Aretha Franklin’s catalog of hit songs will leave a legacy for generations, but, without a will, the legacy of her financial estate is much less certain. According to her attorney, Franklin meant to create an estate plan, but never got around to it. Now her $80 million estate will spend years in probate court.
Similarly, at the time of his sudden death, Prince died without a will, and since then, his sizable estate has been entangled in a contentious legal dispute with no resolution in sight.
Many readers will shake their heads in disbelief: How can celebrities worth tens of millions of dollars just not get around to creating an estate plan?
As an estate planning professional, I find this situation all too familiar. Time and again, I speak with people who know they need an estate plan, but they don’t prioritize it.
Many people wrongly believe that estate plans are only for the mega-rich and that “the rest of us” don’t have enough assets to worry about.
But without proper estate planning, you risk losing the following.
1. Time and money — Any estate without a will goes to probate court, which is costly and slow. In Ohio, the average probate decision takes approximately 12-18 months.
And the associated attorneys’ fees and court costs add up. Prince’s estate has already paid out almost $6 million in expenses. Though this case is extreme, the average cost of probate court in Ohio is 2-3% of an estate’s net value. For an estate worth $1 million, the costs could exceed $20,000.
In short, probate almost always costs several times more than hiring an estate planning professional.
2. Privacy — All probate cases become a matter of public record, and the files can be accessed by anyone. A local case in point: On Hamilton County’s website, you can view the details of Marge Schott’s probate case — the estimated value of her assets, who inherited them and how much each person received.
The consequences can be worse than just the embarrassment of your finances being plastered on the internet. If you own a business, probate court can undermine years of vigilance, publicizing your company’s value to competitors and potential acquirers.
3. Control over your assets — Perhaps the most serious consequence of probate is that the court decides who receives which assets. Generally, only spouses, domestic partners and blood relatives can inherit assets under succession laws; unmarried partners, friends and charities get nothing.
Probate also can distribute inheritances in counterproductive ways. In the case of a child with disabilities, for example, a lump sum inheritance can be so large that the child can no longer qualify for government assistance.
4. Protections for your family — Estate planning involves more than just wills; it also helps safeguard your family in the event of unforeseen circumstances.
For instance, though we often associate trusts with the wealthy, they can provide powerful protections for beneficiaries, including from:
- Creditors: Trust assets can be made exempt from debt payments, creditor actions and bankruptcy proceedings.
- Divorce: Trusts are typically considered separate property in divorce proceedings and therefore can help make sure inheritances stay in the family.
Other estate planning documents — like financial powers of attorney, health care powers of attorney and living wills — provide critical protections during your life. Without these, family members often must go through probate court to obtain guardianship rights, which can be burdensome and expensive.
One thing parents often find surprising is that once a child turns 18, the parent no longer has the right to make health care or financial decisions for that child. If your adult child becomes disabled, even temporarily, you might need court approval to act on their behalf.
As I often say, you either pay for estate planning now — or your family pays more for it later. A comprehensive plan developed by a reputable estate planning attorney will cost a fraction of the potential cost of not creating an estate plan.
Estate planning should be thought of as one step in crafting a financial plan — not as a separate activity. At Truepoint, our estate team confers with our financial planners and investment professionals to assess each client’s situation. That way, we can recommend solutions that make the best use of their assets—while achieving the outcomes they desire.
This integrated approach simplifies estate planning. A professional offers insight on best practices, listens to your wishes, and crafts legally binding documents that clarify your decisions — giving your loved ones the security they deserve.