Fast Money Blog
Estate Planning is for Everyone
The sister-brother music duo named Gabby & Gabe made a nice team—she provided the folksy voice and he provided the vintage guitar. They didn’t make a living at their craft at first, but both went on to solo careers and their incomes grew.
Gabby got married, broke into new music genres and had some big hits on the charts. She and her husband grew apart over time, but he still helped manage her PR. And Gabe became a virtuoso in his own right, yet made just enough for he and his wife and kids to live modestly.
When Gabby became ill later in life, she told her dear brother and also her estranged husband that she owed all her success to Gabe’s inspiration. He was to be heir to the bulk of her estate—about three-fourths of it, she estimated. And her spouse, the balance—still a tidy sum.
To ensure her wishes were clear, she had it all written down and she died with a Will in place.
The story of Gabby & Gabe suggests three important estate-planning touchpoints to consider:
- A Will can ensure wishes are fulfilled, not leaving it up to the legal system to decide.
- Estate Planning is about much more than a Will.
- Wealthy and wise or not, estate planning is for everyone.
Let’s start with the first point above:
Fortunately, Gabby had a Will. But if there was no Will, her estate would be distributed according to the probate process and applicable laws that vary from state to state.
For example, with no Will in Nebraska, her estranged (not legally divorced) husband would actually be the sole heir. Happy marriage or not, verbal agreements to the contrary or not, Gabe would get nothing.
Now imagine the flip side—that Gabby and her husband had been legally divorced versus estranged and there were no other surviving parents or descendants. If no Will was in place, then Gabe, by law (a surviving sibling) would be sole heir to the estate—nothing for the ex.
Gabby wanted neither result. She wanted Gabe to receive the bulk, but her husband was also to be included. When it’s not in writing, other outcomes may legally result. Plus, unintentional heirs sometimes suffer “amnesia” regarding past conversations about who gets what.
A Will can help assure the wishes of the deceased.
For the second point above:
It’s more than a Will—an estate can present complexities, which could be minor or major.
Gabby had a tax-deferred IRA split among her heirs. An estate planning professional helped stipulate that those funds were distributed over time versus in one lump sum, which helped minimize the up-front tax burden for her brother and husband.
She also had 4,000 acres of farmland for the two men to share proportionally. Instead of a weighted interest in one entire parcel, she gave 3,000 acres to one and 1,000 acres to the other to prevent problems later on—for example, if one wanted to sell and one didn’t.
A professional can address tax considerations, real estate options and other hurdles or pitfalls.
For the third point above:
Wealthy and wise means something different to everyone. But estate planning can help with all of it.
Gabby wanted to ensure her husband had long-term income. So she chose a trust that would distribute funds to him periodically into the future, helping him budget and manage the wealth.
And long before Gabe’s windfall inheritance, he considered his wonderful vintage guitar to be an important asset—not particularly valuable, but cherished. So when he planned his own estate years prior, he also chose a trust, bequeathing the instrument to a museum that was planned for the future.
Estate planning helps everyone, whether they’re wealthy at the time or not (or may become so later), and can include options such as trusts, which help with the security and distribution of assets over time.
Planning on an estate plan?
As they say—the best time to prepare for the future is before it arrives. Here are some good questions to ask regarding the state of one’s estate:
- Is there an existing plan, including a Will, an Executor, a designation of assets, a witness, signatures, supporting details and a safe, accessible means of document storage?
- Are there new tax laws or tax implications to consider?
- Have new sources of wealth developed? Or new financial burdens?
- Are there assets in real estate or heirlooms or property of a complex nature that are difficult to divide evenly?
- Were there deaths or births or marriages or divorces in the family?
- How about health events? Extended care plans? Special needs? Legal settlements?
- Or has the passage of time simply changed one’s mind about matters?
The Key Word is Plan.