Should you rely on “will power” to bequeath assets? The more complex your estate, the more ill-advised that choice becomes. Having only a will in place when you die may not be enough. As MarketWatch noted recently, research from the Williams Group (a major estate planning firm) indicates that estate fights reduce inherited wealth for as many of 70% of families.1
Inheritance is no simple matter. In a simpler world, an individual with a $3 million estate could pass away and simply leave $1 million each to his or her children – enough said, over and done. But life isn’t so simple: one heir may deserve more money as a result of a disability or fate dealing out hardships, while another may truthfully deserve less due to his or her behavior, or his or her financial success.
If you feel one heir should receive more of your estate than another, that wish needs to be articulated in your estate planning. Stating these wishes before you pass away (the why, the how, the how much) and letting your heirs know how you feel isn’t cruel – candor now is preferable to confusion and in-fighting later. After you're gone, you kids cannot ask why you did what you did and could leave some unresolvable questions.
Beyond money, what about possessions & real property? Homes, businesses, raw land, antiques, artwork, collectibles, heirlooms, and pets: your children and grandchildren may have different perceptions of their future value, and disagree on their destiny. Being clear about who is going to get what today (and why specific decisions are being made) may make things easier on all and help defray potential legal challenges tomorrow.
Consider leaving some things up to the kids. For personal property make a list of those valuable assets and subsequently allow your heirs to take turns choosing the possessions or properties they want to inherit. If a squabble breaks out between heirs over this or that item, you can settle it with a family auction – that item goes to the highest bidder when you pass away.
Also, consider a revocable trust. Wills are made public; they are probated. I personally thought this was not much of a concern. Yet, I may have been naïve. A leading life insurance & annuity industry magazine in 2014 had a list of their 'Top 100 Marketing and Sales Ideas." Number 5 on the list was to go to the probate court and find out who inherited a lot of money. Then you can use this information to sell them an annuity. I'm not sure what is worse...that someone proposed this as an idea or that the magazine included this on their 'Top 100' list. Sad.
While there are many non-probate assets that pass directly to a designated beneficiary or a joint tenant (jointly held bank accounts with right of survivorship, jointly titled real property, POD accounts, most types of IRAs and workplace retirement accounts), other assets do not. The length of the probate process varies by state. It takes weeks in some states, months in others.3,4
Assets within a revocable trust can avoid probate, assuming they have been properly transferred into the trust or the trust named as beneficiary of the asset. Upon the death of the grantor who established the trust, the grantor’s appointed trustee distributes the assets within the trust per the grantor’s wishes, no probate involved. The chance of a family fight over inherited assets lessens.5
Living wills? Those can prove quite valuable. You may not die suddenly, and you could be incapacitated for a period just prior to your death. Should that be the case, a living will (also called an advance directive) can articulate how you want to be treated. Additionally, a health care proxy document can appoint someone (known legally as a health care agent) to authorize doctors and nurses to carry out those directions. A health care proxy is also crucial in instances when a younger individual becomes severely disabled.5
If you are an Ohio resident, the Ohio State Bar Association has a template that is advisable to use as health care facilities will already be familiar with this form.
Opt for more control. When you pass away, your money will have only three possible destinations. Percentages of it will go either to your heirs, to charity, or to the government. If your estate planning lacks communication and contains just a will, you could be inviting a dispute and things may not turn out quite the way you want. While creating a revocable trust can cost ten times as much as creating a simple will, it may be worth every penny in the end.6
Best Regards,
Kevin Kroskey, CFP, MBA
This article adapted with permission from MarketingLibrary.net, Inc.
Citations.
1 - blogs.marketwatch.com/encore/2014/09/29/how-to-prevent-family-feuds-when-it-comes-to-your-inheritance/ [9/29/14]
2 - nolo.com/dictionary/in-terrorem-clause-term.html [10/9/14]
3 - nolo.com/legal-encyclopedia/why-avoid-probate-29861.html [10/9/14]
4 - nyparenting.com/stories/2013/5/fp_askattorney_2013_05.html [5/13]
5 - money.usnews.com/money/personal-finance/articles/2012/07/17/how-to-avoid-fights-over-inheritance [7/17/12]
6 - nhmagazine.com/July-2013-1/Wills-Trusts-and-Estate-Planning/ [7/13]
1 - blogs.marketwatch.com/encore/2014/09/29/how-to-prevent-family-feuds-when-it-comes-to-your-inheritance/ [9/29/14]
2 - nolo.com/dictionary/in-terrorem-clause-term.html [10/9/14]
3 - nolo.com/legal-encyclopedia/why-avoid-probate-29861.html [10/9/14]
4 - nyparenting.com/stories/2013/5/fp_askattorney_2013_05.html [5/13]
5 - money.usnews.com/money/personal-finance/articles/2012/07/17/how-to-avoid-fights-over-inheritance [7/17/12]
6 - nhmagazine.com/July-2013-1/Wills-Trusts-and-Estate-Planning/ [7/13]