Four Deaths, Three Estate Planning Mistakes, 10-01-2009

What would you want to leave behind for your family? If your choices were A) a contentious mess, or B) a well-coordinated estate plan, you would choose option B, right? All too many of us end up with option A. In fact, a recent national survey discovered that only 44% of Americans have a simple Will, much less a well-coordinated estate plan.

This is a story of four best friends from school: Charlie, Keith, Mike, and Stu. Each of them lived very successful lives, but their deaths brought very different outcomes.

Charlie was the first of the friends to pass away. His death was quite a shock to everyone because he died in a car accident at a young age. Unfortunately, Charlie never got around to planning his estate and died without a Will. So, not only did his assets have to go through the court process called “probate,” his assets also passed by “intestacy,” which is a fixed formula set by the state legislature for those dying without an estate plan. Charlie was unmarried but had a long-term partner. Unfortunately, the state’s formula did not take that into consideration. So, all of Charlie’s assets went to his blood relatives and none went to the person who mattered most to him, his long-term partner.

Keith learned from Charlie’s mistake. Shortly after Charlie’s death, he went to an attorney and created an estate plan. However, he stuck the plan in a drawer for the many years since it was created and forgot about it. When Keith passed away, he had not updated his estate plan in almost twenty years. While his plan avoided intestacy, it did not reflect his current relationships and intentions, meaning that his estate was not distributed as he wanted at his death. Keith, who had been married to Linda for more than a decade, would want everything to go to her. However, Linda was shocked to discover that his outdated estate plan left everything, including the house they had shared for years, to his former girlfriend from 18 years ago, Betty.

Mike learned from both Charlie’s and Keith’s mistakes. Not only did he put an estate plan in place, he made sure that he kept it updated with his current dispositive wishes. However, he forgot to think about beneficiary designations. Like many of us, the majority of Mike’s wealth was controlled by beneficiary designations. Mike had been with the same employer since graduation. The beneficiary designation on his retirement plan listed his mother; at that time, he was unmarried and had no children. His designation sent the bulk of his wealth to his mother, who was in a nursing home. Not only did it deprive his wife and children of money they desperately needed, it ended up reimbursing the state Medicaid agency for paying for his mother’s nursing home care.

When Stu died, he had seen the personal and financial tragedies that could occur with improper planning. Stu went to an attorney who focused his practice in estate planning. The attorney prepared a well-coordinated estate plan that considered all of Stu’s assets, including those controlled by beneficiary designation. Stu did his part, too. He made sure to follow up with the attorney periodically and whenever there were significant changes in his life. While Stu’s family was saddened by his passing, their grief was not compounded by poor planning.

The four friends each had the best of intentions, to provide for their loved ones after their passing. However, only Stu had an updated, well-coordinated estate plan and only Stu achieved the goal of caring for his loved ones who were left behind. You can follow Stu’s lead by making an appointment with Morris Hall to complete your comprehensive estate plan.