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.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of Kiplinger’s expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of Kiplinger’s expert advice - straight to your e-mail.
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.
-
-
5 Mistakes Veterans Most Often Make When Filing for Disability Benefits
Our military takes care of us, and when they are injured, sick or unable to work, the VA can help take care of them. For a successful benefits claim, here are some mistakes to avoid.
-
Don’t Poke the Bear! How to Respond to Angry Customers
Arguing, doubling down and refusing to negotiate could make matters worse, so it’s best to aim for a win-win solution. And if that doesn’t work…
-
Doing Your Retirement Income Planning in the Right Order Matters
A strong retirement income strategy considers many factors, including the retiree’s unique financial resources and needs. How and when you tackle them is critical.
-
2 Ways Retirees Can Defuse a Tax Bomb (It’s Not Too Late!)
If you’re retired and find yourself sitting on a “tax bomb,” you may think there’s nothing you can do. But two strategies could seriously reduce your taxes in retirement.
-
Short-Term Investments to Protect Against Inflation and Market Volatility
Rates on Series I savings bonds, T-bills and fixed annuities are all above historical averages and could serve investors well during turbulent times like these.
-
What’s the Difference Between Average and Actual Rate of Return?
An average rate of return can mask losses over time, so what investors really want to keep an eye on is the actual rate of return.
-
Can You Build a Retirement Income Plan With Both Risk and Reliability?
Two strategies for making retirement savings last — probability-based income planning and guaranteed income planning — can help ensure you have what you need in your golden years, but which is right for you?
-
10 Common Investing Mistakes That Can Easily Be Avoided
Some of these missteps might be a given when you’re starting out. A financial adviser offers tips on how to stay on track for years to come.
-
I'm a New Widow. Who Are the Experts I Should Consult?
A support network of experts who can help a new widow can be just as important as your personal support network at such a difficult time.
-
Is Your Money Really Working for You? A Math Lesson in Rates of Return
Getting a high average rate of return does not necessarily equate to actual money in our pocket. A personal finance expert explains why math doesn’t equal money.
