about how his non-monetary assets should be handled. It’s complicated, but perhaps less devastating than when someone like you or me dies without a Will.
Prince’s heirs will be dividing up a valuable guitar collection, a vault of unpublished music, and more. But for people who leave behind $300K, $500K, or $1M dollars, their heirs often need this money to live without a parent, caretaker, or financial provider. For families with children, the situation is even more challenging—especially if both parents die at the same time, leaving behind a legal mess in which the children can suffer the most. According to a 2015 survey from Caring.com, just over half of parents have a Will. Among those who do, 60 percent haven’t updated it within the last five years. Another survey revealed that more than a third of parents with kids younger than 18 don’t have life insurance, and even if they do, more than half have less than $100,000 in coverage—which isn’t enough to cover future expenses like paying off the mortgage or funding the kids’ college education.
Why do so few people take care of this very basic and important task?
Most people without a Will say they just haven’t gotten around to making one. Or maybe we’re simply too uncomfortable confronting our own mortality. But are these valid reasons…or just excuses?
Years ago I received a call from an estate attorney whose client was the mother of a 6-year old boy named Brad. Brad’s parents divorced before his father died, leaving Brad a life insurance policy of $500,000. The problem was that there was no Will creating a Trust for Brad, so the proceeds couldn’t be paid out without the supervision of the probate court. Every time Brad’s mother needed money for summer camp or music lessons, her attorney had to petition the court and pay $500 in fees to get a $1,000 distribution. It was a mess. The estate attorney asked if I would serve as a co-trustee with Brad’s mother so the court could be petitioned to release Brad’s inheritance from the Probate Court’s costly supervision. It worked, but it cost the Trust $50,000 in court and legal fees over a 5-year period before it was clear sailing. If Brad’s father had made a Will in the first place, Brad would have had about $50K more in his Trust to pay for everything from music lessons to college. What a waste.
Death comes to all of us at one time or another, and an early, unexpected death can result in costly and complicated legal actions when a Will is outdated and circumstances have changed—or there has been no Estate Planning at all. Take a lesson from Prince and make this Estate Planning checklist part of your plan for the next month. Pay homage to yourself and your loved ones. Just do it:
- If you don’t have a Will, write one by Memorial Day. Protect your loved ones and write a Will. If your situation isn’t too complicated, you can even do your own with software like WillMaker. At least it’s a start.
- If you have a Will, review your documents every 3-5 years. If the legal language isn’t clear to you, get some help. Be sure your Will clearly states who your fiduciaries are and which of your beneficiaries will receive what. If you moved from the state in which your Will was executed, it must be updated.
- Pay attention to the Personal Property Memorandum. All Wills include a reference to this memorandum, but 90% of these are blank. Fill yours out. Make your wishes clear.
- Verify your beneficiaries on other legal documents. The beneficiaries included on your IRAs, life insurance policies, and 401(k) accounts supersede those listed in your Will, so be sure they are accurate and not contradictory to your wishes.
- Make sure your Power of Attorney (POA) and Health Care Directive are up to date. If your health care POA is over 7 years old, it probably needs to be updated. Even if you have a Will in place, writing down end-of-life decisions can make all the difference for family members and other loved ones—no matter what your age. Take time now to complete The Five Wishes, a simple, online advance health care directive. Learn more in my blog Love, Loss, and Five Wishes.
Once your Estate Planning documents are complete, please send copies to our office so we have them on file. We’re usually one of the earliest calls received after a death or major health event, so we may be of help to the beneficiaries outside of what we manage for our clients at Schwab.
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