Every now and then, we see media reports about celebrities who pass away, leaving vast holdings untethered by wills or estate plans. Family members, significant others, lawyers and advisers are left with months or years of work, untangling the financial mess.
Tech entrepreneur Tony Hsieh may be the most recent example of a high-flying fortune seemingly cast to the wind following an unexpected death. The founder of the online shoe and clothing retailer Zappos passed away in a house fire last November, leaving little word on how to manage an estimated $840 million in financial assets.
Reports show the only guidance family and friends could find were written on thousands of sticky notes stuck to walls throughout the house, noting financial commitments to employees, co-workers, friends and businesses. The 46-year-old left far-flung assets for his family to locate, and when all the dust settles, a vast majority of his wealth will likely be subject to the 40% estate tax rate.
Hsieh may be the most recent example, but there are plenty of other prominent people who have died, leaving close friends and family with little to no instruction on how to allocate their fortunes. The list includes Bob Marley, Prince, Aretha Franklin and Sonny Bono.
But estate planning is not just for the wealthy. Regardless of an estate’s size, an estate plan can be an invaluable tool that families can use to manage financial assets and other responsibilities after death.
Plans often contain a trust or will that address beneficiaries and how financial assets will be managed and distributed. Plans may also include a durable power of attorney, which designates a representative to make financial decisions, and an advance directive covering certain medical decisions.
If possible, it also is important to let beneficiaries know what lies ahead rather than waiting until you’re gone and letting them read about it in the plan. This approach can better prepare them for their financial futures, and it may also deepen personal relationships.
Estate planning is not always popular. Most people would rather not think about their mortality and name prospective guardians for their children. They must account for personal assets, and the process can take weeks. Attorney fees are not insignificant.
But the benefits outweigh the costs. Families experiencing a loss are already grieving, so why subject them to more work, uncertainty, and potential conflict with other family members? Without an estate plan, the public probate process can take months or even years to resolve.
Remember, plans are living legal documents and should be reviewed periodically to ensure they are current. Laws change and families evolve, so modifications may be necessary.
Estate plans can remain active long after you are gone, and it’s comforting to know assets will be managed and people will be cared for according to your wishes. No one wants to leave their family behind to decipher sticky notes hanging from a wall.