Wills and Trusts: What They Are and Why You Need Them Part 1
Happy Is the Person Who Knows What to Remember of The Past, What to Enjoy in The Present, and What to Plan for In the Future.
-Arnold H. Glasow
As I mentioned, I grew up on a small family farm in central Ohio. My dad had bought the land and everything that went with it. Like many farms of that time, my family ran the farm while my parents worked jobs earning the money that supported us. The farm was not a hobby. It was a real working farm that had an even shot of paying its way each year and adding to the bottom line. That was the goal, and usually it worked.
Most of the money we made farming went right back into the farm, paying for capital equipment, new breeding stock, supplies and land. I helped with the farm through my early twenties. During that time, there was precious little extra cash. We had necessities, but not much else. We scrutinized every expense before anything was spent. We'd put off maintenance for equipment and infrastructure-such as fencing, doors, hardware, tools or an implement part-in favor of a cheaper temporary fix.
Our 102-acre farm was home to a herd of fifty head of cattle and two horses. But we used barbed wire strands to fix a hole in the fence, rather than replace the line of fence that was in disrepair. It cost less to fix the fence in this way, but it was not a permanent fix and it would last only a short while. If we were lucky, it would last a year or two, but it sometimes held for just a few months. However, the dairy cattle noticed the impermanence of our work. They became really adept at making their way through holes that had been patched with barbed wire. A couple cows became so good at escaping, we gave them nicknames to suit their achievements, such as "Houdini," "Missing," and "Over There." After spending many hours chasing after our wayward cattle, my father implemented a project of "riding the line": We'd drive the entire circuit of fences, searching for new holes opened by our innovative animals. We spent hours checking and fixing the fence.
I am certain our financial security could have been advanced substantially-along with our neighbor relations-if we had just installed proper fencing. But we didn't. Instead, we kept chasing after cows, driving the fences, and twisting barbed wire. Since then, I always wondered about the economies of "making do" because of the short-term costs. It seems that, eventually, the quick cheap fix is more expensive than doing it properly. It may be alright to do this to solve a problem until it can be addressed, but kicking the can down the road too much is expensive.
Nowhere is that more true, than in estate planning.
I can't count the number of times I've heard people tell me that estate planning was a luxury that they couldn't afford. Instead, their cheaper alternative is to go without. They take comfort knowing that, if something were to happen to them, their kids already have loving Godparents and Grandparents. As for their possessions, perhaps they've told some family members, "When I die, I want you to have ______." But they also just rely on the fact their family will automatically inherit everything, so why bother, really? What those people don't realize is they are just shifting their costs onto their heirs, and doing so at increased costs and at a difficult time that may have long term adverse consequences.
Without a thoughtful estate plan, a decedent's assets may become tied up in probate. If these are few in number, the process will likely exhaust the funds, and there may be an insolvent estate. If the assets are sufficient to support an intestate estate, the court proceeding can take years and thousands of dollars to complete. In the meantime, the estate heirs may get nothing or far less than would otherwise have been available.
Even worse, state laws spell out who gets what, and, usually, a court has no discretion to deviate from those laws to alleviate financial stress to the beneficiaries, or to avoid a dispute that arises; these disputes may be actual litigation or simply the effect of family fights. So, the decedent's promises to a relatives and friends may mean absolutely nothing.
Then there's the risk that fall on minor children. Designating someone as a Godparent has no legal force. States require a legally designated minor child's guardian. Without a designation of guardian that may be expeditiously executed, a child is a ward of the state until the process is completed, and a judge decides who shall be the child's guardian. As I said, a cheap fix is always the most costly in the end.