I rarely step out of writing strictly about investment-related issues because my passion is for investment management and there are far smarter specialists in the estate planning field than me. However, I recently experienced first-hand the effects of poor estate planning within my extended family that I felt would be prudent to share.

My step father’s mother (who lived in California) recently passed away without a will or estate plan in place. She owned her home and cars outright, had numerous bank accounts, and four adult children who would inherit her estate. In this case, she and her husband had accumulated significant assets that they wanted to see distributed among their children with as little disruption as possible.

Unfortunately that is not going to happen.

Without the implementation of a living trust, all of the assets are now headed to probate and the heirs are already arguing what they feel should be theirs. Some have a larger sense of entitlement than others, which is only going to fracture the family dynamic even further without a matriarch in place to calm the waters.

Probate in California is generally a two-year process that will include tens of thousands of dollars in legal fees, court fees, and estate taxes. Even if the family had a will, it would only specify to the judge how the assets are to be divided and still rack up significant costs. Don’t forget that if you miss one property tax payment, mortgage payment, or other liability in those two years you are probably going to lose the house to begin with.

All of that could have been avoided with a living trust and will that a competent lawyer will create for you in the neighborhood of $1,000-$1,500. It used to be that trusts were for the ultra-rich and cost $5,000 or more for a well-heeled estate plan. However, the abundance of low-cost legal services have brought the prices down to reasonable levels that are a MUST for anyone that owns a home, cars, retirement accounts, bank accounts, or has kids. In addition, you can often specify a health care directive, custodians for your children, and a host of other important instructions that avoid the courts altogether.

Right before my wife and I had our first son we sat down with a lawyer and had a trust drawn up for a very reasonable fee that included instructions for our kids and each other in the event something happened to one or both of us. That document will likely last the rest of our lives as an insurance policy against any probate costs or disputes against our wishes. The only maintenance is updating assets or changes to our instructions should they occur over the years.

Do me a favor and take action….

If you already have a living trust, make sure that it is up-to-date with a schedule of your most important assets. Review all of the key directives to ensure they are still in line with your wishes and contact your lawyer to make changes if need be. In addition, you should double check that your house and bank accounts are titled in the trust as well. Just having a trust doesn’t mean anything unless your assets are titled correctly. Lastly, if you are married, your retirement accounts should generally list your spouse as the primary beneficiary and your trust as a contingent beneficiary for the most efficient flow of tax burden.

If you don’t have a living trust, take a look around and analyze your life. If you fit into the criteria I outlined above, then spend the money and ensure that your estate will pass efficiently to your heirs. Life is short and any of us could leave this world at a moment’s notice. Don’t think that you will have time for it later, because there is always an excuse to put it off. Instead, be proactive about putting it into place and talking with a lawyer about your wishes.

If you live in Southern California and want a referral for a local lawyer, I would be happy to send you some that I have worked with over the years. I don’t receive any fees from them or anyone else for writing this article or sending business their way. My ultimate goal is to light a fire under anyone that doesn’t have the tools in place to ensure their family’s safety and security.

I can help with any life insurance needs that may be a component of estate planning, but that is a separate discussion from the living trust itself.  At the end of the day, this document is an invaluable instrument to guide the disposition of your estate without the need for a 3^rd party interfering in your affairs. A little bit of money now, can save your family a whole lot of money later.