Drafting your will and testament is not exactly on most summer to-do lists. For many, the process is a memento mori, a task more foreboding than mowing the overgrown lawn.
It’s no surprise that according to the American Bar Association, 55 percent of Americans do not have a will or other estate plan in place when they die.
And for families, the statistics are not much better, according to a survey done by the online legal service Rocket Lawyer. The firm found over half of Americans with children did not have a will in 2014.
The reason most Americans said they didn’t have a will, according to the survey: “They just haven’t gotten around to making one.”
The consequence of that, says Bonnie Bowles, owner of Wills and Wellness, a family focused estate-planning practice in Denver, is there’s no guarantee who will inherit your assets. You also put your children at risk, she says, of being placed in Child Protective Services or in the custody of someone you may not feel is fit to fill your parental shoes.
“If you don’t have an estate plan, you have a ‘plan’ written by the state,” she says. “You’re relying on the state of Colorado to say what happens with your kids and your assets. Your family ends up having to go through the court system with judicial oversight, and the court system is not where people say they have the most enjoyable experience.”
Probating a will can take anywhere from six months to nearly two years, according to the American Bar Association. Most states, including Colorado, have minimum periods of time that creditors are allowed to respond, during which the probate estate cannot be distributed. And that’s only if an individual’s affairs are in order. Anything tricky — even just having a loved one who has died miss a mortgage payment — will extend that timeframe.
Probate is also expensive, Bowles says. It can cost between 5 to 7 percent of your estate. Under Colorado law, only those who have $50,000 or less in the personal property when they die can have loved ones collect their assets through a process that avoids probate.
That’s not the case with most families, she says.
“If you have a typical home, worth $400,000, both parents have life insurance at $1 million, both have an IRA, and money saved in a bank account, that can easily add up to $2.6 million in probate,” she says. “Five percent of that is $130,000. That money goes to attorneys and appraisers. The fees rack up over time through the court system.”
Her firm offers estate planning that starts at $2,000 for families. She says that may seem like a lot up front, but that completing an estate plan through an online legal site, or through a lawyer who charges only a few hundred dollars to set up a basic will and testament, often leaves too much to interpretation.
“If I’m a joint owner with my mom on my home, then I may have a will that says I leave everything to my husband. But if that deed uses certain language that means when I pass, my mom gets my share, it makes no difference what my will says. How assets are titled trumps a will,” she says.
Bowles says understanding how assets are titled and how beneficiaries are designated are the two most important and least understood facets of estate planning.
Even if you’re an estate planning lawyer, you still encounter problems. For the past six months, Bowles has been helping her husband navigate probate court for his grandmother who died decades ago.
“We’re going on five months of legal work and it’s still not completed,” she says. The family has been navigating two probate courts — one in Oklahoma and one in Illinois, where her husband’s grandmother resided at the time of death. The lengthy process is just to prove Bowles’ husband is the beneficiary of mineral rights on Oklahoma land that an oil and gas company would like to explore, something that was forgotten in what the family said was an otherwise solid estate plan.
“It’s deedable property that, had the attorney written the Bowles estate owned rather than my grandmother owning it individually, would have made all the (difference in the) world,” says Tom, Bonnie’s husband.
“It’s one piece of paper that we’re now paying hundreds of dollars for. I’m not going to get rich from the interest payments on the mineral rights, but we’re talking about a couple hundred bucks a month. We’ve got three young kids, and it would absolutely help pay for college.”
Another benefit to planning your estate with a lawyer versus an online form is that a lawyer will help you update your plans as laws change, and check in with you throughout the course of your life.
“The estate tax changes annually. As recently as four years ago, the law changed regarding power of attorney,” Bonnie Bowles explains. “If your POA was drafted more than four years ago, you would need to have it updated.”
Blake Harris, the founder of Mile High Estate Planning in Denver, agrees. “We live in a very litigious, expensive society,” he says. “In a lot of cases, you may be better off not even having a will than creating one and forgetting about it.”
He suggests that families update their estate plan at least every three years, or whenever there is a major life event such as a death, birth, marriage or divorce.
“As your financial picture changes, as your values change, you want to make your estate plan that actively reflects the needs and wants of your family,” he says.
Should singles have an estate plan?
“People think estate planning only comes into play once someone passes away. It actually becomes very important when we are older,” says Blake Harris, founder of Mile High Estate Planning in Denver. What many people don’t realize is that estate planning goes far beyond a will. It also involves setting up a durable power of attorney for both your medical and financial decisions in the event you become unable to make them.
A married person has a spouse as a natural “agent” to make medical decisions on his or her behalf, but a single person does not necessarily have that security.
This means that if you become incapacitated, a judge might give one of your relatives the right to make medical and financial decisions for you. If you have no living relatives, the court could even appoint a stranger as your guardian or conservator. The same can be true for a single parent who passes away and does not designate a guardian for his or her child if the child is under 18 years old.
Regardless of whether you’re married or single, if you do not make plans, the state dictates who inherits your assets. And for a single person living in Colorado, that means living relatives who are most closely related to you. So if you don’t want your precious possessions going to the family you’re not even on speaking terms with, it may be worthwhile to designate beneficiaries for your assets.