Don’t Make the Same Mistake as Prince
Before he died, Prince had an estimated estate of $300 million. In addition, he had a whole library of unpublished music and future royalties that has an unknown net worth. Most people who have an estate that large typically have a complex estate plan that minimizes taxes at death and details out how the estate is to be distributed. At the very least, people have a basic will.
Prince had nothing…..no estate plan and not even a simple will.
Now it is up to a judge to figure out and determine who gets what. I am sure that there will be people coming out of the woodworks to get their piece of the estate. It will probably be one big ugly fight.
You probably don’t have an estate problem as complex as Prince. However, everyone has an estate of some type and everyone needs a plan. This is especially true if you have children. It goes way beyond the assets you might leave if something happened to you and your spouse. Most importantly, it is about the welfare of the kids.
Most parents think that getting a will in place will do the job. The problem is that a will doesn’t completely do the job in the worst case scenario and you always have to plan for the worst case scenario. What if something happened to both spouses leaving the kids without parents? Grant it, the probabilities are very low. However, since probabilities remain, you have to plan for it.
Think of a will as a wish list. You write in the will what you wish to happen for your family hoping that a probate judge agrees. After all, your will has to be approved by a probate judge. Also the probate process leaves your estate open to a challenge from an interested party that disagrees with your wishes.
If you take one additional step, you can eliminate these potential liabilities for your kids. Setting up a trust fixes that problem. AT the risk of making an attorney cringe, think of a will as a wish list and a trust as the final word.
When a trust comes into play, everything transfers to the trust. It becomes a private matter and avoids probate. You appoint ahead of time someone to administer the trust. You can go into detail what you want to happen in the event that the worst case scenario occurs. You can elect guardians. You can dictate how and when you want the money to be distributed and for what reason. Said another way, you can protect the kids from themselves by giving them access when they are more mature to handle it.
This is even a good step to take if you have adult children. I know of too many stories where adult kids would get into fights after the remaining parent has passed. With the trust, you can remove all questions as to where assets are to go.
The process is easy. It takes very little time to set up. A few appointments with an estate planning attorney will get the job done. For the sake of your family, this is one thing you don’t want to neglect to do.
Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.