In the unfortunate event that you should pass away without an estate plan (or at the very least, a will) in place, a number of potentially distressing things can happen. Not only can it cause a lot of unnecessary stress during the grieving process, but it also requires a major time and financial commitment from your loved ones as well.
Not only that, but it will be your court - not your family - that decide what happens to your assets when you pass away without some type of estate plan in place. Your surviving spouse or domestic partner will likely get the top priority. Things will then go to your kids, your parents (if they are still alive), your brothers and sisters, and finally to any extended family members.
However, that isn't always the case and if you have strong opinions about the legacy that you leave behind for other people, it is absolutely in your best interest to act while you still have the opportunity to do so.
When it comes to what happens when you pass away without leaving a will, the answer unfortunately varies depending on which state you live in.
In most cases, there will be state laws that attempt to "mimic" what your final wishes may very well have been. However, because there was no will, your actual preferences go unknown and potentially unacknowledged. At this point, your estate goes to what is called probate court. Here, a state-appointed representative will be named and approved by the court. Normally, this is either a spouse who is still living or one of your children, provided that they are legal adults.
Until that person is approved to distribute your assets, they remain frozen. If nobody wants to perform this important role, the court will select a public trustee to perform much the same function.
How to Create an Estate Plan
The first step towards putting together a viable estate plan involves enlisting the help of a professional. While you can technically accomplish a lot of the requirements on your own from a legal perspective, this is something that is far too important to leave to chance. You'll want to enlist the help of someone who has experience in estate planning to make sure that all variables are accounted for.
When putting together this plan, you'll focus on a few core areas, like:
Writing your will, if you have not already done so. This is a document that specifies exactly how your assets will be distributed after you die. It also specifies who will be the executor of your state, who will become the legal guardian of any children that you may have, who will take care of your pets, and more.
Any assets that don't get left to your surviving friends and family members can instead be left to other beneficiaries that are specified in your estate plan. Examples of this would be specific IRAs, a 401(k), or some other type of investment account.
Your estate plan will also specify your durable power of attorney, otherwise known as your DPA for short. If you are still alive but can no longer manage these elements of your life, the DPA can take over and do so on your behalf.
You will also establish an advanced medical directive. This will outline medical procedures or types of healthcare that you do or do not want so if critical decisions need to be made, and you are unable to do so on your own, others will know what steps must be taken.
Other factors that will be accounted for in your estate plan include life insurance and any trusts that exist. If you're leaving behind family members who already depended on you for financial support, investing in life insurance policies and making them a part of the estate plan can be a great way to continue to do so after you pass away.
Living trusts let you place certain types of assets like money or even real estate in what is essentially a hold, allowing you to dictate when and how they are eventually distributed. Some people use specific types of trusts to help their family members avoid having to pay estate taxes, for example.
Additional Considerations About Leaving a Lasting Legacy
The number one thing to remember when putting together an estate plan is that all proper documentation needs to be in order. That includes not only your will and information about any trusts as outlined above but also data pertaining to your bank accounts, your real estate deeds, investments like mutual funds, and more.
People also often forget that they should include information about funeral prepayment plans, as well as any preferences you have in terms of your final arrangements.
In the end, leaving a lasting legacy isn't something that happens automatically - you need to be proactive and plan ahead. Estate planning today goes a long way toward allowing you to accomplish precisely that.
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