A few weeks ago, Aretha Franklin died. Her passing made headlines, as the Queen of Soul had only recently been diagnosed with cancer.
Her death only became news because she left behind no will, despite having millions in assets and multiple children.
Last year, Prince died, also without a will. This begs the question, if major celebrities with lawyers, agents and financial planners are dying without wills, how can regular people be expected to make them?
Fortunately, wills aren’t as complicated as the average person might think. Read below for what financial advisors want you to know about wills.
Estate planning isn’t Only for the Rich
Financial planner Cary Carbonaro of United Capital said that many of her clients think that estate planning is only for the rich. She said it’s necessary for anyone who leaves anything behind.
“An estate is just what you leave,” she said. “You could be poor and have an estate because you still have stuff.”
Even if all you have is a house you co-own with your husband, a car and a life insurance policy from work, it still benefits your family to write up a will.
Keep Track of Your Beneficiaries
Carbonara said a big mistake she sees with many of her friends is that they don’t check their beneficiaries when making their will. A beneficiary is someone whom you designate to receive money in a specific account like an IRA or a 401k after you die. Usually when you open a retirement account, they’ll ask you to pick a beneficiary.
If you write your husband down as your beneficiary in your life insurance policy, he will get the money even if your will says all the funds should be given to your children.
Carbonara said this is an especially common mistake for divorced couples. Many of them forget to change their beneficiaries after they divorce and remarry so an ex-spouse ends up inheriting something they weren’t supposed to.
When you’re creating your will, double check all your bank, retirement and life insurance accounts to make sure your beneficiaries are either left blank or set up the same way as your will.
You Can Pick Multiple People for Different Roles
One of the biggest pieces of estate planning for parents is picking a person to take care of their children if both parents pass away.
Marguerita Cheng, CFP® and CEO of Blue Ocean Global Wealth said one common misconception she finds is that parents think they need to designate one person or couple to raise the children and distribute the assets.
Cheng recommends people pick multiple people for those roles, since a person who’s good with your kids might be bad with money. Discuss this choice with the intended people before anything happens so they’re comfortable with the scenario.
It Might Cost Less Than You Think
You don’t have to go to a lawyer to get all the necessary legal documents, which include wills, living wills and medical directives. Sites like LegalZoom provide those documents for just a few hundred dollars, including a review by a professional attorney. A lawyer might charge $1,500 for a full estate planning package.
If you do have a complicated situation and feel like you need a lawyer, try one of these services first and then have a professional lawyer look at your documents. That will be cheaper than having them draft the documents from scratch.
Estate Planning is for Your Loved ones
Some people think planning their estate is depressing and morbid, but doing so can ease the burden on your loved ones after you die.
If you die without a will, your heirs will be left trying to piece together where your life insurance policy is and how to access your IRA. if you create a will, the whole process will go smoother for them. It’s hard enough to grieve someone’s loss, but it’s even harder to do so while going through mountains of paperwork.
Wills Can Be Contested
Even if you have a will set up correctly, it doesn’t mean it can’t be contested by an angry relative after your death.
This often happens when someone is surprised at the amount they’ve received and feel like they deserve more. For example, if you leave your assets behind to your two children and allocate a larger sum to your daughter, your son may contest test the will to get his fair share.
One way to avoid the scenario is to make your wishes known ahead of time. If your son knows that your daughter is getting more because she’s a single mom with two kids, he might be less likely to contest it after you pass.
Thank you for reading all the way!
Come visit us at guidevine.com