What is an estate plan and why should you put one in place? It doesn’t matter your age, health, or wealth status, an estate plan is a valuable tool. Estate plans can help avoid problems for your heirs that all too often arise after death. If you want a say over who will receive your property, wealth, and care of your children after death, then you need an estate plan.
While many people may believe estate planning is only for the rich the truth is that everyone needs to do some sort of estate planning. Each person’s situation is different and so is everyone’s estate plan. One tool of estate planning, depending on the total value of your assets may be a will. A will is a document that states exactly where you want your assets to go after your death, and who will care for your minor children.
What happens if you do not have a will? Without a clear directive of your wishes, the state will make decisions about who will receive your assets and who will be the guardians of your minor children. You will have no control over how your assets are spent on your children and no ability to gift assets to people outside of your family. Dying without a will can often lead to hurt feelings, anger, or disappointment to your heirs and loved ones.
How does the state assign your assets? If you are single, the state will distribute your property based on intestate succession rules. This means that all of your property will go to your children and if your children are not alive then your grandchildren. If you don’t have children or grandchildren alive, or at all, then your property will go to your parents, and if they are aren’t alive your siblings. The intestate list goes on to nieces and nephews, then grandparents and then aunts and uncles.
Another common misconception is that all of your property will go to your spouse if you die without a will. This is not true. If you are married, property is assigned based on the character of the property. Community property (the property you acquired during your marriage except for any gift and/or any inheritance) will go entirely to your spouse. Separate property (property you owned prior to marriage and/or gifts and/or inheritance) is divided between your surviving spouse and any children. The amount your spouse and children receive is based on how many children you have. If you want your spouse to receive all of your property upon your death you will have to designate that in a will or a trust.
Within your will you also can designate who will be the guardian of your minor children if necessary. If you have minor children, and their other parent is unable to care for them, your will may grant guardianship to an adult that can care for them. If you do not make this designation the State will.
Once your will is created,signed and witnessed you should discuss its contents with your family and loved ones. While you don’t have to let them know how you have chosen to designate your gifts you should at least let them know you have a plan, where to find your will upon your death and that they are involved in your planning. By being clear about your intentions, you avoid future potential hurt feelings or unrealistic expectations.
Based on the total value of your assets a will could be the only estate planning tool you utilize to pass your property after death. This document does not alleviate the need for probate, but does allow you to pass your property as desired. Additionally, this important document can help you try to avoid drama for your family, hand pick the guardians of your minor children, and to distribute your property and assets according to your wishes.
Stay tuned to my blog for Parts Two and Three of my blog series on Estate Planning.
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