On of the frequently asked questions I get is “Do I need an estate plan?”
The answer is: Yes!
As a recent article in Forbes points out, if you die without an estate plan, such as a will (“intestate,” in legalese), the state where you lived has an estate plan for you. And you probably won’t like it. When someone dies without an estate plan, property is distributed to the surviving family members according to the rules of intestate succession. These rules are strict, and must be followed by the probate court. In fact, one enterprising lawyer has developed a website detailing what will happen to your property if you don’t have an estate plan. For example, if you are married and have two minor children, and your property is worth $100,000 (a modest amount by California standards), your surviving spouse will receive one-third of your property. Each of your two minor children will also receive one-third of your property. However, since you don’t have a will, your surviving spouse and children must go through the probate court to receive the property. And since your children are minors, typically the probate court will require that any money your children inherit be placed in a blocked account, which means that the money can only be accessed by your children after they turn 18. Your spouse won’t have access to those funds.
This can be avoided if you have an estate plan.
As the Forbes article discusses, you don’t have to be rich to have an estate plan, or an estate. Estate planning isn’t only for Thurston Howell, III of Gilligan’s Island. Your estate simply consists of everything you own at the time of your death: Your home, personal property, investments, bank accounts, retirement plans and any interests in a family business or partnership. While beneficiary designation forms control who gets retirement accounts, along with life insurance proceeds, for most other assets, you need an estate plan consisting of a will or living trust which says who gets your stuff. Your estate plan should address who gets what, and how and when they get it.
Many people wait until they have children – or even later in life – to have an estate plan, but that can be a mistake. Simple estate planning should be a rite of passage for every 18-year-old, and evolve with wealth and relationships.