The Consequences of Neglecting Your Estate Plan
Even though most Americans know that having a will is an important part of estate planning, there is still some evidence of resistance. A recent survey by Caring.com found that only 56% of American parents have a will or living trust document. In addition, 52% of adult children do not know where their parents keep their estate documents, and 58% are unsure of the contents of those documents. A lack of preparation in this case can cause a world of trouble and result in financial and emotional strain at a time when one must be able to think clearly in order to get family affairs in order.
No one knows the importance of having estate planning documents in order better than Andy Cohen, CEO of Caring.com. He and his sister experienced their own crisis involving their parents.
“Before starting Caring.com I was working at Intuit, running their website Quicken.com, and my parents got sick and both passed away. During that time I realized how hard it was to be a caregiver and how there weren’t any good resources out there to help family caregivers know what to do. So I started Caring.com to try to make it easier for other people who are caring for aging parents. One of the challenges me and my sister had was finding all of our parents’ legal documents. We didn’t have copies of them and we weren’t sure how they worked, so it was very difficult for us,” says Cohen.
The Cheat Sheet spoke with Cohen for more insight into why so many consumers are unprepared when it comes to estate planning.
The Cheat Sheet: Why aren’t more people drafting a will or establishing a living trust?
Andy Cohen: I don’t think anyone wants to face the prospect of the end of life. Whether it’s your own death or someone else’s death, no one wants to think about it, so it’s something that people tend to put off. I live in California, and people tend to do the same thing when it comes to earthquakes. No one wants to prepare for an earthquake because it’s an unpleasant thing. Death is a more unpleasant thing than an earthquake, but it’s just human nature. Unfortunately, if you pass away or your parents pass away, [neglecting the issue] can leave a real mess behind.
CS: How does a will differ from a living trust?
AC: A will outlines who gets what. It will answer the question of where you want your assets to go. If you don’t have a will, the court will decide for you where your assets will go. This is done through a process called probate. This is a long and expensive process; you don’t want the courts deciding where your assets go. A living trust is something that also allows you to avoid probate. If you just have a will and the assets are going to heirs, it has to get certified by the court. If the assets are held by a trust, then you can avoid the probate altogether. All it does is retitle your assets. So a trustee would help execute your will, and our assets would not go through probate. Probate could take a year to two years and cost tens of thousands of dollars. Your assets get frozen while they’re in probate, but the way to avoid probate is to put your assets in a trust.
CS: What are some consequences of not having a will or trust in place?
AC: You’re basically allowing the court to decide for you what happens to your assets. If you want to have any say in it, which most people do, you’ll need a will or trust. As our survey shows, only half of Americans are doing this, so the other half is going to have a big issue on their hands, especially if they have aging parents in their 70s or 80s. That’s the time to have everything in place or you won’t know what their wishes are.
CS: What are some tools that can help make estate planning documents easier to access?
AC: The easiest way is to make several copies of your estate planning documents and give them to your loved ones, but there are a number of online companies coming out with applications for this. One website is Estate Assist. It is so important to keep documents in a place where you can find them because if you can’t locate your documents, the court will not be able to give you credit for having them.