- It’s Not Only About The Money.
The problem with simple wills is that they generally deal with who gets the stuff. General will plans for married families typically distribute assets “All to Spouse then to My Kids in Equal Shares. Fine. But consider this question… Is money the only thing you give to your kids? Don’t we also give our kids other valuable things: respect, work ethic, religion, morals? Of course we do.
Unfortunately, this is where simple wills fail. There is no written plan for how our kids should be raised. It is better practice to think through what’s really important in your family. A good estate plan will write out those wishes. Then, the legal documents can ensure those wishes are carried out.
- They Only Deal With Death
Wills will often name decision makers and dictate where the assets go in the event of an untimely death. They may also name guardians for small children. BUT… wills only matter after you pass away. They don’t matter if you’re still alive. So, what would happen if you became severely disabled in an accident, but didn’t pass away. Aren’t those same instructions regarding your assets and family important if you are in a coma for a decade?
- Outright Distribution
Simple estate plans give assets to kids outright. This would mean your child would receive a check from the estate or life insurance company on their 18th or 21st birthday. Does this sound like a great idea? Haven’t we all seen news stories of lottery winners hitting it big and blowing it all and developing drug problems within 6 months?
It seems to me that hitting the “Mommy/Daddy Lottery” is no different than winning the big jackpot. The same predators, distractions and temptations are there. Consider planning for them by giving your kids a distribution in trust rather than outright. This will allow you to put some instructions and some protections in place to protect your kids from these harmful influences.
- Simple Wills Don’t Incorporate All Assets
If you would pass, some of your assets would pass to your loved ones through your will. Other assets Will pass according to beneficiary designations with financial institutions. The Will for example, does generally not handle life insurance distributions.
So you may take care in your will to provide for your kids not to receive an inheritance through their will until their 25th birthday (good idea), but the life insurance will be distributed to them at either age 18 or 21 (bad idea). Good estate plans incorporate distribution instructions for all assets.
- Simple Wills Don’t Protect Assets
If you leave all your assets to a family member, those assets just became subject to that family member’s predators and creditors. Estate Planning is a time to be practical. Let’s assume I (like you) leave all the life insurance money to my spouse. Let’s assume that 5 years later (I would hope not 5 months later) she decides to remarry. What if she chooses the wrong person and he later files for divorce? What happened to all the money?
The same analysis would apply to your children if they marry the wrong person or other risks like your heirs being sued for a future car accident, etc. A great estate plan would consider these future risks. After all, you’re not paying the life insurance premiums so that your family’s future spouses become wealthy, are you?