Whenever the topic of estate planning comes up, people invariably mention creating a will. And with good reason—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. There’s a saying in the lawyer world of estate planning: “Where there’s a will, there’s a probate.” And it’s no laughing matter.
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 helps ensure your assets are properly distributed when you die. But 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. The first article in this series offers an in-depth look at some of the consequences of failing to plan for incapacity.
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 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.
And 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.
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.
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.
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. And here’s the thing: If your plan is incomplete, it’s your family that suffers, having to clean it all up after you are gone.
Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.