As the years fly by faster and faster, most of us start thinking about what will become of our financial and physical assets when we die. Surprisingly few of us actually do anything about it, however. We may think that we don’t have enough “money and stuff” to make an estate plan worthwhile. We may think that our heirs will be able to divide up our assets without hard feelings. We would be wrong.
What Happens if I Do Nothing?
If you do nothing at all, you die “intestate,” which means without a will. When this happens, the state that you live in will step in. The probate court will tally up all of your assets, pay all of your outstanding debts, and distribute what’s left according to a standard formula.
Most states award up to half of the estate to the surviving spouse. The rest is divided among the children. If you don’t have children, your estate goes to your spouse or in some states is shared between a spouse and certain relatives. If you are single with children, your estate goes to your children. If you have no spouse and no children, your estate usually goes to your parents.
What Is Accomplished by a Will?
If you have a will, you (rather than your state government) can decide who gets your assets and property after you die, including particular items. If you want specific people outside your family to inherit some of your property, or if you want to leave your estate to your spouse and child in different proportions than the state provides, a will is one of the best ways to make sure that this happens.
Will documents are readily available online. However, in all but the most simple of circumstances, it is usually a good idea to have a lawyer review what you’ve drafted.
Wills are especially important if you are in a relationship that is not recognized as marriage by your state. A will is a simple legal document that must be signed by you and usually witnessed and signed by one or two other people. In a few states, wills can be handwritten, oral or even video. You appoint someone you trust to “execute” or carry out the terms of your will. A will must go through the probate process, which can be time-consuming.
What Is Accomplished by a Trust?
If you want to avoid the probate process entirely, and/or accomplish special goals (like controlling distribution of the assets over time, or helping a charity or a disabled relative) you can create a trust. This can be an attractive option if you have a larger estate, because probate can cost up to seven percent of the value of your estate.
In an irrevocable trust, you give up control of your assets during your lifetime. They are managed instead by a trustee. In an irrevocable trust, your assets are protected from creditors. There are tax advantages.
In a revocable living trust, you retain control over your personal assets during your life. Such trusts are commonly used as a substitute for a will in estate planning. You can change the terms, by adding or removing beneficiaries, or cancel the trust entirely. The assets are not protected from creditors and lack the tax advantages of irrevocable trusts. Your assets transfer automatically and quickly to your beneficiaries at the time of your death.
Call an Estate Planning Lawyer
The law surrounding what happens to your financial and property assets when you die can be complex, especially if you die intestate. Plus, the facts of each case and the law in each state are unique. This article provides a brief, general introduction to the topic. It is not legal advice. For more detailed, specific information about your particular situation, please contact an estate planning lawyer.