Death is a subject hardly anybody wants to talk about. Yet, dying is inevitable, and when someone dies, they will leave behind assets and debts. What happens to those assets and debts?
In most cases, individuals would rather be able to dictate what happens to their assets. Either they want a surviving spouse, child, parent, or other family member or friend to be able to inherit the assets, or at the very least, they don’t want a particular family member to inherit.
But, without a proper estate plan, an individual may lose the opportunity to determine the fate of their own assets. Loved ones may be disinherited. Plus, family members may have to incur a great deal of time and expense in settling the estate after someone dies (a process called probate).
There is a solution that will protect loved ones and save them the trouble of having to deal with legal issues like probate when they should be focusing on dealing with their grief instead — preparing a legal estate plan.
What Is an Estate Plan?
Whether they realize it or not, most everybody has an estate. All assets comprise an estate. These assets can include cash, savings accounts, retirement accounts, personal property like furniture and other possessions, jewelry, stocks and bonds, vehicles owned, homes owned, and more.
When someone dies, all of those assets have to go somewhere. Making a plan to determine what happens to your estate is called an estate plan. The person who makes the plan is called a testator.
Usually an estate plan consists of a document called a last will and testament. Sometimes an estate plan also includes plans for a trust, an arrangement where assets are held by a third person for the benefit of others.
An estate plan should include detailed instructions as to whom each asset should be given when someone passes away. The people who inherit these assets are called beneficiaries.
An estate plan should also provide information on how those beneficiaries will inherit. For example, if a testator has three children and wants all three children to inherit the family home, will the children inherit in equal shares? Or, does one child get a majority share? Having a solid plan will help avoid any disputes among beneficiaries or other interested parties.
Furthermore, there may be situations in which a beneficiary dies before the testator has an opportunity to update the estate plan. If that’s the case, an estate plan should have contingency instructions in place detailing who should inherit that beneficiary’s gift instead.
Generally, spouses and children of a testator will inherit. Many states have specific statutes that will ensure surviving spouses and children of testators will inherit a part of the estate even if a will does not say so.
However, it is important in an estate to include all of the individuals whom the testator wants to benefit. Other relatives such as parents, beloved cousins, nieces, nephews, aunts, uncles, and close friends will likely not inherit unless specifically named in a will.
When Is It Necessary to Have an Estate Plan?
Not everyone needs to have an estate plan, though most people should have one. There are several factors to consider when determining whether a person should have an estate plan.
First, does a party have children? Generally, if there are children involved, it is important to be clear about what happens to your estate in relation to the children. As mentioned, an estate plan will help determine whether the children inherit assets equally or whether any of the children should not inherit.
Most importantly, however, if there are minor children, an estate plan would determine who should be the childrens’ guardian if the childrens’ parents pass away.
Second, what kind of assets does a person have? If a person owns very little property or none at all, has little cash or savings, does not own a vehicle, and has no other valuable assets, then an estate plan may not be necessary.
However, the opposite is also true. If a person owns at least one home, a vehicle, a savings or checking account, or other assets, it is advantageous to have an estate plan.
Other important factors in determining whether someone should have an estate plan is whether they want any gifts to go to charity. If so, an estate plan is necessary. If a person owns a business, it is also important to have an estate plan to create a business succession plan.
There are many other things to consider in whether an estate plan is necessary. However, when in doubt, err on the side of caution and create an estate plan.
Do I Need an Attorney for an Estate Plan and Trust Administration?
While it is possible to create a will on your own, it is generally best to consult with an estate attorney who can ensure that your state’s statutes and regulations regarding estate planning are met. An estate planning attorney can also evaluate your needs and create an estate plan just right for you and your own personal circumstances.