Written by Thomas M. Geier, CPA, CFP®, PFS
We all, I’m sure, have heard of some of the tremendous legal battles between heirs of the rich and famous. For example, John Wayne passed away in 1979 and there were law suits still being settled over 30 years later. There are many reasons as to why such estates tend to be litigated, but one simple factor is the complexity of the family structure. “Duke”, as Wayne was known, had three wives, four children from his first wife and three from his third, and at least twenty grandchildren.
Such intricate or complicated family relationships can make it difficult to distribute any estate to the heirs. A simple starting point, though, is a will. What is a will? It is a legal document that outlines your wishes for the distribution of your property and for the care of minor children in the event of your death. It paves the way for a smooth transition of your assets.
What happens if you do not have a will? You die “intestate” and the state will oversee who gets what. In the majority of states, at the current time, that means about half of your estate going to your spouse and the remainder to your children. However, each state has its own rules. Don’t assume that someone will be provided for by receiving your assets when that may not be the case, causing severe financial difficulties.
A will allows you to designate how all of your belongings are allocated. For example, if you have family heirlooms, you can note who will receive which ones. Also, smooth transitions of certain investments or business assets can be provided for. If you have minor children, you can appoint a guardian and provision an amount for their care. In absence of your instructions, the court could appoint the guardian. With a will, considerable tensions and problems among your surviving relatives can be bypassed, as they do not need to try to guess your wishes during a very emotional time.
How to Get a Will
Constructing a simple will is actually very easy. You write a list of all of your assets and belongings and write out instructions as to where you would like them to go. Date and sign the document. However, for complex families, the use of an attorney is recommended. This legal expert should be familiar with the laws of the states where your assets are located and in which you live. They need to be experienced with complicated “family trees” and how to best structure your estate so that your wishes are acted upon at your death.
Clarification on Living Wills
Sometimes, people can be confused by the term “living will.” This is not an estate document. A living will is a set of instructions that outlines your wishes for medical care if you become incapacitated. For example, life support procedures are set forth in a living will. These documents are usually put into the hands of your physicians and medical professionals.
Setting up Trusts
One way to help set aside financial provisions for your survivors is to use a trust. A trust sets up a legal entity that you can then transfer assets to. The assets are invested and drawn down based on the trust’s instructions. Such documents help match certain assets to support a specific goal of yours. For example, if you would like to provide for the education of your grandchildren, you can set up a trust, fund it, and stipulate that money in the trust must go towards education expenses.
Trusts also help with tax concerns. Large estates may be subject to estate taxes. Various trust structures can be utilized to minimize these taxes. Also, the legal aspect of the trust continues in existence as long as the documents dictate. Therefore, you can use a trust to allow for financial provision for many generations of your family.
Peace of Mind
A will is a simple way of putting instructions in writing that greatly eases the burden on your survivors. Your wishes will be carried out without a lot of contention, stress, and emotional pressure. At Geier Asset Mangement, we can help you walk through the many financial issues that may arise when you begin the process of writing your will. We can recommend legal experts and monitor the process from a financial planning focus. Bottom line, peace of mind should be the final result.
© Geier Asset Management, Inc. July 2015. Thomas M. Geier is a Vice President of Geier Asset Management, Inc., a Registered Investment Advisor. The above blog reflects the opinions of Mr. Geier and not necessarily the firm. Any advice given is general in nature and investors must consider their own individual circumstances. Past performance is no indicator of future performance. The firm makes no warranties or representations of any kind relating to the accuracy or timeliness of the information provided.