It's Time to Create a Will

I’m almost ashamed to admit this: I don’t have a will. I’m not happy about that, and it’s a situation I’ll change within the next few weeks.

After being surrounded by so many intelligent people at the Financial Blogger Conference this weekend (please read my review), my lack of attention to this important facet of financial planning was almost embarrassing. Even if the topic weren’t to have come up, I would have known in the back of my head that the most successful business owners at the conference sure had their will taken care of or had engaged in at least some estate planning. The reality is that my business has been financially generous, and the wealth is not protected in the even of my death.

This isn’t to say I haven’t tried with a minimal amount of effort. I’ve browsed through the self-help options for completing a will, and I’m not convinced that time and money spent with these generic solutions might fully protect whatever might exist of my estate at the time of my death.

Cost and negotiations

Software like Quicken WillMaker Plus and services like Nolo and LegalZoom are certainly economical. You could conceivably complete a Last Will and Testament for under $100, and the process could take less than thirty minutes. Go to a lawyer and you’ll need to spend a large multiple of that amount, maybe $5,000. And you’re giving a lawyer in person a great advantage in terms of negotiation: when you list all your assets, the lawyer can simply argue that the cost of the service is a small enough percentage of the customer’s wealth. It’s easier to negotiate when your adversary is not aware of how much money you have in the bank — and fees should always be negotiable.

Another disadvantage in negotiations is the location. Most businesses close to me are located in Princeton, New Jersey, which is not exactly a frugal place to live. Lawyer firms abound. I would be better off using my connections to find a lawyer on referral willing to negotiate a fair fee, either by asking friends who may be in a similar situation or by asking lawyers I’ve worked with previously for recommendations.

Benefits of talking to a live lawyer

Completing your will yourself requires making a number of assumptions, but speaking with an estate lawyer or at least a financial planner with experience with estate planning can lead to other options you might not have considered. It’s relatively easy to complete a will online and have a document that may or may not hold up in court, but there’s more to estate planning than creating a will.

It may be more tax-advantageous, flexible, and safe to set up trusts for your children if you plan to pass on a portion of your wealth to the next generation (or second generation) down the line. This isn’t going to be possible when using interview-styled electronic, automatic will generation software. A living trust is a component of estate planning often ignored by software as well; if you want to relieve your family members from the burden of dealing with funeral costs and other related expenses, a living trust can help smooth end-of-life planning.

Likely to be the most important feature of speaking to a legal professional to handle your estate planning is peace of mind. You want there to be no concerns that the legal documents you have will achieve their intended goal — getting your wealth to the right people and organizations after your death with the least amount of hassle, the least of which would be avoiding probate. You will be more confident after working directly with a lawyer who is intimately familiar with the laws of where you live.

You could take the approach of completing your will yourself using software and asking an estate lawyer to review, but chances are lawyers will find opportunities to improve your plan, and you might not escape paying for advice and work to ensure you have the best plan for yourself and your family.

Who needs to create a will

If you are fortunate enough to build enough wealth so that there is a good chance of there being tax consequences for your estate — and depending on the state, that amount might be $5 million, $1 million, or something else. In New Jersey, where I live, residents are required to file a tax return if the size of the estate is $675,000 or more.

But it’s not just the size of your financial assets that should determine whether you need to complete a will. If you have any assets and you care how they are distributed after you die, you need a will. Without one, or with a will that is not comprehensive, your estate might end up going through the probate process. Probate involves more lawyers and courts, takes significantly more time, and in general, causes survivors a significant amount of stress. Go easy on the relatives you leave behind and make sure you have a fully-functioning estate plan including a legal will.

Next steps

Every time I board an airplane, I wonder to myself, Why haven’t I completed a will? I’m supposed to be on top of my personal finances. Of course, it’s irrational; the chances of me getting in a situation in which my family needs to review my estate plans as a result of boarding an airplane are slim. Flying is a very safe form of travel, yet it’s always in the back of my mind. I’m probably better off flying than driving long stretches of the New Jersey Turnpike, something I used to do twice every day. My goal is to accomplish the task of creating an estate plan before my next scheduled cross-country travel. (I’ll probably be spending Thanksgiving in California with family, as I’ve traditionally done for nearly a decade.)

Here are the steps I plan to follow.

• Get my financial documents in order. Estate planning will only be successful if I know exactly what I have. I have Quicken to help me with this, as well as a number of documents pertaining to the sale of my business.
• Think about my intentions. I don’t have any dependents. No wife, no children. I may someday, but my plan needs to reflect today’s reality. But this leaves an interesting question: who should inherit what I have, assuming I’m able to preserve my wealth in the mean time?
• Get recommendations for lawyers. As I mentioned above, I have two resources to tap: friends who have been through this process (and who have provided good recommendations in the past and whom I can trust) and lawyers I’ve worked with previously. My virtual rolodex includes a cadre of lawyers, but none who focus on estate planning themselves.
• Choose the right firm for me. This is generally easy. The choice comes down to cost and attitude, but it’s a judgment call. I probably won’t need a long-term relationship with this lawyer, but I’ll definitely want one who listens well and appreciates my situation.
• Negotiate the fee. I haven’t had much success negotiating with lawyers in the past, but there’s always an opportunity to try. If I get started early, I won’t be under as much pressure to finish the estate planning before my Thanksgiving goal, so I can be patient and find the best price point.
• Set up the first meeting. And if I’m lucky, it will take only one meeting. I’ll be relying on the lawyer to ask the right questions and inform me what types of protection are best for my situation.
• Complete the estate plan. By the end of the meetings with the lawyer, I should have a fully legal estate plan and I should feel confident about the plan’s ability to protect me and my estate many decades into the future.
• Occasionally review the plan. Situations change, and in my case, might change drastically if and when a family is added to the mix. Times like these call for a full estate plan review — and another visit to the lawyer.

When did you or will you set up your will or complete estate plan?

Photo: Images_of_Money