Ask Chuck: Pop-Star Prince Problems to Avoid!
To learn Biblical answers to your financial questions, you can #AskChuck @AskCrown your questions by clicking here. Questions used may be lightly edited for length or clarity.
Dear Chuck,
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When the pop artist known as Prince died so unexpectedly recently, I was shocked and saddened by the loss, but also surprised when I saw this headline: Prince Leaves $300M, No Direct Heirs And The Ultimate Succession Nightmare. I don't have nearly as much as he did, but I'm not sure my affairs are in order either. What needs to be done to have a plan in place?
Not Ready to Go Just Yet
Dear Not Ready,
Sadly, the tragic, legal tangle that Prince's potential heirs are facing is pretty common. With no current wife, no living children and few close relatives (he has a sister), it's not entirely clear just yet who stands to inherit, though it's likely to be his estranged sister, according to media reports. It's going to get complicated, and not just for Prince's relatives.
I like to say that if you don't have a will, the government has one for you. Who would you rather have prepare your will for you?
LexisNexis reports that about 55 percent of American adults do not have a last will and testament, and for some segments of the population it's even higher. Among African Americans, 68 percent don't have final documents, and 74 percent of Hispanics also don't have a plan in place. And while people may think it's no big deal to die without their estate in some kind of order, it makes a real mess for those who are left behind.
It can take 2 years in probate court to handle a complicated estate and even 6 months when things are simpler. And the cost such delays incur make money for attorneys, drawing from loved ones who might benefit from an estate. The law firm of Morris, Hall & Kinghorn, PLLC estimates that probate costs grieving family members $2 billion annually with $1.5 billion of that going to attorneys; that's 75%!
As you can see, it pays to make a plan because if you don't, it simply pays well for the attorneys who help untangle your finances, taking money from your loved ones.
For someone like Prince, whose business and intellectual assets continue to make money even after death, a trust can be better than a will to manage those monies on an on-going basis for the good of the heirs. In fact, assets owned by a trust do not go through the probate process, which takes money out of an estate.
Consider this from About.com: "After adding up all of these fees and costs, you can count on probate taking anywhere from 3%-8% of your assets away from your beneficiaries, which doesn't include estate and income taxes that may be due and payable during the course of the probate administration. Compare this with the cost of settling a Revocable Living Trust, which will range anywhere from less than 1% to 5% of your assets."
The Bible commands those who make a plan to give resources to their families.
Proverbs 13:22 observes, "A good man leaves an inheritance to his grandchildren, but the sinner's wealth is stored up for the righteous."
A will doesn't have to be expensive, and Crown has some tips for helping you get ready. However, even if you draw up something yourself, after reviewing information on the Internet or free sites, it is still wise to have an attorney at least review your will to ensure that you haven't created a costly problem for your family. Taxes on your estate will be due about 6 months after your death, and so having the proper format to deal with that reality is worth a little planning.
Getting ready to do a will begins with gathering critical documents, which you may want to keep in a safety deposit box … BUT … be sure that you are not the only name on that account, as it will take a court order and cause expensive delays for your family if no one can get access to your final wishes.
As you are gathering up all your financial puzzle pieces, take stock of your life and consider becoming debt free. If you are struggling with consumer debt Christian Credit Counselors, a trusted Crown partner, can help you create a debt management plan to help you with a systematic way to pay in full your unsecured outstanding debt in less time and with less interest, making a better provision for your family. This is important when you consider what must be paid before your estate can be fully settled. Once your will is in probate (the legal process of distributing your assets), all debts must be paid before the process concludes.
As a general rule, an estate first pays the following:
1. Funeral expenses
2. Administration: fees due the court, attorneys, and others administering the estate.
3. Allowance to provide for the needs of the decedent's family while the will is being administered.
4. U.S. government: any taxes and other claims due.
5. Expenses pertaining to medical expenses, if death was due to medical complications.
6. State, county, and local governments: any taxes and other claims due.
7. Wages and/or garnishments due others.
8. Claims secured by liens.
9. Outstanding debts.
Check out Crown's advice for beginning the process of developing a will and download a free Will Planning Kit that can help you begin to think through your final wishes.
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