Contrary to popular belief, not only Warren Buffet and Mark Zuckerberg require estate plans. If you own anything when you die, you have an estate. Your estate includes personal property, real estate, retirement accounts, life insurance, and business interests. Putting a basic estate plan in place can help ease the administrative burden of your death on your family, provides protection for your minor children, and establishes a plan in case of incapacity.
What happens if I die without a will?
If you die without a will (dying “intestate,”) state law dictates the distribution of your property. Each state has its own intestacy statute establishing a priority of inheritance between a surviving spouse, children, parents, siblings, and more distant family members. If no family members can be found, all of your property goes to the state. Dying intestate can present a substantial hardship for your family and has the potential to cause contentious disputes. Documenting your intentions in a will ensures that your wishes are met and avoids potential hardship for your family.
Who will raise my children if I die?
Most couples postpone estate planning until they have children. In all likelihood, your spouse will raise your children if you die, but what happens if your spouse dies also? Unless you name a guardian in your will, the courts determine custody of your children after your death. For most people, the uncertainty of a court appointed guardian is a very scary thought. By nominating a guardian in your will, you can be assured that your children are in good hands after you are gone.
Who will decide if you can’t decide for yourself?
Even if you do not have minor children and do not own any significant assets, planning for incapacity is a must for everyone over the age of 18.
- Health Care Directive/Living Will: A health care directive/living will is a written document that informs others of your health care wishes and authorizes someone (“health care attorney-in-fact”) to make health care decisions on your behalf in the case of incapacity. If you are unable to express yourself due to incapacity, you want to ensure that your health care providers and loved ones are aware of your wishes. This can be accomplished by signing a health care directive/living will.
- Power of Attorney: A power of attorney is a written document authorizing someone (attorney-in-fact) to make legal and financial decisions in case of incapacity. Signing a power of attorney ensures that someone you trust will be available to handle your day-to-day legal and financial affairs. Without a power of attorney, you leave your friends and family with the unpleasant task of making these decisions in a time of crisis.
- Quick note for parents of young adults: Most states do not permit parents to make health care decisions on behalf of their children after reaching the age of 18. This means that if your adult child is injured in an accident and is incapacitated, you may need to seek court approval to make medical decisions on his or her behalf. Discuss the significance of these documents with your children. This conversation is often appropriate as children prepare to leave the family home for college.
Do you really need an estate plan? Yes. Bottom line — old or young, rich or poor — basic estate planning is essential for everyone.
