This is the second in an ongoing series of articles discussing the true costs and consequences of failed estate planning. The series highlights a few of the most common—and costly—planning mistakes I encounter with clients.
Whenever the topic of estate planning comes up, people invariably mention creating a will. And with good reason, since having a will is a foundational aspect of your estate plan. However, a will is only one part of effective planning.
Here’s why having just a will is not enough:
A will helps ensure your assets are properly distributed when you die. But it offers no protection if you become incapacitated and are unable to make decisions about your own medical, financial, and legal needs.
Should you become incapacitated with only a will in place, your family may have to petition the court to appoint a guardian or conservator to manage your affairs, which can be extremely costly, time consuming, and traumatic. The first article in this series offers an in-depth look at some of the consequences of failing to plan for incapacity.
While you may believe that having a will allows your loved ones to inherit your assets without court intervention, this is not true. For your assets to be legally transferred to your beneficiaries, your will must first pass through the court process called probate.
The probate process can be quite inconvenient, even distressing, for your loved ones. Moreover, probate is public, making it easy for outsiders to find out who’s inheriting from you, in what amounts, and the overall value and contents of your estate. This may not be what you or your loved ones want to have happen after you die.
You may be thinking you can just pass on your assets using beneficiary designations to avoid all of this, but that may bring on a whole new set of issues. In fact, I plan to write a separate article on that topic in a future installment of this series.
Passing on your assets using a will leaves those assets vulnerable to several potential threats. If your will distributes your assets to your beneficiaries outright, those assets are not only subject to claims made by a beneficiary’s creditors, they are also vulnerable to lawsuits and divorce settlements the beneficiary may be involved in.
And if assets left via a will pass to beneficiaries without any conditions, those assets are susceptible to the beneficiary’s own poor judgment. For instance, a sudden windfall of cash could cause serious problems for someone with poor money-management abilities and/or addiction issues.
This article is a service of Beverly R. Davidek. I don’t just draft documents; I ensure that families and business owners make informed and empowered decisions about life and death, for themselves and the people they love.