Michael Murkins, CFP®, Senior Associate Financial Planner
October 19, 2022
Are wills and estate planning just for the rich? No, but that is the perception of many.
“There is no minimum level of wealth required to have an estate plan, and every adult should look to have a basic plan in place to care for their own needs and the needs of their family,” according to Patrick Hicks, General Counsel and Head of Legal at Trust & Will.
Why are wills so important? You’ll learn why when you read examples of real-life devastation in families who we feel were not prepared.
The main components of an estate plan are:
- Advanced Directives (Living Will, Medical Power of Attorney, Organ donation instructions)
- Power of Attorney for Financial Decisions
- Review of Beneficiary Designations
For this article, I’ll primarily focus on wills. For additional information on estate planning and a 7-step checklist of estate planning basics, read NerdWallet’s article.
Let’s start with a few alarming statistics about wills:
- According to a Gallup poll, less than half (46%) of U.S. adults have a will.
- For Americans 65 and over, only 76% have a will. For Americans aged 50-64, only 53% have a will. (Gallup poll)
- According to a Caring.com survey, 40% of the people without a will say their main reason they don’t have a will is that they haven’t gotten around to it.
- Nearly 2 out of 3 Americans believe that you should have a will by the time you’re 55, or sooner, but less than half of those 55 or older actually have one. (Caring.com survey)
- Although 56% of Americans think having a will is important, more than 60% of those without a will haven’t started the estate planning process. (Caring.com survey)
- When survey participants were asked why they don’t have a will, 1 out of 3 respondents believes they don’t have enough assets to leave behind. (Caring.com survey)
- 35% of American adults say they were exposed to family conflict due to a lack of an estate plan or a will according to WealthCounsel.
- $59 trillion dollars of wealth is predicted to be transferred from 94 million estates in America by 2061 according to Boston College.
So, what are some of the pitfalls of inadequate or nonexistent wills? Read these real-life stories about families who were not adequately prepared.
Death without a Will
One of our team members talked to a friend and her husband about three years ago about financial planning, including whether they had a will. At that time, the husband said they did not have a will. Our team member encouraged them to see a professional about their estate planning and make sure to get a will.
Unfortunately, they did not act. The husband died of Covid-19 without a will and the estate went into probate. Because of children from the husband’s first marriage, the estate will probably be split between the widow and the deceased person’s children, something the widow said her husband would never have wanted.
Another one of my colleagues recalls a conversation with an affluent friend who is still living. My colleague assumed the friend had a will but decided to ask anyway. The answer was, “No.” When asked why, the man explained that he and his spouse did not see eye-to-eye on where the money should go. One spouse wanted it to go mostly to the children and one spouse wanted it to go mostly to charity. Because of indecision, the results for this man’s family could be disastrous.
Passing without a will, also called dying intestate, means that courts ultimately decide who receives your assets as outlined in this article, “What Happens if You Die Without A Will” by LegalZoom. Another good article from the American Bar Association explains what a will does and what it does not do.
A Will/Estate That Has Not Been Updated
Filmmaker John Singleton had a stroke at age 51 and slipped into a coma in April of 2019. His family discovered he never created a medical directive or power of attorney. When he passed away 13 days later, the family was horrified to learn he had never updated his will.
According to Legacy Assurance Plan, “In the 26 years since [creating the will], Singleton fathered six more children with different women—but he never updated his will to reflect the additions to his family.” With an estate value estimated at $38 million, it’s inevitable that relationships and infighting resulted as the family went to war over their portion of the estate.
Another example is that one of our planners heard about a case where the outdated estate plan ended up costing millions of dollars in estate tax that could have been avoided.
To read more unfortunate examples, read this article from 2021, “Estate Planning Horror Stories: 5 Nightmare Scenarios that Will Scare You Into Action.”
An Unsigned Will
If someone dies with an unsigned will, the will is usually not legally valid. If someone has a will that is not legally valid, upon their death, their estate will be shared out under certain rules, not according to the wishes expressed in the will. Please make sure your will is signed.
“David and Donna Rae Egelhoff were an unhappily married couple who decided to divorce. Two months after the divorce was finalized, David died in a car crash, leaving behind a life insurance policy and a pension plan.
Although David had two children from a previous marriage, he had failed to designate them as beneficiaries after his divorce,” all according to this article. Despite suing for the money, the kids ultimately lost the case. Thus, the money went to the ex, and David’s children were left with nothing but legal costs.
The financial planners at Syverson Strege regularly request to review a client’s will, including making sure the correct beneficiary is listed. One of our planners recalls a story where an advisor caught an error. A person had mistakenly listed their neighbor’s name instead of their spouse as a beneficiary. Had the error not been caught, the neighbor would have received the inheritance.
The moral of this story is not only to update all your beneficiaries, but to make sure the correct name is listed. If the wrong beneficiary is listed, the wrong people get the inheritance.
Check out this informative article by Kiplinger called “Beneficiary Designations: 5 Critical Mistakes to Avoid.”
If the lack of a will can create such devastating outcomes, why don’t people have a will in place?
- They don’t want to think about death.
- Age – younger people don’t think they need a will.
- It’s confusing. 74% of American adults think estate planning is confusing, according to WealthCounsel.
What can you do now?
If you don’t have a will, contact a professional as soon as possible to begin the process. If you already have a will, make sure it is updated, signed, and the correct beneficiaries are listed. And don’t assume the people you care about have a will. Be bold and ask them.
The good news is that for those of you who work with a financial professional, preferably and advisor who is a CERTIFIED FINANCIAL PLANNER™ practitioner (CFP®), most likely that advisor will make sure your estate planning documents are in good order.
If you need advice on the topic of estate planning, wills, or any other financial planning topic, please contact us at 515-225-6000 for a no-obligation, complimentary, confidential consultation.