Written by: Sean Hummel, CFP®
Did you know that 55% of Americans have ZERO estate plan! Maybe that’s not so shocking. What if I told you only 36% of parents with young children have a Will! This means if you’re one of the 64% without a plan, when tragedy strikes, the courts would decide who cares for your children! The #1 reason for not having a plan…
“I haven’t gotten around to it.”
As a financial advisor specializing in high-net-worth individuals and families, I’ve seen firsthand how estate planning can preserve wealth, protect loved ones, and ensure your legacy aligns with your values. Many clients assume that if their net worth falls below the federal estate tax exemption ($15 million per individual starting in 2026) they don’t need a formal plan. After all, no federal taxes means no problems, right? Unfortunately, that’s a dangerous misconception. Dying without an estate plan can lead to unnecessary stress, financial losses, and family conflicts, even for estates that are well under that $15 million threshold. In this post, I’ll outline the key risks and why proactive planning is essential, regardless of your net worth.
Understanding the Federal Estate Tax Exemption
First, a quick clarification: Starting January 1st, 2026 The federal estate tax applies only to estates exceeding $15 million ($30 million for married couples). For families below this limit, there’s no federal estate tax liability. However, this doesn’t eliminate other challenges. State-level estate or inheritance taxes may still apply, with some states exemptions as low as $1 million. More importantly, the absence of a plan exposes your assets to probate court oversight and default state laws, which often don’t reflect your personal wishes.
The Probate Pitfall: Delays, Costs, and Public Scrutiny
Without a will or trust, your estate goes through probate, a court-supervised process to validate your assets, pay debts, and distribute what’s left. For families below the exemption, this can be particularly burdensome because smaller estates often lack the liquid cash to cover fees without selling assets.
- Time Delays: Probate can take 9 to 18 months or longer, tying up assets when your family needs them most. Imagine your spouse unable to access joint accounts or sell a home during this period.
- Financial Costs: Expect fees for attorneys, executors, and court filings to eat up 3 to 7% of your estate’s value. For a $5 million estate, that’s potentially $150,000 to $350,000 gone; funds that could have supported your heirs.
- Loss of Privacy: Probate is public record, meaning anyone can access details about your assets, debts, and beneficiaries. This invites unwanted attention, from scammers to distant relatives.
In contrast, a common option is a revocable living trust, which allows assets to pass directly to heirs, bypassing probate entirely. It’s a straightforward tool that saves time and money while maintaining confidentiality.
Intestacy Laws: When the State Decides for You
If you die intestate (without a will), state laws dictate asset distribution. These rules are rigid and may not align with your intentions:
- Spousal and Child Shares: In most states, your spouse gets a portion (e.g., one-third to one-half), with the rest divided among children. If you have no children, assets might go to parents or siblings.
- Blended Families: Stepchildren or unmarried partners often receive nothing under intestacy, leading to disputes. I’ve advised clients in second marriages where this oversight disinherited beloved step kids.
- Minor Children: Without named guardians, courts decide who raises your kids (potentially a relative you wouldn’t choose). Plus, minors’ inheritances are managed by court-appointed conservators until age 18, with restrictions on use.
These defaults can fracture families. A simple will lets you specify guardians, create trusts for minors (e.g., to delay distributions until age 25 or 30), and include non-traditional heirs like charities or friends.
Family Conflicts and Emotional Toll
The absence of clear instructions often sparks arguments among heirs. Who gets the family home? How are sentimental items divided? Without a plan, emotions run high, and legal battles can ensue. Court records show that intestate estates are more likely to result in contested probates, costing thousands in legal fees and eroding relationships.
For families (even those under $15 million), assets like real estate, investments, or businesses add complexity. Without powers of attorney or healthcare directives, incapacity (e.g., from illness) can lead to court-appointed guardians, further complicating matters.
Overlooked Tax and Financial Implications
While federal estate taxes aren’t a concern below the exemption, other taxes can bite:
- State Estate/Inheritance Taxes: 17 states and the District of Columbia impose these, with exemptions ranging from $1 million to $13.99 million. Families in high-tax states could face unexpected bills.
- Income Taxes on Inherited Assets: Heirs may owe capital gains taxes on appreciated assets. Proper planning, like stepped-up basis rules, can minimize this, but without it, the IRS takes a larger share.
- Retirement Accounts and Life Insurance: These pass via beneficiary designations, not wills. Outdated or missing designations can send funds to ex-spouses or trigger probate.
Additionally, without a plan, your estate might miss opportunities for charitable deductions or spousal portability, which allows surviving spouses to use unused exemptions.
Why Plan Now? It’s Simpler Than You Think
Estate planning isn’t just for the ultra-wealthy, it’s for anyone who cares about their family’s future. Start with basics:
- A Will: Outlines asset distribution and names executors/guardians.
- Trusts: For privacy, probate avoidance, and control over distributions.
- Powers of Attorney: For financial and healthcare decisions if you’re incapacitated.
- Advanced Care Directive: also know as a living will aides in healthcare decisions (e.g. during incapacitation.)
- Beneficiary Reviews: Update IRAs, 401(k)s, and insurance annually.
Where Do I Even Begin?
Stand alone attorneys and online legal services can cost thousands to produce generic documents. As a client with Ten Ring Wealth you have unlimited access to the most comprehensive digital estate planning solution on the market, provided at no cost to you through Ten Ring Wealth Advisors partnership with Wealth.com.
If any of this resonates with you. Contact me today to discuss tailoring an estate plan for your needs. Your family will thank you.
Sean Hummel, is a CETRIFIED FINANCIAL PLANNERTM specializing in high-net-worth families. With over 10 years of experience, he partners with CPAs and estate-planning attorneys to help clients preserve wealth, minimize taxes, and transfer legacies exactly as intended.
XY Investment Solutions DBA Ten Ring Wealth Advisors does not provide tax or legal advice. The tax and estate planning information offered is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation
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