Many people know that they need life insurance to replace their income in the event of their passing. But besides life insurance, you also need to have a legal document known as a will. A will ensures that your property is transferred according to your wishes after your death. This is important because you don’t always designate a beneficiary for your property the way you do for life insurance benefits or retirement accounts.
There are many hidden dangers associated with not having a will in place. I spent years working in bank trust departments, which manage property and money for their clients upon their deaths — especially in complicated situations that require professional expertise. When our clients had no wills, I saw issues come up all the time.
These problems should serve as a reminder and illustration of why it’s so important to have an up-to-date, signed will. Here are some of the most challenging issues I witnessed:
In most cases, leaving your children a large sum of money is a gift. But if you have heirs who aren’t equipped to handle so much at once, it can do more damage than good. Maybe these heirs are simply bad at handling money, or maybe they’re addicted to drugs or alcohol. Either way, receiving a windfall can enable their bad habits and anger other beneficiaries who might have to employ lawyers to fight the proposed distribution.
Sometimes confusion about the actual beneficiaries of an estate surfaces unexpectedly during the settlement. Consider the case of musician and politician Sony Bono, who died without a will. After his passing, his ex-wife Cher and a man who said he was Bono’s son tried to claim part of his estate, which his wife, Mary, contested in court. The estate of rock star Jimi Hendrix was also litigated as part of a long-running family feud over the rightful heirs.
If you own property in multiple states, dying without a will can mean that pieces of your estate must go through probate — the legal process of distributing property — in multiple states. Probate is a costly and time-consuming process, especially if each beneficiary hires an attorney in each state. Imagine three beneficiaries with property in four states — that’s potentially 12 attorneys.
When you don’t have a will in place, it’s possible for a treasure hunter to create a fake one — especially if your estate is large. One of the most famous cases of this concerned the estate of businessman and filmmaker Howard Hughes. When he died with no immediate family and no will, several purported wills surfaced, and the estate spent millions defending against the bogus documents. Sophisticated analytic techniques and tools now exist that make it harder for would-be forgers to succeed. Even so, it’s better to not subject your heirs to potential grief and big attorney bills.
When there’s no will naming an executor, probate courts appoint one — usually an experienced attorney. However, the beneficiaries often chafe at the time the executor takes to inventory, appraise and distribute the estate. Family members seem to do a much faster job as executors, maybe because they’re often beneficiaries, too.
If these potential outcomes don’t motivate you to draft and execute a will — and other key estate-planning documents to express your health care and other wishes — then spend a little time researching some of the famous cases in which people have died without wills. The majority of Americans do, but you don’t want to be one of them. I encourage you to complete this task as soon as possible.