So you were thinking that you don't need an estate plan? Think again. An estate plan isn't just about dividing your assets, it's also about when, how, and who will get those assets and if you still have minor children, it’s about who cares for those children. The law thinks this planning is so important that if you don’t have an estate plan, they will create one!
An estate plan is a set of legal document that lets you detail your wishes for the distribution of your property, care for family and the payment of your final expenses. Only 46% of U.S. adults have executed an estate plan, and only 36% of those with children under the age of 18 have a will.
If you die without an estate plan (i.e., intestate), the law of the state where you reside determines how your property will be distributed. For example, in Indiana, here’s what happens:
- If you’re married, your spouse gets half of your assets and your children/grandchildren get the other half.
- If you’re married without children, your spouse gets three-quarters of your assets, and your parents will receive one-quarter.
- If you’re single, 100% of your assets go to your children.
- If you’re single without children, your parents get one-quarter of your property and your siblings, nieces, and nephews will receive the rest.
The court will also appoint some individual to take care of your children. That’s known as a guardian, and it’s usually a family member. While that may sound OK, a judge’s criteria may not be the same as yours. It’s better if you decide which family member or perhaps skip your family altogether and choose a friend to serve as guardian. Without a will, you give up your right to choose.
Talk to an experienced estate attorney who can prepare your will to be certain that your wishes are clearly articulated and minimize the potential for others to contest the terms.
An executor (also known as a personal representative) is the individual you name to carry out the wishes detailed in your will. He or she also is responsible for settling all your affairs. Consider carefully the person you select for this responsibility. You should also name a successor executor, in case your first choice is unable to act. An executor's job includes the following:
- Determining your assets;
- Contacting those you've named to receive property and distributing it to them;
- Notifying the credit agencies of your death;
- Canceling your credit cards;
- Opening a bank account for your estate;
- Ensuring debt payments, utilities, taxes and other outstanding expenses are paid, while your estate is open;
- Paying debts;
- Closing social media accounts;
- Filing the will in the right probate court; and
- Filing a final tax return and possibly an estate tax return.
There may be some property that won't pass via the will. This will include retirement accounts, life insurance policies, annuities, and property that is owned with another person (joint with rights of survivorship). These assets transfer, according to beneficiary designations or to the joint owner.
Reference: Inside Indiana Business (June 11, 2018) “With a Will, It's Done Your Way”