Imagine leaving all your assets and money outright to a child or spouse only to have a creditor come in and take everything, leaving them with nothing. How about having a pregnant wife who gets in an accident but since you didn't clarify in a legal document who to save, the doctors save the fetus over your wife or vice versa? Couples are divorcing daily, and although no one wants to believe it would happen to them, it does. Imagine being separated from that spouse but not officially divorced and they get everything when you pass away.
Or your spouse leaving you and your children, marrying someone new who he/she leaves everything to. All of these situations plus so many more play out every day to individuals and couples like you.
Pride, denial, and a lack of education about estate planning are common reasons people do not make arrangements ahead of time. These factors sometimes lead us to thought processes such as, “I am too young,” “it won’t happen to me,” or “my parents/spouse/kids know what I would want to be done.” All three beliefs are wishful thinking and far from the reality of what usually happens.
Most of us don't like thinking about death and it's actually something that people don't plan for. We buy cars based on safety ratings even though, statistically speaking, we will not depend on such features, buy all sorts of insurance based on the small probability of something that could potentially happen, and constantly worry about things that never actually happen. Estate planning is much more important than any of that because you ARE going to pass away. Some consequences of not realizing this are:
- Paying probate costs
- Avoidable attorneys fees
- Your wishes not being met
- Family harmony destroyed
- Your legacy ruined
Effective estate planning can have many positive benefits such as minimizing taxes, maintaining family harmony, providing your family with a hassle-free transition, and giving you the peace of mind you deserve. By planning ahead you can determine the ideal situation for yourself, rather than having it decided for you by the state. You would be surprised by how many people don't want to use their money for estate planning matters only later to find out that it costs them four-times more because they failed to do so. Unfortunately, most of the time that person is dead, so it's their families and loved ones who suffer.
For some estates, probate expenses are a major consequence of not planning or failing to plan properly. If you pay a fee in advance to set up a trust (which typically avoids probate), you can save thousands of dollars in court and attorney fees. The trust sidesteps many court costs, taxes, and complications associated with the probate process. Your intentions written in detail and validated within a will or trust will also help to avoid your estate being contested which could result in excessive court costs. The most effective and efficient use of your money would be to start planning now because one day, it will be too late!
Excessive attorneys fees:
Estate planning attorneys make most of their money when people fail to plan. This is how it works; someone passes away without an estate plan. Not only is the family going through the grieving process, planning a funeral, and communicating all this with the social group, but also the deceased failed to plan so they have to go through the probate process. In order to go through this complicated, and expensive, legal system, they must pay an attorney (usually hourly) to help them out. This is when an attorney, can step in to help, but at a high price. Proper planning can avoid this because the attorney fees will be minimal due to the conscious efforts of the deceased before they passed away. Not only does their estate keep more of its money, which in turn is more for the beneficiaries to inherit, but the family does not have to deal with the stress involved during a naturally difficult time of their lives.
Your wishes not met:
If you do not establish any estate-planning documents such as a will, living will, living trust, power of attorney, or health care surrogate then you are taking a major risk. You are literally not preparing yourself for something that is coming, which is completely out of your control. Not all families are alike, in fact, many have complicated arrangements where not all relatives are on speaking terms, or where friends are valued more than blood relatives. Unintended beneficiaries or estranged family may receive inheritance you did not desire them to have if you fail to plan accordingly. Your state may even treat half siblings the same as full so that is something you need to be aware of. This happened when Prince failed to create an estate plan.
If you do not have a declaration deciding the distribution of your assets, the state provides a general order of inheritance that might not be satisfactory for you. If you are incapacitated and unable to make health care decisions or attend financial obligations, and you have not named a power of attorney or health care surrogate to protect you, then you will be appointed a decision maker who may not perform the same way you would.
Take control of your life and decide who will decide for you!
Having a well-thought out plan is crucial to ensuring you, your property, and your loved ones receive the assets and treatment you yourself wanted for them. Estate-planning eliminates uncertainty, creating a positive legacy for those you love and leave behind.
Family harmony destroyed:
Improper planning can destroy family harmony by giving money outright to children or a spouse. Without the proper estate plan, beneficiaries that receive lump sums of money might not know what to do with such inheritances or cause them to think they have more than their lifestyle can really handle.
Most wills direct lump sum payments to spouses and children. What happens if this beneficiary gets in an accident on their way back from your funeral and is sued? Since you failed to create a testamentary trust or revocable trust, their inheritances will be subject to creditor's claims. What if existing creditors, that you were unaware of, have been waiting for money? All of a sudden, your beneficiary receives a lump sum payment from your estate, but really all this goes straight to paying off creditors. It’s your responsibility to protect your legacy and estate! A lack of planning or improper planning itself can result in your loved ones' inheritances being subject to creditors and not lasting their entire life.
A very common situation that occurs when people pass away is families fighting over their rights to property and funds. Have you ever seen this happen? Maybe with friends families, cousins, spouses? Siblings that loved each other their whole lives all of the sudden turn against one another. This happens for many different reasons such as debt, spousal advice, greed, selfishness, power, bad habits, and more.
Another situation that occurs often is parents have children who are not as responsible as the others so they give outright to one sibling who is responsible for giving to the others. All of a sudden, the sibling who did not receive an inheritance sues the estate. What happens if this occurs? An attorney must be hired, usually paid out of the estate funds (decreasing the value of the estate) in order to defend the rights of the beneficiaries. This process can go on for years!
It is your duty to have a solid estate plan that avoids such issues. Your intentions need to be protected with legal documents and products that allow your family to come together after your death, not rip them apart! Death catches up with everyone. It is not a question of if, but rather when. All of this planning is to allow comfort and peace for your loved ones while they are mourning your loss. Do not make it any harder for them and start planning now!
Real Life Scenario:
As noted above, an example of not planning properly can be evidenced by the celebrity Prince. He did not execute any estate-planning documents during his lifetime. Whether he was in denial of an untimely death or was simply careless regarding the possibility, he was unprepared. Because Prince died without a surviving spouse, parents, or children, Minnesota state law decided his assets were to be divided among his siblings, some of whom were either half-siblings, estranged, or both. Because he did not devise a plan, his inheritance was left to siblings who he had gone for long periods of his life without speaking to or seeing. We can not say for sure, but they may not have been the individuals he would have intended to inherit his legacy. His negligence also cost his estate thousands in taxes and fees that could have been avoided if he had strategized with an estate-planning attorney. And if there is any non-sibling who was in his life (such as a best friend) that he cared for or intended to receive some of his property, then they are left empty-handed because without his documented wishes they possess no claim to any of his assets.
In the situation of your estate after you pass away, you are dead so it's your family who gets to deal with the mess or conscious organization of your estate plan. Avoid negative consequences by clearly and legally making your intentions known! Get it done and enjoy your life!
If you would like to take advantage of planning your estate while you still can then please contact us for FREE estate planning consultations by calling (407) 636-4066, emailing us at firstname.lastname@example.org, or filling out the contact form HERE. We would truly be honored to help you and your family!
Do you own a business? Will you inherit one? Does a family member? Even if you answer no to all those questions, you know business owners … [Read More...] about Estate Planning for Business Owners and Entrepreneurs
In the estate planning world, there are numerous tips that I could endlessly write on. To narrow it down to just ten tips was difficult to … [Read More...] about Top 10 Estate Planning Tips
Imagine leaving all your assets and money outright to a child or spouse only to have a creditor come in and take everything, leaving them … [Read More...] about The Consequences of Not Doing Any Estate Planning