Estate Planning, Not Just for the Rich

This is the first in a series of columns dedicated to helping you understand, create and manage your estate and financial plans based on the lessons I have learned over thirty years working in law and finance. I hope you enjoy this column in the Chesapeake Current and, please, send me your questions so that I can respond.

Estate planning and financial planning go hand in hand, but to start at the beginning, we need to start with estate planning. Estate planning is not just for the wealthy. It’s for you and me. It’s for everyone.

What does estate planning give you? A structure, so that when you die (it’s a “when” not an “if”), your loved ones will be protected. It’s simple. With a plan you will protect your loved ones; without a plan, you won’t. What does this mean? It means you need a will, a power of attorney or other document that protects you with medical and financial issues if you cannot help yourself, and a living will. Also, many people these days are choosing to have a living trust to avoid probate.

If we know it’s important, why do so many of us avoid thinking about estate planning? The number one reason is denial: I just won’t die; that’s what happens to the other guy.

Or, I’ll die, of course, but not for years and years. I’m busy right now and I’ll get to it – some day.

Or, I don’t have to worry because my spouse and I put everything in joint names so that if one of us dies, the survivor gets everything. Of course, we travel a lot and if both of us die together, we do not have a plan for the children, but…

Or, I do not have an “estate.” I only have a house, some life insurance, an older car, a small bank account, and a small 401(k) in my name—that’s not an “estate”—is it? (Yes, it is an “estate” subject to the probate process).

Or, I don’t have the money to pay for an estate plan. It’s true, I do have minor-aged children and have not appointed a guardian or trustee to care for them in the event my spouse and I die (but I did buy a big screen TV for them to enjoy! Just know that the cost of an estate plan is about the same….)

Or, I’ll be dead, what do I care?

Well, if you have loved ones, you should care very much.

There is simply no excuse not to have a will, no matter what your age or financial circumstances. Dying without a will means the government decides who gets what, perhaps including who will take care of your minor-aged children. Dying and leaving a mess for the family to unravel is the worst kind of irresponsibility.

OK, how do you go about preparing a will, power of attorney, living will and perhaps a trust? I personally don’t recommend doing it with an online form. There are certainly times when do-it-yourself works well, but this is not one of them. Using an online service to prepare one of the most important legal documents you will ever create is like agreeing to have your heart surgery done by your plumber!

There is a reason why online sites must state that they are not giving legal advice—they can’t. What they can do is supply you with some cookie-cutter language and you can hope you fit into the mold. So, how do you know your loved ones will get what you intend? If you use the wrong language in creating a will, you may end up doing exactly what you did not intend, like our hypothetical couple, Sue and Robert.

Sue and Robert thought they could protect their children and grandchildren by having a will. However, their version of a will came from an online service. They filled out a form, checked off the boxes, signed the documents and forgot about them. Two years later, Sue and Robert were killed in a car accident and the family discovered that five of the grandchildren were disinherited. Sue and Robert had filled out an online form that said “our estate should go in equal shares to our two children.” Sounds right. But, Sue and Robert did not specify that the share of any deceased child would go to the children of that child. When Sue and Robert died in a car accident with their son, his children were left without any inheritance.

The horrors of poor drafting are legendary. Don’t contribute to this by trying to do it yourself.

Go to a professional for drafting the documents. You will spend time with this professional, so choose someone who will spend time listening to you and someone who will teach you what you need to know to make the right decisions for your loved ones.

Start by networking. Talk to friends and advisors to obtain recommendations. Interview the professionals. If the professional is rude, unresponsive, or condescending, cross them off your list. Do not accept merely a will. You need to have a power of attorney or other document that covers medical and financial care, and a living will.

Do not sign anything unless you understand it. Even technical language in a will can and must be explained so that you, the client, has a full understanding of what you are doing.