Penny Wise, Pound Foolish – The High Cost of Avoiding Estate Planning
Living in a time of high inflation, we’re all focused on reining in spending and counting our pennies. But, are some of our saving decisions costing us more in the long run? The old adage “penny wise, pound foolish” couldn’t be truer when it comes to estate planning.
Creating an estate plan may seem daunting and expensive, but the costs of delaying this task can be far higher and more daunting than you might realize.
Are you setting the stage for significant financial and emotional costs down the road by not investing your time and money into creating an estate plan?
This article looks at 3 costs of not creating an estate plan.
1. Financial Cost of No Estate Plan
The potential number of financial hazards your estate could face are too many to count. Here’s a few big ones:
- Asset Distribution Not as You’d Expect: Dying without a Will (aka dying intestate), means your assets are distributed according to provincial laws. So if you think everything just automatically goes to your spouse, think again, it won’t in Ontario if you have kids.The province dictates the distribution between the spouse and children.This is a problem if your spouse needs these assets as a solo parent to pay bills.
- Costly and Lengthy Court Process: Probate courts will appoint an administrator to handle your estate. Not only will this mean a longer wait for your beneficiaries to receive their inheritance, they’ll also receive less due to substantial legal fees and court costs.It can take 8 months or longer in the Greater Toronto Area for the court to appoint an administrator, leaving your spouse without access to your frozen accounts to pay bills.
- Lost Opportunities for Asset Protection and Tax Savings: A well-structured estate plan can also provide tax advantages and protect your assets from creditors. Setting up a trust is one way to minimize estate taxes, protect your assets from lawsuits, and ensure they are distributed exactly as you wish. Without proper planning, you give more of your estate to the government and less to your loved ones.
Having an estate plan protects your assets, minimizes taxes, and directs asset distribution to your loved ones.
The impact of not having an estate plan goes far beyond the financial toll. It can also have profound and lasting emotional costs on your family.
2. Emotional Cost on Family With No Estate Plan
The price families pay when their loved ones die without an estate plan is often overlooked. Yet if you speak to anyone who has lived through it, they’d advise the cost is incalculable. In addition to the potential financial costs noted above, consider these emotional costs:
- Guardianship of Children Decided by Courts: Imagine your kids are assigned by the courts to live with a distant relative who does not share your values or beliefs.Their grief over your loss is compounded by fearing what will happen to them. Not documenting a guardian for your children will have a profound, life changing impact on their wellbeing.
- Lack of Clear Direction Causes Family Rifts: Even if you have a Will, if its instructions aren’t clear, your beneficiaries could argue over what you meant regarding distribution of assets, who gets a treasured piece of furniture, or your last wishes. All hot topics that could tear your family apart and leave irreparable harm.
- Medical Interventions Decided by Strangers: Should you become mentally incapable of making decisions due to an illness or injury, without an Advance Care Plan, your family is left to guess what emergency medical interventions you would want. They could argue about the best course of action and forever lament if they made the right decision.
Read our blog Advanced Care Planning – A Lifeline for Your Family.
It’s a high price to pay when lack of planning causes lifelong emotional harm to your loved ones.
The costs of not having an estate plan keep adding up when you factor in your mental health.
3. Mental Health Cost of No Estate Plan
An estate plan allows you to have peace of mind, and that’s important. Without one you’ll worry about what might happen if the unexpected occurs.Taking action to protect your loved ones, preserve assets and document your wishes, provides welcome relief and mental wellbeing.
And when you document your personal and financial information, you set your executor, and attorneys acting under powers of attorney up for success. This saves them valuable time and ensures no financial loss due to missed insurance policies or bank accounts.
Learn more in our blog – “How to Set Your Executor Up for Success”
Avoiding estate planning to save money is a perfect example of being penny wise but pound foolish.
Conclusion
Even in a time of high inflation, the benefits far outweigh the costs of creating an estate plan. When you add up potential legal costs, avoidable taxes, emotional strain and family upheaval from not having a plan in place the price becomes significant and far-reaching.
By investing in estate planning, you can be confident that your assets are protected, your wishes are honored, and your loved ones are spared unnecessary stress and discord. In a nutshell, estate planning is more than a financial necessity; it’s an act of love and foresight.
Did this article give you insight on why you need to invest now in estate planning?
We’d love to know if you have an estate plan in place, and if not, why not? Share your experience!
Financial Concierge™ offers Professional Executor and Power of Attorney services to assist with executor, attorney duties or help with managing daily financial activities. Learn more about Financial Concierge™ here.
Author: Janet Jackson, Contributor: Jill Chambers
DISCLAIMER: This blog is not intended to be legal or financial advice and should not be construed as anything other than for information purposes.
