By Julie Neitzel
It is quite surprising to note that more than 64 percent of American adults do not have a will, according to a Harris poll. Additionally, nearly one third of high net worth families have not taken basic estate planning steps to protect their assets and provide for loved ones, based on a 2015 CNBC survey.
Pop star Prince’s unexpected death in 2016 has become a case study for the importance of organizing estate planning matters. During his lifetime, Prince fiercely protected his music. In his afterlife, his heirs will fully control his music legacy.
Given the absence of a will or estate-planning documents, his unpublished and published music, image, brand and other assets eventually will pass with full control to beneficiaries. However, before assets will transfer, an estimated whopping $150 million in federal and state estate taxes must be paid. Further dissipation of his estate will occur due to legal fees, court cases resulting from other financial claims on his estate and other expenses from parties fighting over his estate. At a minimum, a will could have protected a portion of his estimated $300 million estate from some level of the unnecessary depletion resulting from the absence of estate planning documents.
Here’s my perspective, as someone who isn’t an attorney:
• Estate planning’s purpose is much greater than wealth-transfer planning or tax minimization for a small or large estate. Its highest purpose is to communicate one’s intentions with regard to providing for loved ones, protecting assets and delineating one’s wishes around end of life decisions. In the absence of documents, courts will have to decide on important decisions, such as who will care for your children, how your money will be distributed, and whether heroic life-support efforts should be applied.
These basic estate-planning documents are important foundations:
• Last will and testament: This will define the distribution of property at death, designation of a guardian for minor children and pets, and name an executor who will be fully responsible for administering the will. Many times, the will enables a transfer of assets in an individual name into a revocable trust for further handling.
• Revocable trust: This document provides a measure of privacy that a will cannot. It provides a disposition plan for the estate property, which can also enable a more expedient transition, bypassing probate and additional estate administration expenses.
• Living will: This document is vital, as it communicates one’s intentions regarding end-of-life medical treatment, resuscitation and organ donation. Should you lose mental capacity, this document removes the burden and uncertainty for family and friends in making life-and-death treatment decisions.
• Durable power of attorney: During your life should you become incapacitated, this document will allow specified individuals to carry on your financial affairs and protect your property during your period of incapacity.
While the legal effect might be limited, leaving letters of wishes to each of your loved ones, and possibly to trustees, could be emotionally significant. Expressing one’s intentions, hopes for the future and the importance of the relationship with a loved one can provide comforting closure during a period of grief and loss.
For the sake of the living, the communication of intentions, as expressed through the estate-planning documents and the not-legally-binding letters of wishes, can provide smoother transitions. While those documents are important to have in place, others might be needed. It is critical to work with your advisers and an estate-planning attorney who can guide you through this process. This important planning area should not be left to chance. ↵
Julie Neitzel is a partner and adviser with WE Family Offices in Miami and a board member of the Miami Finance Forum. Contact her at Julie.Neitzel@wefamilyoffices.com or 305.825.2225.