Without an Estate Plan Your Spouse May Be Forced to Share Your Estate
Don’t assume your estate will automatically go to your spouse or that your spouse is automatically protected when you die. Consulting with a good estate planning attorney will make sure you have all the estate planning documents you need. If you don’t have an estate plan, your spouse may have to share your estate with other family members.
If you die without an estate plan, the state will decide where your assets go. Each state has laws that determine what will happen to your estate if you don't have a will. If you are married, most states award one-third to one-half of your estate to your spouse, with the rest divided among your children or, if you don't have children, to other living relatives such as your parents or siblings.
In addition, without an estate plan, you need to worry about what could happen if you become incapacitated. While your spouse may be able to access your joint bank accounts and make health care decisions for you, what happens if something happens to your spouse? It is important to have back-up plans. And even if your spouse is fine, depending on how your finances are set up, your spouse may not be able to access everything without a power of attorney authorizing it.
To avoid this, it is important to make sure you have estate planning documents in place. The most basic estate planning document is a will. If you do not have a will directing who will inherit your assets, your estate will be distributed according to state law, which, as noted, gives only a portion of your estate to your spouse. If you have children, a will is also where you can name a guardian for your children. Read more about what makes a will valid.
You may also want a trust to be a part of your estate plan. It permits you to name someone to manage your financial affairs. You can name one or more people to serve as co-trustee with you so that you can work together on your finances. This allows them to seamlessly take over in the event of your incapacity. Trusts have many options for how they can be structured and what happens with your property after your death. There are several different reasons for setting up a trust. The most common one is to avoid probate. If you establish a revocable living trust that terminates when you die, any property in the trust passes immediately to the beneficiaries. This can save your beneficiaries time and money. Certain trusts can also result in tax advantages both for the donor and the beneficiary. These could be "credit shelter" or "life insurance" trusts. Other trusts may be used to protect property from creditors or to help the donor qualify for Medicaid.
The next most important document is a durable power of attorney. A power of attorney allows a person you appoint -- your "attorney-in-fact" or "agent" -- to act in your place for financial purposes if and when you ever become incapacitated. Without it, if you become disabled or even unable to manage your affairs for a period of time, your finances could become disordered and your bills not paid, and this would place a greater burden on your family. They might have to go to court to seek the appointment of a conservator, which takes time and money, all of which can be avoided through a simple document.
Similar to a durable power of attorney, a health care power of attorney appoints an agent to make health care decisions for you when you can't do so for yourself, whether permanently or temporarily. Again, without this document in place, your family members might be forced to go to court to be appointed guardian. Include a medical directive to guide your agent in making decisions that best match your wishes.
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Estate Planning Guide
Included in this 2020 Estate Planning Guide is a comprehensive look into:
Probate. In terms of estate planning, there are two forms of probate to be concerned about: – death probate and living probate. This Estate Planning Guide covers them both, explains the difference and how to avoid expenses and burdens that can be associated with the probate process.
Drafting a Last Will and Testament. Why is relying on a Will alone is not part of a comprehensive estate plan.
Benefits of a Living Trust. What is a revocable living trust and how can it be an efficient tool to avoiding probate at your death, as well as to avoid living probate in the event of your incapacity.