Jun 23, 2022 4 min read

Many people do not create an estate plan or do not consider all of the ramifications of their actions. This may be because they never get around to doing it or they don’t think their estate is big enough to need one.

The easiest place to start is getting a will drafted by an attorney. If you have not completed a will, the state will decide how to distribute your assets. This may very well be different than you would want. If you have an older will that has not been updated, it could produce undesirable results. Maybe someone is named as a beneficiary who has passed away, new family members have been born, or there has been a divorcee which might change your thinking.

Anything such as an insurance policy, annuity or 401(k) where there is a designated beneficiary trumps the will. That means if your will says everything is split 50/50 between your two children and the insurance policy says you daughter gets 100%, she gets all of the policy money.

You may also want a power of attorney to allow someone else to make financial and health decisions for you when you cannot. Powers of attorney end upon death. A living will might give guidance about your views on life sustaining medical procedures.

Assets that pass by beneficiary designations do not go through probate. Things distributed through a will do. Probate takes time to complete, incurs expenses that might be 5% to 7% and are public record. This means someone could go to the courthouse and look up information. One way to avoid probate may be to use a living will. There are various trusts that might be used for specific issues. For example, if you will be leaving a large amount of money to someone who has a spending or drug problem, you might use a spendthrift trust. This allows them to get some of the money is small quantities over a long period of time.

You might think that rich and famous people would have great estate plans because they have money to afford the best advice. Often this is not true. When Prince died on April 21, 2016, he left an estate estimated at $200 million dollars. He did not have a will. One year later, the estate had to pay $100 million in estate taxes. The remainder was payed to six siblings according to state law. This may not have been how Prince would have wanted his estate paid out.

When Jim Morrison of the Doors died in 1971 at the age of 27, he left everything to his girlfriend Pamela Courson. There was a stipulation that if she died within the first three months of his death, the estate would be split between Morrison’s brother and sister. Courson lived another three years, but never saw much money because the estate was tied up in probate court. When she died without a will, Morrison’s money went to two sets of parents, which is not where he wanted it to go.

There was a famous father who was very successful in his career. His equally famous son was also a key player in the business. The father left control of his business to his third wife. There was a lot of conflict between the son and the third wife. The son had limited use of his own name. The father’s estate was a mess. Can you guess who I am talking about? Dale Earnhardt, Jr.

Make sure that you have the necessary documents in place to make sure that your assets are distributed as you want.

Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.” If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.