Jill on Money: Plan ahead so that you don't leave a mess for your heirs
Like many Americans, Aretha Franklin the Queen of Soul, did not have a will. It seems incredible that a celebrity who knew that she was seriously ill did not get her affairs in order, but Franklin has plenty of company.
According to a Caring.com survey, only 42 percent of U.S. adults have estate planning documents, including a will. Shockingly, for those with children under the age of 18, the figure is even lower, with just 36 percent having an end-of-life plan in place.
Of those who have not done any estate planning, 47 percent said, "I just haven't gotten around to it." I get it. Contemplating one's death is not exactly high on anybody's to-do list, but it is important that you overcome the anxieties associated with this emotional topic and take control.
So what happens now with Franklin's affairs? Her state of residence, Michigan, will determine who should get what. The Oakland County Probate Court, in Michigan, will oversee everything from property, retirement accounts and the residuals that flow from her vast music catalog.
The likely outcome is that her assets will be split among her four children. But as many parents readily acknowledge, some kids are better prepared to manage financial distributions than others, one of the reasons estate planning can be so important.
"If you have assets that you want to go to certain people, you should create a document that specifies who gets what," said Robert Westley, CPA/PFS member of the American Institute of CPAs Personal Financial Specialist Credential Committee. If one of your children is responsible and the other is a spendthrift, careful estate planning "can provide instruction on how, when and on what terms your assets will be distributed."
Many people erroneously believe that, because they don't have a significant net worth, they do not need to worry about these legal issues. But estate planning is not just about money. Westley noted that for those with young children, "the will is essential because it names the guardians of minor children and you will want to ensure that you, and not the courts, are naming their guardians."
If you are ready to finally begin or revisit the planning process and seek the guidance of a qualified estate attorney (yes, you should pay for a lawyer and not do it yourself), here are the basic documents to consider:
WILL A document that ensures assets are passed to designated beneficiaries, in accordance with your wishes. In the drafting process, you name an executor, the person or institution that oversees the distribution of your assets. If you have minor children, you need to name a guardian for them.
LETTER OF INSTRUCTION This may contain the appointment of someone who will ensure for the proper disposition of your remains, which is important if you are choosing a method that is contrary to your family's tradition.
POWER OF ATTORNEY Appointment of someone to act as your agent in a variety of circumstances, such as withdrawing money from a bank.
HEALTH CARE PROXY Appointment of someone to make health care decisions on your behalf if you lose the ability to do so.
TRUSTS Revocable (changeable) or irrevocable (not-changeable) trusts may be useful, depending on family and tax situations. For 2018, the first $11.2 million of an estate is exempt from federal estate taxes. If an estate is above the threshold (or twice that for married couples), you may want to consider a trust.
