Americans' Ostrich Approach to Estate Planning
If you're among the majority without a will, follow these tips
When you blog about personal finance for people over 50, every so often you need to write a scold post. This is one of those times.
Today’s topic: Please stop taking an ostrich approach to estate planning.
Who Doesn't Have a Will
Incredibly, 51 percent of Americans age 55 to 64 don’t have wills, according to a survey released today by Rocket Lawyer, a website that offers low-cost legal services.
Worse, 62 percent of those age 45 to 54 — and 67 percent of women that age — haven’t drafted wills. (These numbers are slightly better than for Americans in general; Rocket Lawyer says 64 percent of the public doesn’t have a will, up from 57 percent in 2011, but that figure includes people in their late teens and 20s, so I don’t take it quite as seriously.)
When You Die Without a Will
I’m fairly certain I don’t need to tell you what happens after you die if you don’t have a will, but I’ll do so just in case.
If you die without will — or, as lawyers call it, “intestate” — there’s no guarantee who will inherit your assets. Generally, if you were married with kids, your surviving spouse and children will then inherit your assets. If you had minor children, the state will choose their guardians. If you were single and childless, your state will likely determine which of your relatives will inherit your financial assets and property.
What’s more, without a will, your estate will go into probate, a costly, slow-moving process the courts use to sort things out.
Then there are the intangible reasons for having a will: You’ll know that you’ve taken care of your loved ones the way you’d like; you’ll protect your physical and digital assets (assuming you’ve drafted the will properly) and you’ll be able to avoid family skirmishes over who’ll get which assets.
Why People Say They Don't Have Wills
So what gives? Why do so many people not have wills? When Rocket Lawyer asked them, here’s what they heard:
- 57 percent said they “just haven’t gotten around to making one”
- 22 percent felt that making a will wasn’t urgent
- 17 percent didn’t think they needed a will
- 14 percent don’t have a will because they don’t want to think about death
My response: whether you’re married or single, a parent or childless, a millionaire or middle-income, you need a will.
If you have assets in the six figures or higher, you probably ought to have a trust as well, to help minimize estate taxes and avoid probate. A trust also offers you greater control over when and how your assets will be distributed — such as letting your young child receive only a certain amount of money at a certain time.
The Price of a Will
Don’t use the cost of drafting a will as an excuse for not having the essential estate-planning document; it’s money well spent.
If you don’t want to hire an estate lawyer, you could use a DIY site such as Rocket Lawyer, Legal Zoom or Nolo. You can normally expect to pay between $35 and $70 or so, though Rocket Lawyer is offering wills for free this month.
I’d recommend hiring an estate lawyer to draft your will (and perhaps a trust) if you have sizable assets, minor kids or heirs you think might dispute their inheritances, to be sure your wishes will be carried out properly. If you go the online route, I’d suggest paying an estate lawyer to review the will you created, just to be safe.
Remember to include your digital assets in your will, too. “If you have a Facebook, Instagram, Etsy, iTunes or Ebay account, you must bequeath them to a beneficiary if you want them passed along after you’re gone, says Mazyar M. Hedayat, a lawyer in Chicago, Ill.
Retirement Accounts Have A Special Rule
Incidentally, having a will won’t ensure the money in your 401(k) and other retirement accounts will wind up in the right hands after you die, as an excellent Wall Street Journal piece by Jason Zweig just explained.
For retirement accounts — what some scholars call “substitute wills” — you need to be sure your beneficiary designations are accurate and up to date. Otherwise, well… here’s the sad tale Zweig told about a wealthy telemarketing exec who died last month:
Even though his will said all his assets would go to his children, because he didn’t ask his wife of two months to sign a waiver allowing him to name his kids as his 401(k) beneficiaries, she’ll inherit the money. Because of this oversight, he essentially disinherited his kids.
Create an Estate Plan File at Home
Scott Taylor Smith, author of the excellent book When Someone Dies: The Practical Guide to the Logistics of Death, recommends creating a file at home labeled “My Estate Plan.”
Then, put in there all your estate-planning documents including your will (and trusts if you have them); a durable power of attorney form that gives someone the ability to make financial decisions for you if you can’t; plus end-of life instructions such as a living will and healthcare power of attorney.
Be sure you update your will whenever your personal situation changes, such as a divorce or remarriage. Your loved ones will thank you, even if you don’t know it.