Estate Planning Avoids Throwing Money Down the Drain
Don’t feel left out. If you don’t have a will or other estate planning docs you’re not alone. Statistics taken over the last decade have shown that up to 55% of Americans 45 years and older don’t have a will or other estate planning set-up. It’s not just the common-folk that forget to get their estate planning docs in order. Business mogul, Howard Hughes, Presidents Lincoln, Johnson, Grant, and Garfield, and even iconic pop music stars like Sonny Bono and James Brown are just some of the many famous people that died intestate without valid estate planning docs.
As the saying goes, nothing in life is free. And, in this case, nothing in death is free. Dying intestate causes state intervention. The state uses your estate funds to administer your estate and parcel out your property. The more you have, the more they take. What’s even more maddening is the state’s already decided who gets your property. This equates to high costs, less for your heirs, and the potential that undesired beneficiaries get your stuff. Dying testate with proper estate planning documentation in place is the only way to avoid state intervention.
Example: California resident Harry died suddenly of a heart attack at age 42, leaving his wife Wanda, two children, and no will or other estate planning docs. The estate was worth $200,000, including a house, life insurance, and some savings. This would have been enough for Wanda had she received the entire estate, but without a will, Harry’s estate passed to Wanda through California intestacy law where she was entitled to half of the estate and the 2 kids were entitled to the other half of the estate. Wanda needed a court order and bond of $100,000 to manage her own kids’ estate. Wanda had to pay filing, court, and lawyer fees. This would have been avoided had Harry died testate.
Forging Estate Planning’s Unknown Road
Creating a valid will is only one step of setting-up a proper estate planning package for most people because it only disposes probate property, which is the stuff you own as an individual. Dying intestate does not impact non-probate property, including jointly held assets and accounts with beneficiary designations like insurance policies, 401(k)’s, and pay on death or transfer on death accounts. Proper estate planning necessitates further strategy when someone owns real property.
A will governs some transfers of real estate but not others. If you own a home with your spouse as joint tenants with rights of survivorship the home passes directly to the surviving spouse on death. If, however, you hold property as tenants in common, you can use the will to indicate who gets your share in the property. Problems can arise here if the surviving spouse adds a child’s name to the deed. If the kid goes bankrupt, gets sued, divorced, or ends up with government assistance, the creditors may pursue the child’s interest in the house.
Creating a living trust as part of the overall scheme is the superior method of setting-up your estate planning package. An estate planning package with a living trust in place avoids probate, allows flexibility, avoids inheritance problems like adding kids to title, and ultimately secures your legacy for your loved ones now and in the future.