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Prince or pauper, young or old, here's why you still need a will

You've surely heard the somewhat baffling news that music legend Prince died without leaving a will. A court hearing to determine the fate of Prince's estate — including the possible contents of a secretive vault the musician left behind at his Paisley Park Studios estate — concluded recently with a special administrator appointed but no will discovered.

This high-profile case of apparent negligence has rekindled the collective finger-wagging over having the correct estate-planning documents. But the question that remains is: Why is it important to have a will?

Statistics suggest that a majority of Americans don't have a will. And after reading hundreds of these documents, I've found that even most people who do have a will have one with suboptimal language they don't understand.

Prince performs 'Purple Rain' in Los Angeles, Feb. 8, 2004.
Richard Hartog | Los Angeles Times | Getty Images
Prince performs 'Purple Rain' in Los Angeles, Feb. 8, 2004.

Why don't people do a great job planning for their death? Primarily, most of us want to avoid contemplating the subject of our own demise. Secondarily, we tend to gauge the probability of our imminent passing as extremely low — "I'm not going to die anytime soon!" — and therefore discount the impact of its occurrence.

Here are the top three reasons why it's vital to write a will.

1. Intestacy

However improbable, the negative impact of dying "intestate," with no estate plans in place, is so significant that it demands our attention and action. Prince is just one of many who've left behind a legal cacophony for courts to iron out and heirs to fight over.

The whole situation, however, could have been avoided with one meeting with his attorney. But while this effect is magnified in the case of a celebrity, it's no less important for you.

You have the opportunity to make the impossibly hard decisions involved in estate planning for and on behalf of those you leave behind. You can make your final word a blessing instead of leaving behind at best a mess and at worst a curse.

Think of your will as your advance instructions on how to administer whatever you've left behind, instructions that are followed by the person you designate as the personal representative (or the executor or executrix, as it's still called in some states).

2. Legacy

It gives you an opportunity to fulfill your responsibilities, even after you're gone. Your influence over your assets, businesses and charitable goals, and in the lives of your family and friends, can be extended well beyond you. In your will, you may name a trustee to oversee assets that you direct to be held in trust on behalf of those you leave behind.

And don't think you're off the hook if you're younger or have less money than you think is required to justify throwing around words like "trust" and "estate." If you own anything, the law considers that your estate. And even if it doesn't show up on your personal balance sheet, your life insurance proceeds are one of those assets.

Most parents of minor children — and even those of adult children — see the wisdom in directing their assets and life insurance proceeds to a testamentary trust with rules for distribution that they write.

For example, my will allows my trustee to distribute funds to my now 12- and 10-year-old boys for their "health, education, maintenance and support" throughout their youth.

Then they'll get one-third of the balance in the trust if and when they receive a bachelor's degree (not a mandate, but a sign of maturity in their mother's and my opinion), followed by two additional distributions at later ages. This will hopefully ensure that the money helps, not hurts, them.

Consider Warren Buffett's estate-planning advice (which I've paraphrased) to leave your kids enough to do anything but not enough to do nothing.

3. Family

Perhaps the most important reason to write a will pertains to the needs of parents of minor children. It's in your will that you elect new parents in case both Mom and Dad are gone. In order to make these selections official in the eyes of the state, they must be noted as guardians in your will.

What happens if you don't? A court in your state will decide the matter. Wouldn't you rather choose who should raise your kids if you're unable to do so?

That way, you can select guardians who will continue raising your children with values similar to those you're working so hard to impart. (By the way, for those who think the children's grandparents are the natural fit for guardians, a word of caution: Your mom and dad have already had their run at parenting. They might appreciate, and would almost certainly accept, the invitation, but consider going with someone younger, who can keep up better with the kids and allow Grandma and Pop-pop to spoil their grandkids as planned.)

"Make your estate plans as complex as necessary but as simple as possible. This helps ensure that you understand what you're doing and that your plan can be sufficiently explained."

Make your estate plans as complex as necessary but as simple as possible. This helps ensure that you understand what you're doing and that your plan can be sufficiently explained to your heirs after your passing, minimizing misinterpretation.

Choose individuals to fill the offices of personal representative, trustee and guardian as you see fit. It's not a popularity contest, and it's likely best that different people serve different roles. Also consider establishing backup designees to fill those positions, in case anyone is unable or unwilling.

Yes, you can write out your will on the back of a bar napkin if you wish, but it may not be worth a lot more than the paper it's written on (and seriously, it likely won't be enforceable).

Yes, having an online or software-produced will may be (much) better than nothing, but I still can't bring myself to recommend it, and here's why: Wills are written in a different language than the one we speak. It's called legalese. Your interpreter is an attorney. We can argue all day long whether this is unjust, but it won't change the reality.

Additionally, the process of administering wills, dubbed probate, is handled on a state-by-state basis. This is why I recommend having your will completed by an attorney specializing in estate planning in your state of residence. You wouldn't ask your orthopedic doctor to perform brain surgery, would you?

How do you choose the right attorney? Approach friends and family members you deem the most responsible and ask them whom they used. (If they don't have a will, take them off your "most responsible" list.)

Ask your accountant or financial advisor. Then talk to at least a couple of attorneys before making a decision. Confirm that they are more adept at translating legalese than speaking it, and know right up front how they charge for their services. Many attorneys charge on an hourly basis, but consider asking for a flat fee so you don't feel pressure to withhold any questions for fear of running up the bill.

One alternative that falls between the napkin route and hiring an attorney is using a prepaid legal service. Perhaps it's one of the benefits your employer offers. Here, you are still likely to come away with more "boilerplate" documents that may not be optimally customized, but at least it adds more of a human element into the process at a reduced cost.

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Is a will all that you need to adequately prepare your estate plans? Likely not.

While you're drafting or updating your will, also consider having a durable power of attorney document and advance directives drafted. (The durable POA authorizes someone else to make financial decisions when you're unable or unavailable; advance directives authorize someone to make medical decisions on your behalf if you're unable.)

Most estate-planning attorneys will offer a package complete with all three documents. The cost for these documents can vary widely depending on your geography, but you should be able to write these extremely important documents for between $250 and $1,000.

If your level of wealth falls below something like Prince's but is still above average, it's altogether possible that you'll want to include other documents — such as revocable, irrevocable and charitable trusts, for example — to ensure your assets get where you want them to go while minimizing federal and state estate tax, as well as state inheritance and income tax, to the greatest degree possible.

Yes, you'll pay more for your estate-planning documents as the complexity increases, but consider it the cost of being financially blessed.

Lastly, don't allow the time and money you invest in your estate documents to become invalidated by failing to ensure that your beneficiary designations — on life insurance policies, retirement accounts and annuities — are in alignment with your will.

This is especially important because your beneficiary designations will trump the wishes outlined in your will. That's right. If you updated your will but never changed your 401(k) plan beneficiary designation from your mom — or your ex-spouse — to your new spouse, the designated beneficiary on record wins in a conflict with your will.

Estate planning can be costly and confusing. I get it. And I also understand that we'd generally prefer not to discuss death. But when you engage this topic purposefully, the discussion can actually be quite life-giving. This is because — regardless of our age, health or the size of our financial estate — we're all creating a legacy.

— By Tim Maurer, director of personal finance for Buckingham and The BAM Alliance, and author of "Simple Money."