Consider in the last month how much time you’ve spent on social media, dreaming of your next vacation, or watching television. We all waste time, and I’m as guilty as anyone. However, there are some things we have to make time for – eating, exercising, family, going to the doctor, working, and so forth. Life is a balancing act, and with as busy as our lives are, the last thing we want to think about is planning for life after our death. However, if family is a priority, as I suspect it is for most people, it is important to devote a little time to preparing our estate plan. And by little, I mean just a few hours in most cases. In the last year alone I’ve encountered numerous “horror stories” where an individual died without proper planning, leaving an absolute mess for his/her loved ones. Following are a few examples:
SCENARIO 1: A previously divorced woman is single, but has been in a long-term relationship with a man, who was living with the woman at the time of her death. The woman leaves behind four children from her prior marriage. The woman dies without a Last Will and Testament. The surviving boyfriend claims he was married by common law to the woman and should be entitled to the house and part of her financial accounts. By law, a person who dies without a Will is deemed to have died “intestate,” and the property then passes according to whatever state law says. In this instance, as long as the woman was not married by common law, her property passes to her surviving children. However, if the Court finds the woman was married by common law to the man she was residing with, under Iowa law, the man may get one-half of the property and the children will share the remaining one-half. In addition to not having a Will, the woman failed to update the beneficiary on her life insurance policy, leaving her ex-husband as the beneficiary. A lawsuit in the case has been pending for close to a year. All the while, the surviving children and live-in boyfriend (or common law husband) are not only struggling with the death of their loved one, but waiting in limbo regarding how the assets from the estate will be distributed, all of which is costing unnecessary fees and costs. If only the woman had changed the beneficiary on her life insurance policy and signed a simple Will before her death, the assets would have been distributed by now and her loved ones would not have been put in this unfortunate situation.
SCENARIO 2: Wife dies with a Will, in which she gives her Iowa residence to her husband, and her real estate in Colorado and Florida to her two children from a prior marriage. While wife was prudent to have signed a Will, she neglected to put the Colorado and Florida properties into a living Trust. As such, a probate proceeding must be opened in all three states – Iowa, Colorado, and Florida. Probate is a process generally supervised by the Court, which requires at least four to six months to complete, along with a lot of paperwork. Had the woman set up a simple revocable living trust and funded it with her real estate, her loved ones would have saved significant time, stress, and expense, as they are now forced to hire three attorneys to handle the probate in each state where the woman owned real property.
SCENARIO 3: Surviving widow sets up a Last Will and Testament and names her only son as her sole beneficiary. With the hopes of avoiding probate and making things simple for her son, the woman names her son as the beneficiary of all life insurance and retirement accounts. The woman does not have real estate so a revocable trust is not necessary to avoid probate. However, the woman fails to name her son as a beneficiary of her bank accounts, which exceed $25,000 at the time of her death, thereby forcing the son to open and go through a probate (in Iowa) just so he can receive the funds in his mother’s bank account.
The moral of these real life examples is this: a few hours of simple planning can save your loved ones a great deal of stress, conflict, time, and money. As a general rule, review your plan every five years, or sooner if you encounter a life-changing event such as a divorce, death, marriage, or birth of a child. As much as we don’t like to think about our own death, most of us have thought about what kind of legacy we can or will leave. Don’t be the person whose loved ones say, “I wish Mom/Dad would have taken time to do some planning rather than leaving this mess for us. I’m not going to do this to my loved ones.” Be the person whose loved ones say, “I’m so glad Mom/Dad got their financial and estate affairs in order. I’m going to do the same thing for the ones I love.”
Facebook can wait. “The duty of planning the morrow’s work is today’s duty.” -C.S. Lewis, The Screwtape Letters.
The information contained herein is for informational purposes only, and is not legal advice or a substitute for legal counsel. You should not act or rely on any information herein.