By: Al Young
When I was an undergraduate student at Marquette University, the one common condition my friends and I shared was that we had no money. Mark was the exception. He had a lot of money. He had a new Mustang, a great stereo, and lived off campus in a new high rise apartment building. He seemed to have everything. As it turned out, he was missing one thing – parents. Mark’s parents died in a car accident when he was in high school.
Unfortunately, Mark’s parents did not do any estate planning. They didn’t even have a Will, so Mark and his sister inherited everything on their 18th birthdays. While we were sorry about his tragedy, we loved having a friend who not only had what seemed like endless amounts of money, but also who couldn’t spend it on himself, and on us, fast enough. I don’t know what happened to Mark. He dropped out after our sophomore year and I lost track of him.
As a father, I often think of Mark, all that money and how it was spent. I have worked hard to build my estate and to provide financial security for my family. The last thing I want if something happens to my wife and me is for my children to receive an inheritance when they are 18 year old high school students.
Mark is just one real life example of why estate planning is so important. If you think about your own family situation, other potential disasters associated with inheriting large sums of money may readily come to mind–a child or other family member has creditor problems, a bad marriage, addictions to alcohol or drugs–to name a few.
So why doesn’t everyone have an estate plan? The three most common reasons I hear from people who eventually do come to see me are: 1) a reluctance to face one’s own mortality, 2) a fear that estate planning will be complicated, and 3) a natural reluctance to disclose private information about one’s estate to a stranger. While these fears are real, failure to take action can have disastrous consequences for your family. To overcome the fears, begin with small steps.
First, make a list of your assets and debts showing their current values. Your financial advisor should have a template you can follow. For life insurance policies, retirement plans and IRAs, make sure the beneficiaries are current.
Second, determine who you want to inherit your estate and at what age(s). Consider staging the ages when a child or grandchild will receive an inheritance. Perhaps 1/3 should be distributed at age 25; 1/3 at 30 and the balance at 35. The distribution scheme is limited only by your imagination. But the important point is that you get to choose. The loved one does not automatically receive everything at age 18.
Third, consider the appropriate individuals (primary and alternate) to serve as your personal representative to handle your estate. If a minor or young adult will be a beneficiary, consider who should serve as trustee (again, primary and alternate) to manage the inheritance until the minor or young adult attains the age you specify.
Lastly, ask relatives, trusted friends and advisors for the names of competent estate planning attorneys. Most attorneys offer a free consultation to new clients. Take advantage of that to meet with two or three attorneys to find one that you feel you can trust.
Over and over again, clients tell me that they feel a great weight lifted from their shoulders after they execute their estate planning documents. Avoid the mistake made by the parents of my college friend Mark. Put an estate plan in place today.
Al Young is a shareholder with the law firm of Fox, O’Neill & Shannon, S.C. in Milwaukee, WI. He concentrates his practice on estate planning, tax and business law. Al can be reached at 414-273-3939 or firstname.lastname@example.org.
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