I frequently meet people outside the office who don’t have estate planning. Many of them feel that it isn’t “necessary” at this point in their lives. Commonly, these couples or individuals are parents, who have children under the age of 18. My conversations with these individuals generally follow the same scenario:
At an event earlier this year, a friend mentioned that he didn’t have a will because he didn’t need one. That led to this exchange:
Me: “Your divorced?
Me: “You own your house?”
Me: “You have life insurance?”
Me: “You have retirement accounts?”
Me: “Do you want your ex-wife to be responsible for your money if you die and your kids are under 18?”
Him: —Big drink of beer, without an answer.
I hope I gave him something to ponder. Many people under the age of 50 think that they don’t “need” estate planning because they don’t have “anything”. However, the what you have doesn’t matter, so much as the what happens to the “nothing” that you have?
The costs associated with not having an estate plan significantly outweigh the costs of having a plan. If you pass away while your children are under 18 and no planning in place, a conservatorship will most likely be necessary to manage the property that you intend to pass to your children.
Conservatorships are Expensive.
If you pass away with minor children, do you want your $250,000.00 life insurance policy to be tied up in a conservatorship that will end up consuming between $20,000.00 to $30,000.00 of those proceeds in attorney fees and filing fees? The average cost of setting up a basic conservatorship for a minor child is between $2,000.00 on the low end and $3,500.00 on the high end, assuming there are no complications (when an attorney says this, he/she knows that there will be complications, there always are). Annual accountings and other reporting requirements will run around $1,500.00 to $2,500.00 per year – again assuming no complications.
Who Manages Your Kids’ Money?
Although costs are important, the scarier proposition is that your ex will be managing your money again. You divorced for a myriad of reasons, and you may not trust your ex with your money. It’s not an absolute, but there is a good chance that your ex will petition the court to be appointed conservator of her child’s estate. Your parents may petition too, but for many people that isn’t an option, or it’s scarier than having your ex serve as conservator.
If your married and something happens to both you and your spouse, a conservatorship will also need to be established to manage the estate for your children. Again, you will have no input into who manages this money for your child. A professional conservator may be appointed, which results in additional fees and costs.
Child Turns 18, Now What
After I walloped my friend with points 1 and 2, I knocked him out with point 3. Without a properly drafted will, your kid gets his or her share of your estate when he turns 18. Just imagine the D&B (Dave & Busters) points he can earn with $125,000.00 100,000.00
(don’t forget to subtract attorney fees and court costs). The claw machine never had it so well. While some people’s kids may be able to make wise financial decisions at age 18, that is not always the case.
Seriously, imagine yourself at age 18 with $10,000.00 let alone $100,000.00.
So what can you do to avoid this result and enjoy an evening when you’re out with me…
Call my office at 503-668-3558.