It’s a lesson seen periodically in news headlines: A famous celebrity or musical artist passes away, leaving behind a substantial estate, and there is no will in place to determine how it will be passed on. As a result, lawsuits and family fights ensue.
It leaves many people shaking their head and thinking, “someone that well-off, and they didn’t have an estate plan?”
Yet many people don’t. According to one recent survey, two out of three Americans don’t have a will or other estate plan in place. Yet nearly two-thirds of the respondents in the survey agreed that having one is important.1
Estate planning pitfall #1: None
Even if your estate will be just a fraction of the ones typically left behind by A-listers, it's no less critical that you adequately prepare for your inevitable passing. While it's never fun to face one's mortality, failing to prepare an estate plan will put the government in charge of your financial afterlife. Indeed, drawing up an estate plan is an advanced act of protection and mutuality for your loved ones. (Discover more: Wills and the basics of estate planning)
It's called intestate succession, and the particulars vary from state to state. But generally, said Kimberly Hanlon, an estate planning attorney in Minneapolis, most states give top priority to a surviving spouse, followed by adult children. But if you're unmarried and have no kids, then things get a bit murkier as parents and siblings come into the mix.
And in cases like celebrities, where the estate is large and has control of songs and copyrights that can produce future revenue, arguments often ensue.
Family squabbles on the scale you often see occurring following a celebrity's death are less common among more mainstream people, but they do happen, generally when tensions have already been running high in the family before a person dies. (Related: How to keep heirs from fighting)
"The thing about probate cases, is there's an element like family law," said Hanlon in an interview. "With divorce, you only have two people, but in these cases you can have multiple players — and sometimes they group together in alliances, similar to a reality TV show. There are all sorts of long-standing family dynamics that are the undercurrent of what's happening. There's no other area where 'Mom always liked you best' is something that really arises in a case. They can be very difficult cases for the court to sort out and manage — and they're difficult for the families going through them."
Estate planning: Need more than a will?
Wills aren't everything when it comes to estate planning, of course. Many people also set up trusts and foundations to avoid certain tax liabilities — and shield their net worth from the public.
Put simply, a will lets you divide your assets however you'd like, but gives you no say as to what's done with them beyond that. A trust is an entity that holds property and lets you establish rules around what's going to happen to your assets (i.e., it dictates how money will be used or what's to happen to specific assets). (Discover more: Is a trust right for you?)
Having an estate plan isn't a set-it-and-forget-it procedure, either. It's important to regularly review your plan to adjust it for changes in your life. (Related: Estate planning: 6 big mistakes you might be making)
"You should at least review it periodically to make sure it says what you thought it said or what you want it to say," said Allen Porter, a partner at Miller Porter & Muller, P.C., in Princeton, New Jersey. "Relationships evolve and people change and die — so you want to draft a will so it’s good not only for today, but so it has some durability. You might name not just one executor but a few backups as well."
Comprehensive estate planning isn't cheap. Prices vary widely by location and your need, though a range of $1,000 to $1,200 isn't unusual .2 That, sometimes, can be an added hurdle for people who have put off making a will.
But the short-term cost, say estate planners, is far outweighed by the long-term security and peace of mind.
"The price of having that estate plan done is minimal compared with the value of the decisions that you get to make and having your estate be in order for your family and not leaving a mess behind," said Hanlon. "I have people who come to me to do estate plans and, as soon as we're done, they breathe a sigh of relief."
Discover more from MassMutual…
Calculator: How much life insurance do I need?
This article was originally published in April 2016. It has been updated.