What do painter Pablo Picasso, former NFL quarterback Steve McNair and music icon Prince all have in common? They each died without an estate plan, leading to significant complications for their loved ones.
Nineteen lawyers spent several years settling Picasso's assets among his six heirs. Meanwhile, McNair's estate assets were listed at nearly $20 million, with no plan for how they would be allocated. And, more recently, Prince left behind approximately $300 million of intellectual property rights.
Although few people have the wealth of these celebrities, their complicated finances should serve as a reminder of why it's important to have an estate plan. With proper planning and help from a firm that works with an estate planning attorney, these types of situations can be minimized.
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Consider these five reasons estate plans, which are larger in scope than wills, are important:
1. To stay in control of your finances, even after you're gone.
Everybody with an estate plan can feel confident knowing that their wishes will be carried out. You can specify exactly how and when your heirs receive an inheritance, which can be particularly important for anyone who wants their inheritance to be delayed, perhaps for a young grandchild.
2. To help ensure your business isn't impacted by your death.
Small business owners can have the comfort of knowing that their businesses will not be negatively impacted by their unforeseen deaths. If properly drafted, an estate plan has the ability to ensure that the business will continue uninterrupted. Business owners can spell out exactly what should happen to the affairs of their businesses if they die. This action helps reduce the amount your business will owe in taxes, as businesses are often slammed with sizable unforeseen tax liabilities. The last thing any business owner wants is to think that all their hard work could be diminished by the IRS in estate taxes.
3. To maintain your privacy.
Without an estate plan, one's assets can become public information upon their passing. This situation occurs when a probate court is required to take action on the matter. The probate court assists in settling the individual's estate. A solidified estate plan will negate any need for court involvement.
While privacy is important, you shouldn't allow it to become a blockade for your family. In your estate plan, compile a list of all of your updated passwords and account information. This list includes but is not limited to your phones, bank accounts and emails. An estate plan will allow that information to become available upon your death or even disability. If you fail to include this information, your family may have to wait an extensive amount of time to unlock some of your accounts.
4. To protect yourself in case you become disabled.
Today, many Americans experience a disability of some kind before they die. Being proactive with an estate plan allows you to arrange exactly how a scenario that involves your being disabled will be handled. When you create a plan for disability, you ensure that the individual you choose is in control of your personal assets. Otherwise, your property may be appointed to a legal guardian who may not act in your best interest. This guardian could mishandle your most valued assets.
5. To catalogue your assets.
Everything you own has value that is directly tied to you. When you take inventory for your estate plan, it allows you to think of ways to expand the worth of all of your assets. Conveniently, this process is necessary for your estate plan and your retirement plan. Effective estate planning will allow you to accomplish these two important objectives simultaneously. These assets include retirement accounts, pensions and all other sources of capital. It is important to remember to calculate your debts into this equation as you're taking inventory. Your end goal in this process is to find out if you have the resources to sustain yourself for the remainder of your life.
The Bottom Line
There really is no price on knowing that your family will be taken care of when you ultimately pass. If you want to learn more about estate planning, seek out a local adviser for further information on estate plans. An advisor can help you prepare so that your legacy and your loved ones are protected.
Gregory Ricks is the founder and CEO of Gregory Ricks & Associates, a Registered Investment Advisory Firm, an insurance professional, and radio host of "Winning at Life." He is the founder of Total Wealth Authority, a team of outside financial, tax and estate planning professionals.
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