The recent death of Aretha Franklin points out some estate planning issues for all of us. We would expect some one of Aretha’s wealth and connections to have a complete estate plan. The truth was she did not even have a will.
When you die without a will, it is known as “dying intestate”. State law then dictates who receives all of your assets. Many of your possessions will pass through probate. If you own property in multiple states, the process could become more complicated. You can help to simplify the process by having an updated will.
It has been estimated that 60% of US adults do not have a will. Not all of your possessions pass through the will however. Things such as 401(k) s, life insurance and annuities go to the people who are listed as beneficiaries. Even if the will says all of your possessions will be split in half between your two children, this may not be what actually happens. If your life insurance list only Jr as the beneficiary, he will get 100% of the death benefit and your daughter will only get half of assets that do not have a beneficiary designation.
This means it is important to review beneficiary designations regularly to make sure they are up to date. There could have been divorcee, birth of new children or grandchildren or a death of someone which needs to be adjusted for. While you are alive, this can be done quickly and easily. When you are deceased, it is irrevocable.
You should also have two POA (power of attorney). One is to make health decisions and the other is to make financial decisions when you do not have the capacity to do so. Capacity means you are of sound mind, not dealing with a disease such as Alzheimer’s or in a state such as a comma. The person you give the POA to can only do so when you do not have capacity and they can only exercise it for your own benefit. POAs end at death.
Normally hospital will co-operate with spouse instruction during an emergency, but it can get very confusing when children are making the decisions especially when there is disagreement on how to proceed. The POA shows who you want to make these decisions when you cannot. Having a POA for financial decision can give your spouse access to things you own separately such as an IRA or 401(k). They may be the beneficiary, but if you are in a comma and they need to receive these funds to live on, they may be forced to go to court if you do not have this POA.
Today, almost half of all families have blended elements. Many people have been married before and may have had children. Let me tell you a famous legacy story. There was a famous father who made his third wife executor of his estate, which gave her control of his business. The equally famous son was the principal player in the father’s business.
The son did not understand the implications of his father’s estate plan. As a result, he did not own the rights to his own name or signature. When the father passed away, it sparked a long and expensive feud between the son and the third wife. Can you guess who I am talking about? Dale Earnhardt Jr. Make sure your estate plans are better prepared.