4 Real-Life Scenarios of What Can Happen When You Don’t Have an Estate Plan

A bucket list includes all the things you hope to accomplish in your lifetime – dream trips, family plans, personal accomplishments, the list can be long. At Rock House Financial, we have a bucket list of sorts as well, but it’s a little different. Our list includes everything that we hope our clients take care of so they can leave behind what they want to and to who they want to before they die. Unfortunately, we’ve seen what can happen when estate planning is overlooked.

Consider it next level financial planning!

There are many misconceptions about estate planning. A lot of people believe that estate planning is only important when you’re older, when you have a lot of money or if you’re sick. But this couldn’t be further from the truth.

Estate planning is important for anyone who has children – who will care for your children if you unexpectedly pass away? It’s also important for professionals, anyone who owns property or anyone who has something to lose – where will these assets go when you’re gone?

Discussing your death can be uncomfortable, but it’s an important conversation to have. A financial advisor can help get it started.

Where to Begin

The first step in estate planning is asking yourself some important questions:

  • Are there specific assets you want to leave to specific friends, family members or a particular charity?
  • If you have children, who would you like to care for them?
  • Do your children have any special needs you should consider?
  • Are there certain plans on your bucket list that you’d like to take care of, even if you’re gone, such as paying for your daughter’s wedding or sending your grandchildren to college?
  • If you have a business, have you designated a plan for what will happen to it in the event of your untimely death?

If you don’t have a proper estate plan in place, the state in which you live in does. And chances are, you won’t like it.

Not having an estate plan in place can also leave your family with a lot of stress and arguing over who should get what. If you die intestate (without a legal will), your assets will go into probate, and this process can take years, which can put your family at odds.

Being prepared and making sure you have gathered everything on our bucket list can help you and your family tremendously – being able to avoid probate, preventing headaches and avoiding costs for your executor.

At Rock House Financial, we’ve seen first-hand what this can look like. Below are 4 real-life scenarios that we’ve seen happen to clients.

 

It’s never too early to start planning for the future. Contact Rock House Financial to see how we can help.

 

Scenario #1: Your Business Partners are Left with Nothing

At Rock House Financial, we work with a lot of small business owners. Unfortunately, many business owners believe that a verbal plan is enough to pass their company on to their partners, their children or their spouse. But it’s not.

If you own a business and pass away without having a succession plan in writing, your plans – and even promises – may not go as planned. Just because you tell your business partners from the start that they will inherit your company or be able to buy it when you’re gone, if nothing is ever set up in writing, the state in which you operate in will ultimately decide.

A business that you and your partners worked hard to get started, regardless of how much blood, sweat and tears they may have put in, could instead go to your kids, leaving your partners nothing and changing their futures completely.

Scenario #2: Your Children Start Fighting

A common estate planning mistake we see is people not having beneficiaries listed on all of their accounts, or not updating them.

Many times, people start out with the best intentions. For example, they may list their daughter as the beneficiary on some accounts or as an executor. However, when a second child is born and not added, while the intention might be to leave your assets to your children equally, any assets will only go to the daughter. Even if your children are close and promise to share any inheritance, they may not be able to because of hefty gifting rules and taxes.

This can also happen if some, but not all, assets are left in a trust.

We have seen this happen to some of our clients, and we have to be creative to find other ways to give the kids their fair share. It can create a big mess for the executor and end up costing the family big fees to get it cleaned up.

Scenario #3: Your Spouse Doesn’t Know Where to Start

Another common oversight we see people make with their estate planning is not sharing a list of accounts, access to these accounts or passwords with their spouse or the executor of their will. When this happens, spouses are often left trying to figure out what’s left where.

It’s common in couples for just the husband or just the wife to handle the finances. But if that person passes away, the other doesn’t always know where to start. In addition to grieving the loss of their spouse, they are also left the financial burden of filling in the gaps.

Having the executor of your will aware of what you have to leave behind can make things a lot smoother and can prevent your spouse from having to submit a death certificate every time he or she needs access to a different account. Again, think of this as next level financial planning!

Scenario #4: Funds Not Accounted For; Money Lost

Another thing we do for clients when incorporating their estate plans into their financial planning is consolidating accounts. Many people have many different retirement funds and savings accounts. If they’re consolidated when you pass away, your loved ones will only have to go to one or two places to claim assets to several accounts. This can turn 15 sets of paperwork into just one for investments.

Consolidating everything into one trust can also help divide assets among multiple beneficiaries.

Takeaway

 When estate planning and financial planning can be handled under one roof, it can help make things more organized.

At Rock House Financial, we can help you with multiple financial planning needs. Contact us and take your financial planning to the next step.

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