Don't Make This Tragic Money Mistake
by Dana George | Updated July 23, 2021 - First published on July 2, 2021
Dying without a will can compound the heartache for those you leave behind.
I have a friend who has been obsessed with her parent's wealth for as long as I can remember. She has always known roughly how much they have in savings and investments, how much their property is worth, and the cost of their monthly living expenses.
I'm not spilling any secrets out of school. I've spent years telling her how odd I find her interest in money that is not hers. While her parents go about the business of living, she worries about whether their money and possessions will be spread evenly between three siblings when they're gone.
Fortunately, her parents are planners, so I don't have to worry about her having a complete meltdown when the day comes that their wills are read.
Her concerns, though, do serve as a reminder: Dying without a plan in place for those you leave behind can be a tragic mistake, financially and emotionally.
Last Will and Testament
Dying without a will may not impact you, but it can leave a powerful, painful impression on the people you care about. When there is no will, your estate goes into probate. Rather than follow your wishes, the probate court uses the laws of the state you live in to determine who inherits what.
When a person dies without a legal will in place, it's referred to as dying "intestate," and the probate court takes over. Depending on how complicated your estate is, it can take the probate court anywhere from a few months to a few years to settle. During this time, the court decides where everything you own will go. This can be anything from investment accounts to baseball card collections.
The probate court expects to be paid for its services, so it takes its legal fees "off the top." Those fees generally range from 5% to 10% of the total value of the estate. What's left over is typically assigned to the next-of-kin. If you have an unmarried partner, friends, or charities you care about, they are unlikely to see any part of your estate.
Though a will serves as a blueprint for how you want your assets distributed, it may or may not save your estate from the probate court. For example, your will may be pushed into legal probate if someone contests it or you are part of a complicated business arrangement (like co-owning a company).
Ways to avoid probate
If you want to make sure your estate does not end up in probate, these legal options are among those that can help.
Revocable living trust
In a nutshell, a revocable living trust allows you to control all of your assets while you're alive but seamlessly transfers them to your intended beneficiaries when you die -- all without probate court involvement.
Transfer-on-death (TOD) designations
Cars, trailers, motorcycles, RVs, boats, and other personal property can typically go directly to a beneficiary when there is a TOD in place.
Payable-on-death (POD) designations
A POD designation allows you to transfer money from accounts to one or more beneficiaries. These accounts frequently include:
Suppose you own real estate and want it to pass immediately to your beneficiaries upon your death. In that case, a beneficiary deed allows real estate transfers to take place upon your death, skipping probate.
If you want to be the one to decide who inherits the family cookbooks, fishing tackle, and any of the other possessions that make up your everyday life, write a will. You can buy a simple will template from an office supply store for $5 to $20 or create an online will for under $100. Depending on the complexity of your estate, the average price to have an attorney draw up a will is $940 to $1,500, according to ThumbTack.
You can even set up a revocable trust without an attorney using software or an online service. Living trust software will only cost you around $70, according to the online legal site NOLO.
Whether you want to do it yourself or would prefer an attorney to walk you through the process is up to you and what you can reasonably afford. Because my husband and I wanted our estate planning to be airtight and weren't quite confident enough to try it on our own, we recently worked with an attorney to have a revocable family trust set up. The attorney also drew up new wills, updated our power of attorney forms, created living wills, and offered a ton of good advice -- all for $1,600.
Here's how we justified that cost: Say we die and leave assets of $800,000. If our estate goes through probate, the least our beneficiaries can expect the court to take is between $40,000 to $80,000 in fees (5% to 10% of the total value). That realization was enough to make the $1,600 we spent getting everything in order feel like a bargain.
Make it legal
If you're going to create your own will, make sure it's legal in your state. At the time of this writing, you must have two witnesses sign the document -- except in Vermont, where you need three witness signatures. The witnesses need to be at least 18 years of age, of sound mind, and not an heir or someone mentioned in the will. In other words, your spouse and children cannot act as witnesses if they are beneficiaries.
Typically, a will does not need to be notarized, although it may need to be filed. Where you should file your will depends on where you live. Some states require you to file with a specific court or county recorder's office, while others have a Register of Wills where wills are safely stored.
A call to your local court system or state bar may be all it takes to learn if you need to file your last will and testament, and if so, where it should be filed.
The final word
In Sweden, there's a term called "döstädning." Roughly translated, it means "death cleaning." It's a time in life when people over 50 begin to purge their homes and organize their belongings so their kids won't be burdened by all the "stuff" they leave behind when they die.
Organizing end-of-life documents like trusts, wills, powers of attorney, and funeral plans is another way to make sure the people we love aren't burdened by the stuff we leave behind when we die. It's our final chance to show them we cared by making life a little easier on them.
Thinking about death is never fun, but knowing that you've done everything you can to prepare for it can offer a measure of comfort.
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