October 01, 2020

Estate Planning: The HUGE Mistake that 60% of Americans Make, Ep #13

16 minutes

What is the mistake that 60% of American adults are making? According to a 2019 study by Caring.com, nearly 60% of American adults don’t have a will in place. You may be thinking, “Why is that such a big deal?” In this episode of Retirement Made Easy, I share WHY it’s a HUGE mistake—and what you can do about it. Check it out!

You will want to hear this episode if you are interested in...

[1:23] The HUGE mistake that 60% of American Adults Make
[2:03] Celebrities that passed away without a will in place
[4:30] Estate planning is all about the details
[7:13] Why the beneficiary is so important
[12:34] Get the proper documents in place

Celebrity examples of poor estate planning

Numerous celebrities have passed away without proper wills in place. Jimmy Hendrix passed away in 1970. 34 years later, there was still a court battle happening over his estate. Bob Marley also died without a will. Dozens of claimants have come forward—from the US, Jamaica, and England—asking for an inheritance from his estate. It was left to the courts to vet them. Steve McNair built a house for his mother and it was taken away from her because it wasn’t bequeathed to her in his will. Probate court is NOT a quick process for large estates. It can become a nightmare for your family and will cost a fortune—even if you’re a celebrity.

Estate planning is all about the details

Years ago there was a news story about a man named David Sandler. He was about to get remarried and had children from a previous marriage. He wanted to make sure his assets were left to his children. So before he got married, his wife-to-be Debbie signed a prenuptial agreement. She waived her eligibility from inheriting the retirement pension.

When David passed away, Debbie and David’s children went to court over his estate. David’s children had a copy of the prenup. Unfortunately, it wasn’t good enough. According to ERISA regulations, only spouses can wave their eligibility to inheriting their spouse’s retirement plan.

But Debbie couldn’t legally waive the right to his retirement pension because she was his fiance when the prenup was signed. So Debbie got everything and the children got nothing. The details matter.

Why the beneficiary is so important

There was a mother (let’s say Nancy) who was married to someone (Gary) for a couple of years before they got divorced. They didn’t have children. She got remarried to someone (Tim). Tim passed away before Nancy did. Nancy wanted her estate split evenly between her two daughters. But she forgot about a life insurance policy—it was still listed under Gary. When the daughters discovered the mistake, they brought Gary to court. The probate court decided that Gary got the money.

Beneficiary designations will trump whatever is in your will. Look at who you have listed as the beneficiary of life insurance policies, retirement plans, Roth IRAs, and your 401K. Check and double-check the beneficiaries. Make sure it’s right. If you don’t make the changes, you can unintentionally disinherit your children. What if you don’t have children? You can make your beneficiary a trust, an organization, a church, a charity, or even the Federal government.

I share a cool story about a gentleman in Wisconsin who was creative with his will. Listen to hear what he did!

Get the proper estate planning documents in place

Planning out your will may not be the most exciting thing you can do, but it is important. Because of COVID-19, estate planning attorneys have been busier than ever. People are rushing to take care of the “what-ifs” in life. The pandemic has brought end-of-life planning to the forefront.

What about you? Do you already have the proper documents in place? If so, does it need to be amended? Do you have the proper beneficiaries in place? Does your trust need to be amended? It’s a good idea to re-evaluate everything because our personal lives are in constant flux. Don’t put your friends, family, or heirs through probate court. Don’t be part of the 60% living without a will.

Resources & People Mentioned