Four Reasons You Need an Estate Plan

Aretha Franklin’s catalog of hit songs will remain a relic for generations, but by leaving only a handwritten will upon her death, the legacy of her financial estate was much less certain. According to her attorney, Franklin intended to create a formal estate plan, but simply never got around to it.  As a result, her nearly $80 million estate has been tied up for years in ongoing litigation. Similarly, the artist Prince suddenly died in 2016, without a will.  To this day, his sizable estate is still entangled in contentious legal disputes. 

Many readers will shake their heads in disbelief: How can celebrities with millions not get around to creating an estate plan?  As an estate planning professional, I find this situation all too familiar. Time and again, we speak with people who either know they need an estate plan and don’t prioritize it or incorrectly believe it’s only suitable for the ultra-wealthy. 

Without proper estate planning, any one of us risks the following: 

1. Time and money 

A properly structured estate plan can help preserve more of your wealth by allowing assets to be transferred quickly and efficiently to your heirs without the oversight of the probate court, which can be costly and slow. In Ohio, the average probate process takes approximately 9-12 months and can vary significantly based on the presence of a will and the complexity of the assets. Additionally, court costs and legal fees can quickly add up. The average cost of probate in Ohio is approximately 2-3 percent of value of the estate. For an estate worth $1 million, the cost could easily exceed $20,000. 

A revocable living trust is a common tool used to bypass this process.  For larger estates, trusts can also be strategically designed to help reduce the potential tax burden on your estate, preserving more wealth for your beneficiaries. By hiring an estate planning professional to assist, you could significantly save more time and money in the long run. 

2. Privacy and family harmony

All probate cases become a matter of public record; thus, anyone can access the details, including the value of your assets, liabilities, and personal contact information regarding your beneficiaries.  One notorious local case that “hits home” involves Cincinnati’s very own Marge Schott.  To this day, anyone with access to the probate website can view the details of Marge Schott’s estate—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. 

Not only does the public nature of this information leave your beneficiaries exposed, but it can also cause disruption to their relationships and potentially cause fighting among family members over any perceived imbalance. 

3. Control over your assets 

Perhaps the most serious consequence to an incomplete estate plan is the risk of court deciding who receives your assets. Generally state law dictates the hierarchy, starting with spouses, then children and eventually parents and siblings.  Friends, unmarried partners, and stepchildren you intended to care for may not receive anything, along with charities you wish to see benefit from your hard-earned money. 

In addition, the lack of a properly structured estate plan can be counterproductive.  In the case of a child with disabilities, for example, a large outright inheritance could disqualify the child from receiving critical governmental benefits.  Connecting with the right professional to assist you with planning helps ensure your loved ones receive the financial benefits you desire. 

4. Financial security of the family

Estate planning can also help safeguard your family in the event of unforeseen circumstances.  Though we often associate trusts with the wealthy, virtually everyone can benefit from the powerful role trusts play in protecting your beneficiaries from the following: 

• Creditors: If properly structured, trust assets may be exempt from debt payments, creditor actions and bankruptcy proceedings.
• Divorce: In addition, trusts are typically considered separate property in divorce proceedings and therefore can help ensure the accumulated wealth remains with the family.

Other estate planning documents—like financial powers of attorney, health care powers of attorney and living wills—provide critical protection during your life. Without these documents, families must seek guidance from the probate court to obtain financial or personal guardianship, which can be burdensome and expensive. 

For example, if your child is a young adult and has no documents, you may be unable to act on their behalf if that child is in an accident and becomes temporarily or permanently disabled.  As a parent you may be desperate to provide support, however, once a child turns 18, a parent may no longer be able to assist with health care or financial decisions without court intervention.  This can be extremely challenging in an emergency situation. 

While there is initial cost—time and money — needed to establish your estate plan, doing so can help your family avoid paying the price later. A comprehensive estate plan crafted by a reputable estate planning attorney will cost just a fraction of what it could cost without one.  

Estate planning should be thought of as one step in crafting a financial plan—not as a separate activity. At Truepoint, our estate team regularly confers with our financial planners and investment professionals to assess each client’s situation on a regular basis. This way, we can help guide clients to the proper resources and solutions as their lives and goals continue to evolve—helping them achieve the outcomes they desire. 

With an integrated approach to estate planning, we can help offer insight on best practices, simplify the estate planning process and help connect you with the right professionals to craft the legal documents needed to memorialize your decisions—giving you and your loved ones the security you deserve.