What happens if you don't have a will or Living Trust?
A will permits you to control many important things. In your will, you name an executor or personal representative to be responsible for ensuring that your wishes are carried out. You also designate which beneficiaries you would like to receive your assets. If you have minor children, you may dictate your preferred guardianship arrangements.
If you do not have a will, the courts are required to step in and appoint an executor, and disputes may arise among family members or other loved ones regarding financial assets, debts, or family mementos. For parents of young children, a court, rather than you, may decide guardianship.
A Last Will and Testament can set out your wishes regarding what happens to you, your assets, property, and your minor children, when you pass away. It is best to think of a Last Will and Testament as a set of instructions to your executor and the probate court in your state. It may be legally required to have your will notarized, if not also witnessed and signed by others, for it to be considered legal.
A Living Trust can be used to give assets and property to your heirs, similar to a will. In a Living Trust, assets are transferred into the trust for you to use during your lifetime, then pass to the named beneficiaries of the trust when you die, automatically. Using a Living Trust typically allows assets and property to pass to beneficiaries faster by avoiding probate. You can also make other types of trusts, or by leaving instructions in your will for all your assets to be put into a trust at the time of your death. The latter type of trust is often called a "pour-over" trust because your assets are "poured" into the trust when you pass away.
Without a will or Living Trust, you lack the ability to decide who is responsible for making such decisions as your executor, nor would anyone truly know what your wishes would have been.
What happens to children or dependents if you do not have an estate plan?
Minor children, or dependents with special needs, may have their fate decided by a court if you do not have an estate plan. Courts typically place children with next of kin, but these may not be the people that you would have chosen to care for your children or to control any money you have left to your children. This can result in your children's inheritance and family heirlooms being lost or spent by guardians.
When you make an estate plan, you have the opportunity to consider many different factors that may affect minor children. You can come up with the best plan possible in a worst-case scenario. You can take your time in deciding who would make the best guardian — and who would be the best backup guardian if your first choice is not available. You can provide funds for the guardian to care for your children, as well as designate money to pay for higher education expenses or serve as a nest egg for young adulthood. It is important to understand that the person you name as guardian does not have to be the same person who controls any funds set aside for your children's care. You can name a different person, or professional, to be responsible for your children's money. That person can work with the guardian to ensure the children are provided for financially. Dividing up these duties generally works better in many families.
If you do not write out these carefully made decisions as part of a will or elsewhere in your estate plan, even if you do not have minor children or special needs dependents, your adult children may end up arguing over family heirlooms, your home, or your end-of-life care.
If you are concerned that you may change your mind about your choices at a later point, don't worry. It is very common to change your estate plan. In fact, returning to your documents for a check-in every so often is not just advisable but strongly encouraged.
What are the pitfalls of probate court? How can I avoid probate?
If a person dies without a will (also known as dying "intestate"�), most states send the estate to probate court to determine how assets and property get distributed. Without a will, the probate court will follow state laws on who gets what. With a valid will, however, the probate court typically requires the named executor to report back regularly until all debts have been satisfied and all assets distributed.
Probate court can be an expensive and time-consuming process. Without a valid will, there may be delays for your beneficiaries to access bank accounts or other financial accounts. The courts may not distribute your assets in the way you would have chosen. Probate courts may also require an attorney or trustee, and this person may take their fee from your estate, reducing the amount available for your beneficiaries.
In many states, if you have a will and small estate, your estate may avoid probate court, or qualify for a simpler probate process. If you have a larger estate, you may want to consider a Living Trust. The assets placed into a Living Trust typically bypass probate and automatically pass to beneficiaries.
What happens if you don't have a Power of Attorney document in place?
A Power of Attorney allows you to appoint the individual or individuals of your choice to make healthcare, medical, financial, or business decisions if you become unable to do so yourself. An Advance Directive may serve a similar purpose. A Medical Power of Attorney, often known as a healthcare proxy, allows you to nominate a person of your choice to make health and medical decisions for you in the event you become incapacitated. You may set out specific instructions in your Power of Attorney that let them know whether you prefer specific lifesaving measures. In addition, you can include a Do-Not-Resuscitate (DNR) directive in your documents if that is your wish.
If you do not have a Power of Attorney to make medical or financial decisions on your behalf, a court may appoint a conservator or guardian for you. The process of appointing someone is time-consuming and costly, and your family members may pay the cost, as well as lose the opportunity to help by making decisions based on your wishes. Healthcare decisions often cause arguments even among the closest of family members. It can be much better to decide for yourself who would be best to take on this role in order to minimize drama and hurt feelings later on.
How are beneficiaries impacted if you lack life insurance?
Many families rely on life insurance to cover funeral expenses. The average funeral costs $7,000 to $12,000. Beneficiaries, like your children or grandchildren, could be left with debt if you pass away unexpectedly and without life insurance to cover these costs. Even if you believe your estate may cover the costs, end-of-life health care needs can deplete your funds. A life insurance policy may be an effective part of an estate plan to help protect your loved ones from these expenses.
If you still have questions about estate planning, reach out to a Rocket Lawyer network attorney for affordable legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.