This is the third post on the discussion of the true costs and consequences of failed estate planning. The series highlights a few of the most common—and costly—planning mistakes we encounter with clients. This article discusses why having a will alone may result in your family suffering by having to go to court when you are gone.
Whenever the topic of estate planning comes up, people invariably mention creating a will, which is good because having a will is a foundational aspect of your estate plan. However, a will is only one small part of effective planning; in fact, if your plan consists of a will alone, you’re guaranteeing your family will have to go to court when you die.
In our view, a primary goal of estate planning is to keep your family out of court and out of conflict no matter what happens to you. Yet with only a will in place, your plan can fall woefully short of that goal, leaving your loved ones, and yourself if you become incapacitated, susceptible to getting stuck in an unnecessary, expensive, time-consuming, and public court process.
Here’s why having just a will is not enough:
A will offers no protection against incapacity
A will helps ensure your assets are properly distributed when you die, however, it offers no protection if you become incapacitated and are unable to make decisions about your own medical, financial, and legal needs.
Should you become incapacitated with only a will in place, your family would have to petition the court to appoint a guardian or conservator to manage your affairs, which can be extremely costly, time consuming, and traumatic. Another blog in this series offers an in-depth look at some of the consequences of failing to plan for incapacity.
Your family must still go to court
While you may think having a will allows your loved ones to inherit your assets without court intervention, this is not true. For your assets to be legally transferred to your beneficiaries, your will must first pass through the court process called probate.
The probate process can be an extremely distressing for your loved ones. The proceedings can drag out over several months or even years, and in most instances, your family will have to hire an attorney, generating hefty legal bills that can quickly drain your estate.
Moreover, probate is public, so anyone can find out the value and contents of your estate. They can also learn what and how much your family members inherit, making them tempting targets for frauds and scammers.
If you think you can just pass on your assets using beneficiary designations to avoid all of this… well, that’s just asking for trouble. In fact, we plan to write a whole separate article on that topic in a future installment of this series.
A will doesn’t protect against creditors, lawsuits, or poor decisions
Passing on your assets using a will leaves those assets vulnerable to several potential threats. If your will distributes your assets to your beneficiaries outright, those assets are not only subject to claims made by a beneficiary’s creditors, they are also vulnerable to lawsuits and divorce settlements the beneficiary may be involved in.
And if assets left via a will pass to beneficiaries without any conditions, those assets are susceptible to the beneficiary’s own poor judgment. For instance, a sudden windfall of cash could cause serious problems for someone with poor money-management abilities and/or addiction issues.
Not all assets are covered by a will
Some assets can’t even be included in a will. For example, a will only covers assets or property owned solely in your name. It does not cover property co-owned by you with others listed as joint tenants, nor does a will cover assets that pass directly to a beneficiary by contract, such as a life insurance policy or retirement account.
Don’t let your plan fall short
Though a will is an integral part of your estate plan, a will is almost never enough by itself. Instead, wills are often combined with other planning vehicles, such as living trusts, to provide a level of protection devoid of any gaps or blind spots. If your plan is incomplete, it’s your family that suffers, having to clean it all up after you are gone.
As an experienced estate planning office, we will empower you to feel confident that you have the right combination of planning solutions for your family’s unique circumstances. Schedule a Family Wealth Planning Session today to get started.