COULD THIS HAPPEN TO YOU?
A couple just starting out with two children at home create their own wills with will forms from a book. They leave everything to each other, and then to their children. Unfortunately, one dies of cancer and the other of an infection while their children are still minors. The probate court is forced to split the proceeds into two court-supervised trusts with annual accountings and appearances. Their small estate rapidly dwindles under the weight of fees and extremely conservative financial management, and the children run out of money in their early teens. When you have children, a simple will is not enough.
A professional couple with substantial life insurance and their own home design a wonderful estate plan. It fully protects their 3 children by creating highly customized, detailed trusts. But they procrastinate on choosing the backup guardian. Several months later, as their thoughtful documents languish in the attorney's file drawer, they are killed in a car accident. Although the attorney may certainly testify as to whom they wanted to raise their children, none of those thoughtful documents will be admissible or have the force of law. Again, the court will place their assets into separate trusts, increasing cost and decreasing flexibility. When one of the children requires extensive therapy for injuries due to a serious fall, her trust money runs out. The trustee, court and other children are sympathetic, but fiduciary rules do not allow them to gift money from the other children's trusts to the needy child. We all have a deadline to complete the planning of our estates. We just don't know when it is.
A young father is killed in a plane crash, leaving behind his wife and infant son. They had planned to see an attorney to name guardians but figured since there were two of them, they didn't have to hurry. True, the wife still has time to protect their son and name guardians. However, they didn't think about his separate property (some of it from an inheritance he didn't even know about at the time of his death). With no will, the court places half of all of his separate property into trust for the infant child. The restrictions on the use of the trust money crush the family's hopes for an at-home parent. The wife returns to full-time work to support herself and their child. An estate plan is just as important when one spouse survives as when neither does.
A young couple completes a thoughtful well-designed plan when their first child is still in the womb. Many years later, the plan has held up well so they have stopped regularly reviewing it. The do not realize that, with their careful saving, their estate is now large enough to be subject to estate tax. When both die after long well-lived lives, the federal government takes 30% of everything they owned. Estate taxes reach as high as 55% and are changing all the time. Be sure to review your estate plan periodically.
Although these stories are only loosely based on real events, the consequences described are not guess work. If you recognize yourself in these stories, take the prediction seriously; it's based on the law in California.