Many people make the mistake of thinking they don’t need to get their estate in order until they’re old…or sick…or become multi-millionaires.
The reality is, the time to tackle estate planning is when you’re well. It is something that everyone should do, regardless of how wealthy they are.
Estate planning refers to the process of putting the legal documents in place that allow you to take control and determine exactly what will happen to your assets and responsibilities if you become incapacitated or die.
A basic estate plan includes a Will, Advance Health Care Directive and Durable Power of Attorney. It can also include a Trust and other documents.
What happens if you die without a Will or other estate planning documents?
In this situation, people who did not know you (i.e. judges) will make important decisions regarding your estate, such as:
Assets - The court will decide how your assets are distributed. Most likely the courts will divide your assets equally among your living children, if any, or other next of kin. If you wish to leave money or other assets to other people or causes, or did not want to divide things equally, or did not want to include all of your children or next of kin, the courts will have no way of knowing this.
Heirs - If you do not leave a Will, you increase the risk that bad feelings and legal battles will tear your family apart after your death.
Guardians – If your children are still minors and you were their sole caregiver, the court will appoint a guardian to care for them. The person that they appoint may not be the same person you would have chosen. In fact, it might be someone that you wouldn’t want raising your kids at all.
Taxes - If you have assets, proper estate planning can legally reduce the amount of taxes that your heirs will have to pay.
Probate
Depending on the size of your estate and what types of assets you own, your estate might have to go through the hassle of probate. Probate is a legal process for distributing the assets of a deceased person; it can cost thousands of dollars and be extremely time-consuming. In California probate typically takes anywhere from nine months to two years. Meanwhile, although your heirs cannot access the money in your bank accounts or sell your house, someone will still need to pay the mortgage, property taxes and other bills.
What happens if you become incapacitated?
Many people become incapacitated for a period of time before they die. Two of the standard estate planning documents are meant to address this situation:
The Advance Health Care Directive specifies what medical care and interventions you do or do not want to receive, and lets you appoint an advocate to help ensure your wishes are carried out. For example, do you want a “do not resuscitate” order to be in place? Do you want to donate any of your body parts after your death?Without this document, once you become incapacitated your wishes regarding your care will not be documented, so will likely not be taken into consideration.
The Durable Power of Attorney appoints someone of your choice to handle your affairs and make specific decisions on your behalf if you are incapacitated or otherwise not capable of handling things yourself. This document can be written so that this appointed person can handle specific health, legal, business and/or financial responsibilities for you. For example, you can appoint someone to make medical decisions for you, access your accounts to pay your bills, and more.Without this document, if you become incapacitated the court will appoint a Conservator you. This process can be time consuming and costly, and can result in someone that you would not have chosen being appointed to make vitally important decisions on your behalf.
The bottom line is that estate planning is an invaluable gift that you give to yourself and the people that you love.
If you have not yet gotten your estate in order, now is the time to contact an estate planning attorney and do so!