I think it's safe to say that most of us set out to do a task with the best of intentions. Whether it's just a short shopping trip to the supermarket or mall, rake the leaves, clean out the garage or any other job, we tend to invest ourselves with intent and vigor. But, how many times have you thought to yourself... "I don't feel like it today- it'll be there tomorrow." I pose to you the following question: what happens if there is no tomorrow? After working with attorney's most of my life in the practice of financial planning, I've learned beyond a shadow of a doubt that anything that's not in writing means nothing legally. An agreement has to be in writing and witnessed in order to be official: what you are thinking means nothing. If you are a Judge Judy fan (how could you not like her!) you'll see that many cases come before her that involve a loan of money from one party to another, and to avoid repayment the receiver claims it was a gift. No written agreement? No proof it was a loan... see the difference? So let's talk a bit about putting things down on paper as opposed to keeping them in your head... a safe of which only you have the key and combination.
Putting things down in writing is a commitment and a promise to complete a task or obligation. When you apply for a mortgage, you fill out endless pages of paperwork and sign, sign, sign. This is to commemorate your commitment to pay them back at a certain time for a certain amount. The same can be said for all the legal stuff you encounter on a daily basis: your credit card, getting phone service, utilities, etc. You sign an agreement and are kept to it. But, do you do the same thing with yourself? Are you willing to keep an agreement with yourself, as if you were with an outside party? As we talked about above, what happens if there is no tomorrow? Let's talk estate planning...
The purpose of an estate plan is to determine how and where your estate will be distributed upon your death. You worked your whole life to accumulate your net worth, defined by what you own less what you owe. So, if you've got a buck, you've got an estate. Since when we're born we're not stamped on our bum with an expiration date, we never know when the last time we close our eyes is going to be. Hence, the need for estate planning, or as we touched on above, to put it all in writing. It's your responsibility to yourself and your family or business partner to make sure all your wishes are clearly written down and witnessed to make sure it all goes to who you would like it to go to, as opposed to a court of law deciding on the distribution. Anyone can lay claim to anything you have: a neighbor ex-spouse, newspaper delivery kid... anyone. Unless you clearly delineate where it is to go, you could leave a mess behind. The mess than ends up in the lap of those you love the most when you departed: usually your spouse or kids. Without a clearly written will and other documents, it could take months or even years for your remaining family members to sort things out. Let's be clear if you're thinking about cost: the amount of money it will take to settle your estate will be much higher if you don't lay it out before hand, not to mention the laborious, tedious, and tear-jerking job for those tasked to do it. Also, it's a bear of a job I don't wish on anyone- so do everyone a favor and get it done. If you have your plan in place, is it time to re-visit it? New grandchildren, divorce, deaths, lack or change in relationships and just personal thoughts about disbursements are but a few reasons to review your plan every 5 years or so- less if you have a life event. I've seen estate plans that still had a former spouse in them- not a pretty issue to deal with, trust me! I've seen disbursements to people who have been dead for years, with no provisions for the next beneficiary, leaving the assets in limbo. I haven't seen it all, but in 32 years, I've seen a lot.
It's important to know that beneficiary designation of an annuity, life insurance policy or a retirement account will always supersede your will. For example, if you had your brother as the beneficiary on your IRA and in your will you decided to leave the IRA to your daughter, it will go to your brother regardless of what you put in your will. So remember- will second, named beneficiary first. Trusts can be utilized for a variety of needs if leaving money outright to beneficiaries is not a good idea due to age, lack of responsibility, special needs or any other reasons leaving money outright to a beneficiary may not be a good idea. I emphatically, strongly suggest you speak with your Certified Financial Planner™ and/or your estate attorney about getting your plan down in writing. I also suggest that when you choose an attorney, make sure he or her are specialized in the skills of estate planning and taxes. You wouldn't go to a dermatologist if you broke your ankle, and you should go to an attorney who specialized in anything other than tax and estate planning. I promise you that doing your plan won't harm you in any way, just like doing life insurance won't kill you. You'll sleep more soundly, and so will your loved ones.