Dear Jonathan: Based on my research, I feel like I'm pretty well versed in what I am supposed to do when it comes to creating an estate plan for myself. Everything I have read says that I should have a will, powers of attorney and a trust. What I would like to know, however, is what happens when I die if I don't do any estate planning?
My circumstances are pretty basic: I'm a 75-year-old widower with a modest estate, and I have three adult children who all get along great. I want my children to get everything except for a few personal items and $25,000 in cash that I want a close friend to get. My children are aware of this and have promised that they will honor my wishes. My understanding is that my children will get everything even if I don't have a will? If that is correct, why should I spend money on having a will prepared?
As for powers of attorney, I'm not too concerned about becoming disabled before I die, but even if I do, one of my daughters has agreed to take care of me. So why should I spend money on preparing financial and health care durable powers of attorney when it is unlikely that I will need them?
As for a trust, I don' t think the size of my estate even warrants having the discussion. So what happens at my death if I haven't prepared a will, powers of attorney, or even a trust?
Jonathan: That is a fair question. If everything goes as planned and:
- You don't become disabled or legally incapacitated prior to death for any period of time, and/or you don't want or need someone to help you with bill paying, for instance, then you might not need to have financial and health care durable powers of attorney.
- Your three children all survive you, then you are correct, they will share in your estate, so you might not need a will, at least for them to receive their respective shares of your estate.
The problem, however, is that no one has a crystal ball, and things don't always go as planned. For example, it is more likely than not that you will, at some point prior to death, either be unwilling or unable, due to age or incapacity, to act for yourself. Should this happen and you don't have financial and/or health care durable powers of attorney, then in order for your daughter to be able to act for you, e.g., pay your bills or make health care decisions for you, she will need to be appointed as your guardian and/or conservator through a court proceeding. This is because your daughter cannot act or make a decision for you unless she has legal authority to do so and that authority is provided by the durable powers of attorney or in their absence, a court order. Having financial and health care durable powers of attorney in place will avoid needing court involvement and provide your daughter with the authority she needs to act for you, if it ever becomes necessary.
If you die without a will, your state's intestacy laws, will require that your estate be distributed to your heirs, e.g., your children. This aligns with your intention, but what happens if a child fails to survive you; what happens to that deceased child's share? Or what happens if your children, after receiving the assets from your estate, decide not to honor your request regarding your friend? They are not legally obligated to do so and if they ignore your request, your friend will end up with nothing. To avoid this from happening, you can protect your friend by preparing a will and naming him or her as a beneficiary. This will assure that your friend receives what you want him or her to receive notwithstanding your children's inclinations. Also, with a will you can provide for an alternate beneficiary in the event a child doesn't survive you.
You stated that your estate was too modest to even warrant discussing a trust. However, having a trust can be beneficial for a variety of reasons regardless of the size of your estate. One of the main reasons people (even those with modest estates) prepare trusts is to avoid probate. Probate will be required of any asset titled in your name alone which doesn't have a *beneficiary named to receive it upon your death. And probating an estate takes time and can be very costly. Also, unlike trusts which are private, a probate proceeding is open to the public.
These are just some of the basic issues you need to be aware of if you decide not to engage in estate planning. I encourage you to at least meet with an estate planning attorney who can go over all of this with you in more detail and answer whatever questions you have. If you do so, you will be in a better position to make an educated decision as to the best way to move forward. Good luck!
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
