Estate planning can spare unnecessary heartache, stress, and legal costs

Estate planning can spare unnecessary heartache, stress, and legal costs

Tony Hsieh, the 46 year old founder of the online shoe and clothing company Zappos, died suddenly from smoke inhalation after a fire in November 2020. Hsieh left no will or formal estate planning documents behind. This means that while his family was grieving his loss, they will sadly also be dealing with court hearings, paperwork, legal fees, and more headaches in order to administer his estate.

When someone doesn't have a will or estate plan, the estate goes through a process called “probate.” The courts then become responsible for distributing assets and settling debts. For large estates or complicated circumstances, this process can take years and cost hundreds of thousands of dollars in legal fees. But celebrities and wealthy individuals aren’t the only ones who can pass on a legal and financial nightmare to their heirs.

No Plan is a Recipe For Disaster

Without a will or trust, an estate becomes subject to a process called “intestate succession.” Family members must attend court hearings, file paperwork, and present evidence which often causes tension and can prolong the grief of a loss. Aretha Franklin’s children are still dealing with the court system after more than two years after her death because documents she handwrote were found after an executor had been chosen by the court. Complicated cases with many heirs can take even longer to resolve. Bob Marley’s death led to 30 years of cases, claims, and lawsuits across Jamaica, the UK, and the US.

Additionally, each state has different intestate succession laws which divide assets after any outstanding debts according to a formula.

Non-married partners, parents, distant relatives, friends, and charities are typically excluded from intestate succession formulas. If you wish to include anyone besides immediate heirs in your estate, having a plan to avoid intestate succession is critical. Intestate succession laws also do not address questions of guardianship for minor children who do not have a custodial parent still alive, which gives the court and social service system the responsibility to decide a child’s future.

Being legally married or having no children does not mean that an estate will be simple to divide. Probate is generally required when no will or estate documents can be found. Chadwick Boseman’s wife recently filed a probate case because despite being legally married to the star of Black Panther, her husband left no will.

In addition to months of legal proceedings and adverse state-decided outcomes, probate can end up costing families a fortune in legal fees. Anyone who files a claim to an estate is responsible for their own legal fees unless the court deems their claim to be helpful to the estate itself. Prince’s siblings are still paying, some in excess of $900,000 at this point, over four years after his death as the courts continue to determine the musical icon’s intestate succession. Family members who might have been included in a will could end up paying thousands or hundreds of thousands when there is no plan in place.

Without the structure of a will or trust in place, intestate succession can become a stressful experience for family members during a time of grief and at worst, a financial and legal nightmare.

Avoid Probate: Make a Plan

There are several protections against probate and intestate succession that are simple to set up, low cost, and are easy to maintain. All adults regardless of age, marital status, or dependents should have some type of estate plan.

The simplest option for estate planning is to ensure that all major assets can be passed to a designated heir with a Transfer on Death process. Bank and investment accounts, vehicles, and houses can all be assigned to an heir. We talk more about these options in our article Simple Steps to Avoid Probate. Transfer on Death deeds and notices are inexpensive and simple to set up, but they are not a substitute for a solid estate plan using wills and trusts.

A will allows you to outline specific guidelines for how your assets will be divided and who will be in charge of the process. With major decisions spelled out by you, the court is only involved to ensure the accuracy of the will and to see that it is carried out properly. Having an up-to-date will is a great step to a solid estate plan. But because the court is involved, all financial information about your estate becomes public when using just a will (with no trust).

A trust can add even more protection, control, and privacy beyond a will. A trust typically allows you to bypass the probate process which will avoid opening your finances to the public record. Circumventing probate means that a trust can often distribute assets faster and at a lower cost than a will alone. Trusts can also lower the estate taxes that are owed by limiting what assets are included in the taxable portion of an estate.

Because trusts are specifically tailored to your wishes and managed by a third-party, you have full control over how the plan is set up and executed, both during life and after death. Many concerns about underage or irresponsible beneficiaries, family disagreements, and complex estate distribution wishes can be handled by a thorough trust.

Great estate plans often combine wills and trusts to clarify all potential questions of estate succession. Trusts are more expensive than wills because they require additional upfront costs to set up and active management. But the cost of leaving the decisions up to the court can easily climb to over ten times the cost of a trust, making trusts a worthwhile investment for most people.

A key component of any estate plan is regularly updating the documents. This should happen at major milestones like marriage, the birth and coming-of-age of children and grandchildren, and changes in property ownership to name a few. It’s critical to make changes when you change your plans for how your estate should be divided or if witnesses to your will become unavailable.

How a great legal partner can help

You can set up Transfers of Death documents and even a simple will on your own without assistance from an attorney. But the knowledge of an experienced estate planning team can ensure that your desires are carried out, that your plan is thorough, the tax burden on the estate is minimized, and that your estate documents will remain valid when you are no longer around to defend your wishes.

We can help you:

  • Understand the laws and implications of different estate planning options so you can make the best choice for you and your family
  • Ensure your wishes are carried out by your family or designated individual and not by the courts
  • Outline personal representation of your estate that is both effective and will be properly executed
  • Provide creditor protection for your estate and beneficiaries
  • Ensure each part of your plan will work together to cover you fully
  • Verify your documents against failure - avoid issues like contested wills, invalidated wills (like from witnesses becoming unavailable), and missing items from a will or trust
  • Secure your plan safely and with proper access so your wishes are not lost or forgotten

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