Dec 7, 2018 4 min read

The Aug. 16 death of Aretha Franklin points out some estate planning issues. You would expect someone of Aretha’s wealth and connections to have a complete estate plan. The truth was, she did not even have a will.

When you die without a will, it is known as “dying intestate.” State law then will dictate who receives all of your assets. Many of your possessions will pass through probate. If you own property in multiple states, the process could become more complicated. You can help to simplify the process by having an updated will.

It has been estimated that 60 percent of U.S. adults do not have a will. Not all of your possessions pass through a will, however. Things such as 401(k)s, life insurance and annuities go to the people who are listed as beneficiaries.

Even if a will says all of your possessions will be split equally between your two children, this may not be what actually happens. If your life insurance lists only “Jr.” as the beneficiary, he will get 100 percent of the death benefit and your daughter will get only half of the assets that do not have a beneficiary designation.

This means it is important to review beneficiary designations regularly to make sure they are up to date, and include say a divorce, births of children or grandchildren, or a death of someone in the interim.

While you are alive, this can be done quickly and easily. When you are deceased, it is irrevocable.

You also should have two powers of attorney. One is to make health decisions, the other is to make financial decisions if you do not have the capacity to do so. Capacity means you are of sound mind, not dealing with a disease such as Alzheimer’s or in a state such as a coma.

The person you give the POA to can make decisions only when you do not have capacity and he or she can only exercise it for your own benefit. POAs end at death.

Normally, a hospital will cooperate with spouse instruction during an emergency, but it can get very confusing when children are making the decisions, especially when there is disagreement on how to proceed. The POA shows who you want to make these decisions when you cannot.

Having a POA for financial decisions can give your spouse access to things you own separately, such as an IRA or 401(k). He or she may be the beneficiary, but if you are in a coma and that person needs to receive these funds to live on, he or she may be forced to go to court if you do not have this POA.

Today, almost half of all families have blended elements. Many people were married before and may have had children.

Here is a celebrity legacy story: There was a famous father who made his third wife executor of his estate, which gave her control of his business. The equally famous son was the principal player in the father’s business.

The son did not understand the implications of his father’s estate plan. As a result, he did not own the rights to his own name or signature. When the father passed away, it sparked a long and expensive feud between the son and the third wife.

Who was this son? Dale Earnhardt Jr. Make sure your estate plans are better prepared.

Gary Boatman is a Monessen-based certified financial planner and author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.