Much has been written about Prince’s death on April 21, and while the news has mostly focused on his music legacy and the surge in purchases following his death, financial news outlets are discussing the fact he died without a will. With an estimated $300 million at stake, it could take months – if not longer – to untangle the estate. While Prince was unique in many ways, his estate situation is not. It is a sad fact that many people die lacking an estate plan or with errors in how the plan is designed, which cause issues years later.
So what does an estate plan look like? The basic components of an estate plan entail a will, a financial power of attorney, a health care power of attorney and a living will or advance medical directive. Some people may include a revocable or irrevocable trust, but in general, most of the population (99% falls under the lifetime estate tax exemption) can get by with just the first three. A will outlines how assets should be distributed at one’s death. A financial power of attorney names someone who has the power to make financial decisions on your behalf, while a health care power of attorney names someone to make decisions regarding your health care. A living will or advance heath care directive specifies your end-of-life care, which includes directions on the use of life-sustaining treatments in certain medical situations.
In today’s world, you cannot look at the various parts of your financial life in isolation. Your investment advisor should be aware of changes your estate attorney is making, especially as it relates to titling of accounts and ensuring beneficiary forms align with your expectations. Your estate attorney should be working with your insurance advisor when you are setting up an irrevocable trust funded by life insurance. Your tax advisor and investment advisor should be working together to develop a plan for exercising stock options when you are in a lower tax bracket.
With an estate of his size, it is amazing that Prince did not have a team of advisors working together to ensure that his estate would be as well taken care of as his musical legacy. At Balentine, we take a holistic approach to financial planning. We seek to understand how each piece fits the larger puzzle and work with our clients’ existing advisors to help our clients achieve their goals with the least risk possible. Let this sad situation be an important reminder: the loss of a loved one is difficult enough without the added stress of poor (or nonexistent) estate planning.
In his 1991 hit “Money Don’t Matter 2 Night,” Prince sings (somewhat ominously), “Just when you think you’ve got more than enough, that’s when it all up and flies away.” Taking these four actions can help your estate avoid that same fate:
- Ensure your estate documents are reviewed by someone qualified at least every five years, or earlier if something material changes in your life. This is one of the critical components of Balentine’s financial planning process.
- Communicate to spouses, executors and attorneys-in-fact where original documents are kept and ensure these parties have access to retrieve them in the event you are unable to do so. Many estate attorneys store original documents in their offices for their clients, should you not wish to keep them in a safety deposit box. Balentine specifies the physical location in its financial planning process.
- Make sure executors and attorneys-in-fact are aware of their role and your intentions.
- Ensure your advisors are aware when you make changes to aspects of your financial plan. This includes insurance planning, tax planning, retirement planning, estate planning and investment planning.