Since estate planning involves thinking about death, many people put it off or simply ignore it until it becomes too late. This kind of unwillingness to face reality can create major hardship, expense, and mess for the loved ones and assets you leave behind. Nevertheless, not having a will and not reviewing your plan regularly can cost your family more than taking care of it yourself.
Not Having a Will
People sometimes wonder, “Do I need a will?” Maybe you do not have many financial assets. Maybe you have one child who will inherit everything. Or, you have more than one child and are sure your children will peacefully divide everything evenly. Not having a will is almost always a mistake.
Who gets what: It is true that a will lets you designate who’ll receive your property upon your death. Without a will, your property will be distributed based on your state’s intestate laws which may or may not be in alignment with your wishes. For the person with one child or other beneficiary who is the same as under the intestate laws, this aspect may not seem compelling.
Minors: A will is also traditionally where you would name specific guardians for your minor children. If you do not have a will, though, a judge will choose a guardian for your children under 18. And then, when your children turn 18, they receive their share of your estate outright, with no guidance, direction, or intention. For the person without minor children, this aspect is not relevant.
Personal Representative: A will generally states who you chose to be your Executor or Personal Representative who will represent you in “executing” the directions in your will. It is good practice to name one or two alternates, if something happens to your first (and second) choice. More importantly, most wills provide that the Personal Representative does not need to post bond; that is, you waive the statutory requirement for posting bond.
Administrator Application: However, if you do not have a will when you pass away, an eligible person will have to apply to the court to be the administrator of your estate. If there is more than one eligible person who applies to the court, the court will have a proceeding to determine who they will appoint. This could be very acrimonious and time consuming. In addition, without a will to waive the requirement, the administrator will have to post bond.
Your Assets – Administrator Posting Bond: The applicant will need to produce a list of your assets as well as post a bond based on the value of your estate. The bond premium rates vary based on the strength of the credit score of the applicant and the size of the estate. For a person with good to excellent credit, the bond premium rates are generally between 1% to 0.5% of the estate value (as the amount of the estate increases, the premium rate generally goes down). Therefore, for a $500,000 estate, that calculates to between $2500-$5,000. For a $1 million estate, $5,000-$10,000. This is money that is better spent on you creating a plan now, than leaving to your loved ones the responsibility for paying to post bond.
Administrator’s Credit and Finances: In addition, the person applying to be the administrator of your estate may have to submit their personal financial information in order to obtain the bond as well as pay for it out-of-pocket. They will be able to be reimbursed from the estate later. Initially though, they can’t do anything with the estate assets until the court appoints them and the court cannot appoint them until they post bond.
In sum, by having a will naming your Personal Representative and waiving bond, you save your loved ones time, money, and court inspection of their personal finances. The amount you save them can cover most estate plans with include a lot more than a will.
Not Reviewing your Plan
Estate plans are not a “one-and-done”
deal. As time passes, your life circumstances change, the laws change, and your
assets change. Given this, you must update your plan to reflect these
changes—that is, if you want it to work for your loved ones, keeping them out
of court and out of conflict.
We recommend reviewing your plan annually to make sure its terms are up to date. And be sure to immediately update your estate plan following major life events like divorce, births, deaths, and inheritances.
Moreover, an annual life review can be a beautiful ritual that puts you at ease knowing you’ve got everything handled and updated each year. Let us know if you are interested in this – we are creating a membership program in which an annual life review would be included.
Not having a will and not reviewing your documents regularly are two common mistakes. If you want to not only avoid mistakes, but also implement strategies to ensure your true Family Wealth and legacy will continue to grow long after you’re gone, we can help. You can begin by contacting us or by scheduling a Family Wealth Planning Session online