What is an estate? Technically, an estate is the totality of someone’s belongings. Anyone who owns any property, it could be argued, has an estate. When we discuss estates in a legal sense, we’re mean any property left over after someone’s death. We usually refer to this property as “assets.”
As we move forward through life and accumulate assets, it’s important to start thinking about where those assets will go. Death is a reality of life. None of us will be here forever, but our assets could be around for a very long time, indeed.
This is why estate planning is so important. It is crucial that you determine now, while you can, what will happen to your assets when you are gone. Without estate planning, the distribution of your property falls into the hands of the state. Here are the four key areas you should cover in your plan.
1. Draft a Will
A will is a legal document that dictates who will get your property after you die. A will can create peace of mind for the present and the future. For you, it ensures that your loved ones will receive exactly what you wish. For them, it creates less strife, helping avoid infighting over your property.
A will allows you to give anything to anyone. You can be as specific as you want. Your old baseball card collection can go to your best friend Sam, while your money and real estate go to your spouse. There really are no limits to how you can divide your belongings. This is especially beneficial for someone who had a nontraditional upbringing. Let’s say you have a niece who is more like a daughter to you. Within your will, you can give her an inheritance that is more reflective of your relationship. Without a will, your assets will go into intestate succession, and your beloved niece may get nothing.
When someone dies without a will, their assets go into “intestate succession.” This is where the state divides your money according to predetermined laws. Only the state has a say in who receives your property. A very rigid system, it attempts to take all likely scenarios into account.
Intestate succession in California:
- The deceased was married: Their spouse gets everything.
- The deceased was unmarried and had children: Everything is divided equally among the kids. If the deceased had children who passed, that child’s share goes to their children (the deceased’s grandchildren), if there are any.
- The deceased was married with kids: The marital property goes to the spouse. Any “separate property” is split among the spouse and the kids. If there is only one child, the separate property is split 50/50. If there is more than one child, the spouse gets 1/3 of the separate property, and the remaining 2/3 is split among the kids.
- The deceased was unmarried with no kids: Assets go to next of kin, based on the closeness of the relationship. If, for example, their parents are alive, it goes to them. With no living parents, assets go to siblings. If there are no siblings, cousins are next. The list extends onward from there.
- The deceased has no next of kin: the property goes to the state.
As you can see, it’s probably not best for the state to make these decisions for you. Many people who don’t have a proper next of kin still have friends that are as close as family. A will can allow you to give these people what they deserve.
When you do have a will, your assets will be verified and divided in a process called “probate.”
Probate is the legal process whereby the courts follow the wishes in the will. First, it verifies that everything is accurate. The person is, in fact, deceased, and this is, in fact, their will. From there, the court gives someone the job of handling the affairs of the will. This person is the “executor.” The will can appoint this person, or the courts can.
Being an executor is a big job. First, they must take care of the deceased’s leftover bills and debts. Then, they need to have physical property appraised. Next, they need to contact the recipients of the property and make sure it is handed over. The whole process could take months or even a year.
Executors can also be targeted by the will’s recipients. If they don’t trust the executor, or they believe that the executor made an error, they can take the executor to court. When picking an executor for your assets, choose wisely. You want someone who is competent enough to do the job and who can withstand potential problems.
2. Create a Living Will
A will is enacted after your death, whereas a “living will” handles healthcare while you are still alive. It is used when you cannot care for yourself or become incapacitated. You can use it to make decisions about how you will be treated. For example, you can make decisions about life support. You can also make less severe decisions. You can appoint someone to oversee your healthcare when you can’t do it alone. They can take care of your prescriptions, doctor bills, medical visits, etc. They can make decisions about your care, consenting to procedures and surgeries on your behalf.
Just like with a will, making these decisions now will bring you and your family peace of mind for your future.
3. Appoint a Durable Power of Attorney
A “durable power of attorney” appoints someone to manage your financial affairs. They can buy and sell property on your behalf. They can make investments for you, and they can file lawsuits for you.
You can dictate the terms, and you can change those terms later. For example, you can stipulate that your power of attorney must consult you before making decisions. You can predetermine how incapacitated you must be before the power of attorney kicks in. You can also decide how involved you will be thereafter. Power of attorney can be signed over to anyone you choose, should you need it.
4. Put Your Paperwork Somewhere Safe
Once you’ve signed your will, living will, and durable power of attorney, you need a secure location for these documents. Copies can help ensure that no one alters the plan. Give a copy to everyone you’ve named in your estate plan, and make certain they keep it away from others. Keep copies of your own in a safe. Give one to your lawyer as well. Whenever you need to alter the paperwork, collect the copies you’ve already distributed, shred them, and pass out the new documents to the same people. Stay vigilant about who has what, and keep everyone up to date.
Talk to a Lawyer
This step has been left out of the “four essential elements” because, pragmatically, you should have a lawyer involved in every step of estate planning. Legal documents, handled incorrectly, are open to interpretation. A good lawyer can help you compose this paperwork in such a way that it cannot be misunderstood.
Contact us today. We may be able to help you plan for your future. We can give you a free initial consultation, so call us at (916) 571-1550. You can also reach us online.