You Need a Will – Prince Edition
When I heard about Prince’s death, I did what I think most of us do when a famous singer dies. I immediately went to YouTube and listened to a few of Prince’s songs. The obvious choices for most of us are Purple Rain, maybe Little Red Corvette, and KISS.
It wasn’t until a few days after his death that Prince’s sister, Tyka Nelson, filed paperwork with the state of Minnesota, declaring that she thought her brother had died without a will. Every financial news site immediately had their stories about the benefits of wealthy people having their financial affairs in order. We heard similar stories when actor James Gandolfini died a few years ago. Rich people need wills, this much we know.
But what about the rest of us? Do we need a will?
According to a 2014 Rocket Lawyer survey, 64% of Americans do not have a will. When asked why, 57% said “they just haven’t gotten around to making one,” 22% said a will is not urgent and 17% said they don’t think they need one.
It is my firm view that everyone needs some aspect of estate planning, even if you aren’t worth millions.
I present to you the KISS method of estate planning – Prince Edition.
KISS – Yes we are talking about the KISS method K.I.S.S. – Keep It Simple, Stupid. And yes, I will probably re-purpose this article when Gene Simmons dies.
Why the heck does an average non-millionaire person need a will?
One word: Probate. If you don’t decide what you want to happen with your affairs while you are living, guess who gets to decide once you’re dead? The State! And if you have any assets, your relatives get to fight over it in front of a judge. Who in their right mind wants that?
Prince’s estate could take years to resolve – it will be a giant mess. His relatives will almost certainly fight over his assets and the entire process will be massively expensive.
But it is even worse than that.
His wishes cannot be carried out.
Prince was a huge supporter of the Elton John AIDs Foundation and Jazz Foundation of America. With proper planning, he could have created charitable trusts that would continue gifts to these charities long after his death, perhaps in perpetuity. That’s all over now and it is very unfortunate.
What can we learn from this?
Well, I should preface the context of my message by saying I’m not a lawyer – While I am a practicing Certified Financial Planner, I don’t give legal advice, nor do I draft legal documents. That being said, proper legal documents are an integral part of a comprehensive financial plan. When we encounter a clients that has unmet legal needs, we simply refer them to a local attorney.
Estate planning can be state-specific, find someone local.
Like the old saying goes: There are only two certainties in life, death and taxes, and you need paperwork for both.
The KISS Estate Planning Guide – Prince Edition. It is simple because it contains only three simple items: A Will, Powers-of-Attorney, and Health Directives. We’re going to go over each one, what it is, and why you need it.
What is it?
As I often do when I have a question, I asked Google, “What is a will?” and I was surprised by the accurate simplicity of the answer.
Google’s definition: “The faculty by which a person decides on and initiates action.”
How simple is that? When we think of a will, we think of some massively complicated legal document that takes weeks to prepare with a team of lawyers and the cost of a decent used car. In reality – it really is as simple as that definition, decide and initiate action. That’s it!
Why do you need a will?
A will distributes your assets upon your death.
- Even if you don’t care what happens to your assets, you should care about not leaving a mess to those you leave behind.
Many people procrastinate creating their will because they are unsure how they would like their assets distributed and fear damaging family relationships.
- A will isn’t as permanent as it sounds. Your will is only as permanent as you want it to be. It isn’t written in stone! You can change it as many times as you want. Even if you aren’t 100% positive how you want your assets distributed, at least get something on paper. You can revise it at any time.
On a personal note, I had three children before I finally made a will (and this was several years after I became a financial advisor). Yes, I’m a hypocrite! It wasn’t until my wife and I took our girls to Disney World and decided to leave little Benny at home with the grandparents. We decided that being separated was reason enough to create a will. Because we have younger children, we also chose guardians and created a trust, but your process doesn’t need to be as involved as that. Our entire process took a few hours and cost about $1,200. This sum is no small amount of money, but when you average it out over the time our kids are minors, it is about $54/year.
Power of Attorney
What is a power of attorney (POA)?
Definition from Wikipedia: “A written authorization to represent or act on another’s behalf in private affairs, business, or some other legal matter, sometimes against the wishes of the other.”
- These can be quite technical and state specific, but the quick and easy explanation of a power of Attorney is granting someone the ability to act on your behalf.
Where the POA becomes necessary, is when you have a medical emergency, but it doesn’t kill you. If you are incapacitated, the POA pre-authorizes someone else to make decisions for you. In the scope of retirement planning, think taking IRA distributions from your spouse’s IRA. Without a POA, if you become disabled and unable to act for yourself, your spouse will have a tremendously difficult time accessing your retirement accounts.
Health Care Directives (formerly called a Living Will)
What is it?
The objective of the Health Care Directive is to make your health care wishes known while you are able so that your family and your doctors don’t have to guess what your wishes are if you are ever unable to communicate.
A health care directive gives your family direction on what medical decisions to make on your behalf if you are unable to communicate. This document gives you the chance to write out your wishes.
Even if you are uncertain of your exact wishes, you can chose a friend or family member that you trust to make those decisions for you, in the event you cannot make them for yourself. (You should ask before appointing someone!)
This is a document that you might have to create anyway if undergoing a major surgery. It’s better to complete it on your own terms and not under the anxiety of a pending medical procedure.
So that’s the K.I.S.S. (Keep It Simple, Stupid!) guide to estate planning.
Will, POA, & Health Care Directives.
We recommend it as a minimum for anyone that comes through our doors. Many need more than that, but everyone should have at least that. Call an attorney out of the phone book or better yet, have your financial advisor or accountant recommend one.
There is always sadness when a talented artist dies and 2016 hasn’t been pulling any punches when it comes to that, but if we can use the apparent situation of Prince dying (as it appears) unprepared, and use it to better prepare ourselves, our loved ones can only benefit.
Listen to the full podcast below.
- You Need a Will – Prince Edition
- Top 10 Reasons to Try a “Practice Retirement”
- Preparing Your Parent’s Finances for the Nursing Home
- Is Pension Max Right For You?
- Put the Market Correction to Work for You
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