Why even bother making an estate plan? Is it worth the time & energy? It is important to understand the value of creating a plan like this before taking the first step.
Let me ask you this,
Would you be comfortable with a stranger deciding who gets to inherit your property & raise your children?
You’d probably get angry at me if I asked you this question in person. But that is exactly what you’d be allowing if you pass away without putting an Estate Plan together.
“David does not share a healthy relationship with his wife and they’ve been living separately for some time now. He loves his brother and his 3-year-old daughter a lot. David wants to support her education and promises to help his brother financially to do so. Sadly, due to a heart attack, David suddenly passes away. Depending on the state laws, all his assets will go to his wife including the custody of his kids.”
That’s not fair! Why did this happen to David?
In legal terms, if you pass away without a Will, it would be called dying “intestate”. David’s family would’ve had to go to the court and go through probate which essentially is the process the state follows to distribute the deceased assets & make decisions on other things like custody of children.
While intestacy laws vary from state to state, they were drafted decades ago, based on how they believed people would like their assets to be passed down the line. Families today have complex and unique dynamics.
But you might be saying, “I don’t relate to this. I don’t have any complications in my personal life.” Even in that case, there’s no avoiding the probate process that the court will follow to make decisions.
The problem? While your family probably knows your wishes, the judge doesn’t and he can’t take their word for it. Strict legal instructions are referred to, the outcome of which may not be in your best interest.
Probate, simply put, is the process that the legal system follows to decide how your assets get distributed along with other things like who gets custody of your children.
When you don’t have an Estate Plan, the probate process is extremely time-consuming, mentally draining, and costly.
It would start with the court appointing an Administrator for you who will be in charge of distributing your assets after the court’s final decision is made. Usually, this person would be your spouse or an adult child. If no one is capable of taking up this role, the judge will assign a public trustee to do the job.
If you have set nominees for your assets - such as bank accounts or stock portfolios would directly get passed on and avoid the probate process.
In a situation like that, the court will freeze your assets until probate is completed. The problem is that the legal system is unaware of what you would’ve wanted without an Estate Plan and the outcome may not always be the right thing for your loved ones.
Usually, your assets would be frozen until the court has decided on how to distribute them. As you saw in the example above, the court’s final decision may not always be in your or your family’s best interest.
A significant amount of money from your estate will be spent on probate fees, the remaining will go to your loved ones. It’s a broad range, the Filing Fees would cost $50 to $1200; Executor and Bond Fees 3-5% of the estate value; attorney fees $1500 to $3000 or up to 3% of the estate value.
An Estate Plan streamlines this entire process which saves a lot of time, money, and trouble that your family would have to go through.
Under normal circumstances, your spouse or the surviving parent would get custody of your children. However, if they pass away as well or are incapable of providing for them, the state would ask for volunteers from your family to take the role of a guardian for your kids and take a call based on who they think would be the right fit.
The problem from earlier remains, that the court is not aware of your family dynamics all that well. Their decision might harm the future of your children irreversibly.
Another possible outcome is that nobody steps up to volunteer. Here the court will take the custody and put your kids in the foster care system.
The assets you have built over the years took a lot of effort. I think it’s only right for you to decide who gets to inherit your estate which you have lost sleep over and not let the state decide how to handle it. Also, if you’re a parent, your kids deserve to be raised well and by people who you trust.
Do you think your loved ones would like roaming around the courts after you are gone? Having a Will or a Trust would enable them to have peace of mind by knowing what you would’ve wanted. It would also streamline the probate process and ensure that the legal system makes decisions based on the instructions you have outlined.
Your estate plan is a way to communicate even when you’re no longer around which makes it so important to create today. The future is unpredictable but with this in place, you have control to decide who gets what and ensure that your estate does not fall in the wrong hands.
A TrulyWill series to help you understand estate planning one article at a time.