Who do you trust to distribute the assets you have accumulated throughout your life? A judge, or a close relative/friend? If you do not have proper legal documents, a state judge will make those decisions for you.
One of the most important and often ignored aspects of financial planning is what I call legacy planning. This deals with how your estate (the things you own and your well being) is handled and distributed while alive and after your passing. When meeting with new clients, I often find they have no legacy plan or instructions in place for such issues as the handling of their assets, medical decisions, or guardianship for their minor children.
If you do not have a will, the state in which you live will provide one for you. They call this “dying intestate,” which means you gave up the opportunity to distribute your assets as you want. Instead, you have essentially hired the state to figure it out for you. Laws vary from state to state, but they all have one thing in common: without a will all of your assets may not pass to your spouse and children.
Wills are just the first step. You also need a medical directive and a durable power of attorney. These documents apply if you become disabled and cannot make decisions on your own. A power of attorney (POA) gives authorization to act on someones behalf in a legal or business matter. The person you designate POA will do such things as pay your bills, make financial decisions, and medical decisions. If your condition is so severe that you can be kept alive only by artificial means, or if you need an operation but cannot make that decision because you are incapacitated, your medical directive allows another person of your choice to act on your behalf, honoring your preferences.
Without proper planning, your heirs will have to contend with probate court, possibly in several states. The process involves extensive time delays and high legal fees, and the release of private information to the public. Another potential problem of not having a comprehensive legacy plan is higher tax obligations to federal and state governments.
I know that it may seem costly to hire an estate planning attorney create a will and other legacy planning documents. However, having proper legal structure will cost you less in legal fees, shield more of your assets, lessen the stress on those left behind, and give you peace of mind that your wishes will be fulfilled.