Why everyone needs an estate plan and where to start
How much a should a person with moderate assets worry about estate planning? How should a person go about making their assets easy for their survivors to find? What should a beneficiary do if their loved one died without an estate plan?
Lauren Davies is an estate planning attorney with Pullman & Comley. On "All Things Considered," she offered answers to these and other estate planning questions.
John Henry Smith: All of us tend to think that estate planning is something that rich people do. But it's something we all need to think about — rich, poor and in-between. Lauren Davies is an estate planning attorney with Pullman and Comley. Lauren, welcome to the show. And what do you think about that last statement? I mean, this is truly something everyone needs to think about, right?
Lauren Davies: It is, John. Everybody really needs an estate plan, no matter how many or how few assets you have. If you die and your affairs aren't in order, you've left it to Connecticut law. Just as an example, if you had a spouse and two kids, your spouse would get the first $100,000, and then the other half of the rest would go to your kids. That one catches people by surprise pretty regularly.
John Henry Smith: Well, so you're saying estates of under $100,000 all go to the spouse by default?
Lauren Davies: If you have a surviving spouse, yes.
John Henry Smith: So, playing devil's advocate, if I'm listening to that, and my net worth is under $100,000, why shouldn't I think well, hey, I'm good?
Lauren Davies: What happens if your spouse isn't living? Do you want it to go out to your kids? Maybe your kids are minors, that would make a mess. We don't give assets outright to minors because it results in probate court supervision and unnecessary cost. And the point is that if you don't plan, you haven't taken control over what happens when you die. And it might not be what you want.
John Henry Smith: Okay, so how do people who aren't typically used to dealing with attorneys and these type of financial situations, how do they get started?
Lauren Davies: To take the first step, you need to find an estate planning attorney, you want to do it with somebody that does this kind of work regularly. Just give that person a call and find out how they bill, what they charge and how they would approach your situation. And if after that conversation you feel comfortable, then you would say, "Yes, I'd like to proceed, what next?"
John Henry Smith: Well, now you turn on the TV and you see advertisements about, "Hey, you know, download our app and you can do a will free and clear, nice and easy for fixed costs." What do you say about those types of services?
Lauren Davies: So, fixed cost, if it's coming from an attorney, I don't have any trouble with that, a licensed attorney in the state that you live in.
John Henry Smith: Let's say you have, and I know that we are getting like way, way down in the bargain basement here when we when we talk about this, but let's say somebody, you know, took out a couple of sheets of paper and basically wrote their will? Or even let's go a little bit more efficient. Let's say they typed out a will, had it notarized with a witness to make it somewhat official. And then what? What do you need to sit down and go over with your family right now?
Lauren Davies: OK, so there's a couple questions in there. The first one is that I think about the “napkin will.” There are statutory requirements that come from the state. It's two disinterested witnesses that are adults and a notary. And then there is also something called a witness attestation clause. That is where the witnesses have to so swear that the person that was signing the will did it of their own freewill, that they were competent and that they asked those people to be their witnesses.
John Henry Smith: Do these two witnesses have to be people that you don't know?
Lauren Davies: They have to be, the word is "disinterested." So you could know them but they can't be beneficiaries. They can't be in any capacity in the will at all.
John Henry Smith: What advice do you give people about putting your affairs in order? Should you get a bunch of paperwork and put it in a safety deposit box? What do you say?
Lauren Davies: A safety deposit box is a common place people put their documents. That's a perfectly fine way to do it, a safe place in your house and a binder all in one place. The idea here is you don't want them to get lost, and you want everything to be found, not just parts and pieces. After somebody dies, it's the person's loved ones and family members that bear the cost, and the cost is not knowing where the assets are, what they are, where the will is, where that savings account was? If things are disorganized, time has to be spent to find out what's what. And that's expensive.
John Henry Smith: And if you do have the sudden loss of a loved one, who was also a provider of some sort, you know, just someone who will be the beneficiary of their estate, who did not plan ahead — I've run into plenty of people who were in this spot. “Herbert died and didn't take care of any of this stuff. Oh, my God, what do I do now?” So what does Herbert's wife do, at this moment when the husband's gone, and the funeral has been had? And now we’ve got to deal with the mess, where does she start?
Lauren Davies: You're gonna find an attorney that's licensed in your state to talk with. This is something that I do all the time. You set up a meeting, and I'll give that person a list of questions that I need the answers to. And we're going to start to make a list. And we're going to make a to-do list and a list of Herbert's assets, and then we'll make a plan forward. Take just the 401(k) as an example, if it's filled out, and Herbert said that "it all goes to my wife" and the wife is living, she gets it, and they're going to be trying to get it to her if she's the beneficiary. But if they don't know that he's died, it's probably just gonna sit there. You need to make those calls and inform the banks and other institutions that your loved one has passed away.
John Henry Smith: How do you encourage a spouse or parents who are in denial of their own mortality or dragging their feet to make a plan?
Lauren Davies: That's a tough one. The answer is: gently. And the way I approach it is by trying to frame the planning as a gift to their loved ones. This often makes it easier for them, and we talk about it in terms of, if you do your planning, you're avoiding problems and unnecessary expenses that are going to be borne by your spouse or your children — or whoever your nearest and dearest are.
And then we also remind people that you can change your mind about your plan. We encourage people to just take it out and look at it every two or three years. Or if they did it with me, we do like a health and wellness checkup every couple of years.
You call me, John, if you did your planning with me and you say, you know "Hi, how's it going?" And I say "How's your wife and how's your kids and how's your Uncle Billy?" and you might say "oh, dear Uncle Billy passed away last year." And I'm going to tell you, "Oh, well, we had him in as your executor. So we might need to update that." And we just have a conversation and make sure that everything's still in accordance with your wishes, and that if something needs to be changed, we catch it.
This interview transcript has been edited for length and clarity.