What You Don't Know Can Hurt You

The Critical Importance of Proper Estate Planning

Key Takeaways

• You already have an estate plan – if you haven't created one, your state has written it for you, and it may not match what you'd want for your family.  

• DIY estate planning can backfire catastrophically – trying to save a few hundred dollars in attorney fees can cost your family thousands in legal battles and destroy relationships that took years to build.  

• Blended families face special risks – when spouses have children from previous marriages, even small mistakes in estate planning can tear families apart during an already difficult time.  

• Grief amplifies confusion – family members dealing with unexpected loss can't focus on supporting each other when they're left trying to decode unclear or invalid legal documents.  

• Professional guidance protects more than money – proper estate planning isn't just about asset distribution; it's about preserving family relationships and ensuring your true wishes are crystal clear when you're no longer there to explain them. 

Here's something that might surprise you: whether you've written it or not, you already have an estate plan. If you haven't created one yourself, the state where you live has written it for you. 

Think about this for a moment. Do you know what would happen to your bank accounts, investments, retirement accounts, and home if you didn't make it back to your family tomorrow night? More importantly, would you be happy with those results? 

Effective estate planning ensures the people in your life are cared for by the people you choose. It makes sure your assets transfer as tax-efficiently as possible to the heirs you select – not the ones your state picks for you. 

Why We Avoid the Conversation 

Estate planning is one of those topics many people want to avoid under any circumstances. I get it. For some, there's an almost superstitious feeling that planning for death could somehow make something bad happen. Others feel that by avoiding these plans, they might somehow live longer. These feelings are completely understandable because dealing with our own mortality is sobering. 

But for most people, the real reason they don't tackle estate planning is simpler: it forces some difficult decisions. 

If you have children, you need to choose who will care for them day-to-day if you pass away while they're young. You also need to decide who will manage the money to ensure their caregivers have the resources to provide for them the way you'd want. This naturally leads to an uncomfortable question: would you actually have enough money to provide for them if something happened tomorrow? And nobody wants to think about life insurance, right? 

When "Simple" Isn't So Simple 

Many couples in first marriages with children think their situation is straightforward. The plan seems obvious: if one spouse dies, the other inherits everything. If both die together, it all goes to the children. 

Sounds simple, but here's the problem: not every state would automatically follow that plan. Without proper documentation, your state might distribute your assets differently than you'd expect. Even more concerning, if you haven't properly documented who should be guardian of your children, the state will decide for you – and they might use very different criteria than you would. 

When Complexity Becomes Dangerous 

The situation gets much more complicated if you're in a second marriage where either spouse has children from a previous relationship. This is where what you don't know can literally destroy your family after you're gone.

This actually happened to a client of mine. I'll call them Joe and Mary, and their story illustrates exactly how good intentions and cost-cutting can lead to devastating consequences. 

When Good Intentions Go Wrong: Why DIY Estate Planning Can Destroy Families 

Joe and Mary thought they had it all figured out. Both had been widowed and brought children from their first marriages into their new relationship. They agreed on what seemed like a fair plan: what each person brought to the marriage would eventually go to their own kids, while they'd share the new life they were building together. 

When they bought their dream home, Joe contributed most of the down payment while both names went on the deed and mortgage. Mary faithfully sent Joe money each month for her share of the mortgage payment. Their understanding was simple – Mary would inherit the house when Joe died, but eventually Joe's original down payment would find its way back to his four children. 

For over a decade, this arrangement worked well. Joe's kids grew close to Mary, spending holidays together and building genuine relationships. But as often happens in families, one of Joe's children hit financial rough patches, and Joe stepped up with substantial support over the years. 

Wanting to be fair to his other children, Joe decided to adjust his will so the child who had received extra help during his lifetime would inherit a smaller portion. This made perfect sense. What happened next, however, would tear the family apart. 

The Fatal Mistake 

Rather than hire an attorney to update his will, Joe decided to save money and write a new one himself. He researched online, drafted what he thought was a proper will, and destroyed his old professionally written document. His intentions were good: 

• Leave direct gifts to each grandchild 

• Provide Mary with enough cash to pay off the mortgage 

• Divide the remainder among his children, with adjusted amounts based on previous support 

• Trust that Mary would eventually ensure his down payment made its way to his kids 

  
  

Unfortunately, Joe forgot one crucial detail – he never mentioned the house down payment arrangement in his new handwritten will. 

When Everything Falls Apart 

Joe died unexpectedly at a relatively young age. Mary, already grieving and overwhelmed, hesitantly told me about Joe's handwritten will. I introduced Mary to an elder law attorney, and the news was devastating; Joe's DIY will didn't meet their state's legal requirements and was completely invalid. 

Without a valid will, Joe was legally considered to have died "intestate," meaning state law – not his wishes – would determine how his assets were distributed. The court battle that followed lasted months, during which: 

• Joe's children felt confused and hurt, not understanding why the process was taking so long 

• Suspicions arose that Mary had somehow influenced Joe or was deliberately stalling 

• Family relationships deteriorated as emotions ran high during an already difficult time 

• One child's spouse began spreading doubt about Mary's motives 

Even though the court eventually allowed Mary to honor Joe's gifts to the grandchildren, the final distribution looked nothing like what Joe or Mary had originally planned. By the time the estate was settled, the damage was done. Joe's children, once close to Mary, had become resentful and estranged from the woman who had been part of their family for over a decade. 

The Heartbreaking Truth

Mary and I discussed ways to gift money to Joe's children as he would have wanted, but it was too late. The family bonds that had taken years to build were broken, and Joe's children wanted nothing to do with her. 

Joe's attempt to save a few hundred dollars in attorney fees cost his family immeasurably more. His children lost not only their father but also their relationship with Mary. Mary lost her connection with Joe's family and the comfort that relationship had provided. 

What We Can Learn from Joe and Mary's Tragedy 

Joe and Mary's heartbreaking story teaches us several expensive lessons: 

• The math doesn't lie. Joe tried to save a few hundred dollars in attorney fees, but his estate ended up paying thousands in legal costs just to honor his gifts to the grandchildren. Meanwhile, the family relationships that had flourished for over a decade were completely destroyed. The financial cost of his DIY approach was bad enough – the emotional cost was immeasurable. 

• Grief changes everything. When someone dies unexpectedly, families are already under enormous emotional stress. Add confusion about what the deceased person "really wanted," and you have a recipe for lasting damage. Joe's children weren't just mourning their father – they were trying to make sense of a legal mess he'd left behind. 

• Prevention costs less than cleanup. It's almost always more expensive to fix estate problems after someone dies than it would have cost to prevent them while they were alive. But some damage, like broken family relationships, can't be fixed at any price. 

• Tomorrow isn't guaranteed. None of us likes to think about it, but Joe's sudden death reminds us that we need to ask ourselves: what would happen to our loved ones if we died unexpectedly? 

The Building Blocks of Protection 

If Joe and Mary's story has convinced you that proper estate planning matters, here's what you need to know about the essential documents: 

• Your Will serves as the foundation of your plan. It needs to comply with your state's specific requirements – and as Joe's family learned the hard way, those requirements matter. A will that doesn't meet your state's legal standards is worthless. 

• Trusts can serve many different purposes, from managing assets for young children to minimizing taxes. Think of them as specialized tools for specific situations. 

• Durable Power of Attorney determines who will handle your financial affairs if you become unable to do so yourself. Without this, your family might need to go to court just to pay your bills. 

• Health Care Proxy designates who will make medical decisions if you can't. This becomes crucial if you're in an accident or develop a condition that affects your ability to communicate. 

• Living Will (sometimes called an advance directive) lets you specify your wishes about end-of-life care, organ donation, and funeral arrangements. It gives your family guidance during an incredibly difficult time. 

When Simple Solutions Work (And When They Don't) 

Here's some good news: not everyone needs to hire an estate planning attorney. If your situation is relatively straightforward, online services can help you create legally compliant documents for your state. 

You might be a good candidate for DIY estate planning if your situation is truly simple. This means your assets don't push you into estate tax territory (not just federally - check your state too!), your only real estate is your primary residence, and one of these describes you: 

• Single with straightforward wishes - You're not married, everything goes to family members, and you're not cutting anyone out who would normally inherit. 

• Married couple, no children - Your spouse gets everything, period. 

• Traditional nuclear family - You're married with adult children, your spouse inherits first, and if you both die together, the kids share equally. 

Notice how narrow these categories are? If you have minor children, own real estate in multiple states, or have a blended family situation, you're already beyond "simple." 

For slightly more complex situations – like having minor children or owning property in different states – services like EncorEstate (available through certain financial advisors) might bridge the gap between DIY and full attorney involvement. 

And if you have significant assets you want to protect from potential long-term care costs, that's a conversation for an Elder Law attorney. 

Don't Let Your State Write Your Family's Story 

Here's what Joe and Mary learned the hard way: if you don't make your own estate plan, your state has already made one for you. Every state has "intestacy" laws that determine who gets what when someone dies without a valid will. 

These laws follow a rigid, one-size-fits-all formula that rarely matches what real families want or need. They work especially poorly for blended families like Joe and Mary's, where the relationships and intentions are more complex than state law can accommodate. 

Just like you review your financial plan periodically, your estate plan needs regular check-ups to make sure it still reflects your wishes and circumstances. Life changes – marriages, divorces, births, deaths, moves to different states – and your estate plan should change with it. 

The Gift of Peace of Mind 

Nobody wants to contemplate their own mortality, but here's how I encourage my clients to think about it: proper estate planning is one of the most generous gifts you can give your family. When you die, they'll be grieving and dealing with their own emotions. 

Do you want them to spend that time trying to figure out what you "really meant" or arguing in court? Or would you rather they could focus on supporting each other and celebrating your life? 

Don't let your state make decisions about your family's future. Professional estate planning isn't just about legal documents – it's about protecting the relationships and intentions that matter most to you, ensuring your wishes are crystal clear when you're no longer there to explain them yourself. 

Ready to take control of your financial life?  

The path to financial independence for you and your family starts today. Working with a Certified Financial Planner® professional means working with someone to help you holistically look at your entire financial life, and ensure your estate achieves your desired objectives during your lifetime and beyond.  CFP® professionals work with accountants, attorneys and insurance specialists to make sure you have the team in place to achieve one key objective:  

• Making sure the right person (or people) in your life has (have) the right cash to do the right things at the right time.   

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Neither Prism Planning and Solutions Group nor Insight Advisors provides tax or legal advice, and nothing in this communication should be treated as such. This communication should not be interpreted as a recommendation for a specific investment, legal or tax-planning strategy. We provide this material for informational purposes only. We have made every attempt to verify that the information contained in this communication is accurate as of the date published but make no warranties. Before making any decisions related to your own tax, legal and/or investment situation you should consult the appropriate professionals.    

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