By Paul West
You’ve probably never heard of Melvin Dummar, a gas station attendant who picked up a hitchhiker in the Utah desert one night. He ended up driving the man several hours, all the way to Las Vegas and dropping him off at the Sands Hotel. Melvin was no one, but the hitchhiker was Howard Hughes.
Apparently, Hughes promised Dummar a fortune – $156 million in 1967 dollars (over $1 billion today). The conversation resulted in years of court battles, a (probably) forged will, a media blitz and even a movie. The Hughes estate has become a cautionary tale among advisors and lawyers, as the court battles raged for decades and millions were lost in court fees and taxes, not to mention the relational fallout for the family and friends involved.
So, how important is a will, really? Many of us think we don’t have enough assets for a will to be necessary, or we’ve simply put it in the “I’ll get to it” category. But planning carefully now can save your beneficiaries from legal fees, tax losses and the ugly relational stress that comes up all too often in the estate process.
Let’s look at a few estate planning details that will keep you from the kind of pain and hassle that comes from a story like that of Melvin and Howard.
Plain Old Uncertainty
The gift to your family, when it comes to writing a will, is some measure of certainty in an uncertain time. Obviously, we don’t know when life will end, that’s never a guarantee for anyone. Think of Prince, legendary pop singer, who lost almost half his assets to the estate process and much more to legal battles when he died unexpectedly at age 50.
We also have to think of the traditional phrase at the beginning of a will: “being of sound mind.” Early on-set Alzheimer’s, head injuries, mental illness and other issues with the brain can prevent us from making clear decisions. Although our bodies are living much longer, our minds can still break down.
Another myth worth dispelling here is that “only retired people need wills.” As a younger person, your estate may not be as large, but it could be even more complicated. If you have younger children, who will take care of them? What if they aren’t legally old enough to inherit assets? You also may have homes or other large purchases that aren’t fully paid off, or that you’re in the midst of selling, which can leave your family and friends with major headaches.
If Hughes had updated beneficiaries (assuming Melvin’s story is true, of course), Melvin would be a very rich man. The importance of keeping your beneficiaries current can’t be stressed enough.
Blended families to one degree or another are the rule, not the exception anymore. The current divorce rate is actually less now than it was in the 80s and 90s – the years that current retirees were getting divorced. Depending on the state or the kids to “figure it out,” just doesn’t work – especially in these blended family situations. An ex-spouse who you’ve been estranged from for years could receive all or part of your estate. A step-child, dearly loved and closer than blood, could end up being excluded.
Your beneficiary relationships may change over time, due to marriage/divorce, etc. Your assets, hopefully, will also change over time – perhaps buying a new home or closing a business. I’ve seen more than once when a person has details about guardianship of their young children on their will, and the kids have been grown and gone for a decade!
Updating your estate plan at least every three to five years is an achievable goal that will pay off in clarity and confidence.
Power of Attorney
A close sidebar to this discussion is making sure your Power of Attorney is complete and current. There are a few different types of POAs and most savvy attorneys will help you bundle them.
Your health care POA relates to your medical wishes, especially those at end of life. Your financial POA gives someone decision-making power over assets and money matters. These don’t have to be the same person, and one will not simply transfer to the other capacity – make sure you clarify with your attorney the scope of each document.
Also, keep in mind that once your child reaches age 18 (the “age of majority”), they are considered an adult in the eyes of the law. If they need medical care and can’t make their own decisions (due to incapacity), you can’t even get their healthcare information – let alone be the one to speak into their care plan – without being a designated POA.
As you can see, the details matter when it comes to estate planning and documentation, and having these conversations sooner rather than later can help get things in place.
If your will is unclear or nonexistent, your estate goes into probate court to be distributed. This can be an arduous, expensive and embarrassing process for your loved ones. Probate records are also public records, which makes the details of your estate leisure reading for anyone interested.
Preparing your will is always important in case of a sudden health issue or death, no matter how old you are. Probate could make that even worse. Imagine trying to grieve the complex situation of an unexpected death while dealing with legal forms and confusing questions from attorneys!
Probate fees are expensive, and this is money that should be part of a legacy, not lost to a bureaucratic process.
Miscellaneous and Sundry Details
The minutia in the estate planning process is near impossible to keep tabs on, and that’s why we always recommend working with a professional, from your estate planning attorney to your financial advisor, to help you keep the i’s dotted.
Here are a few small items that sometimes get lost:
- Taxes – You have to file a tax return for a trust if you are the trustee, and estate taxes only get more complex from there.
- Digital assets – Most of us didn’t make a Bitcoin fortune, but you probably have at least a rewards credit card or some Marriot points. Do your benefactors have the passwords? Can they get to these assets and use them?
- Funeral arrangements – It’s not anyone’s favorite topic, but having a funeral arranged and paid for can be a huge relief to your family.
Estate planning is today’s business for tomorrow’s clarity. The complexity of the legal issues, the fluidity of assets and relationships, and the plain old uncertainty of life make these estate planning details a priority for anyone.
Check out our complimentary guide, Estate Planning Simplified, to help you start the conversation with yourself and your family about an estate plan.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither the Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.