After an individual spends his entire life accumulating assets, it is important for him or her to create an estate plan so that the assets will be distributed according to his or her wishes. One of the largest myths concerning estate planning is that it is unnecessary, because a person’s assets will be distributed to his or her family. As a recent article explains, however, leaving estate planning to chance can often have unintended consequences.
If an individual dies without an estate plan, his or her assets will be distributed according to the intestacy laws of the state in which he died. These intestacy laws serve as a sort of default estate plan, and attempt to achieve the distribution that an individual would have wanted upon his or her death. Often, intestacy laws provide for a decedent’s children and surviving spouse first, then continue through a person’s family members.
Importantly, default estate planning only applies to a person’s probate assets. Probate assets are those that are transferred either through a will or intestacy laws. Many individuals also have non-probate assets, which transfer by the operation of other mechanisms. Non-probate assets include assets in trusts, assets owned jointly with another individual or individuals, and assets which transfer under contract such as a life insurance policy.
These assets will transfer according to their terms. Theoretically this is in line with the decedent’s intentions because he or she selected or agreed to the terms at some point. However, often the terms of non-probate assets are never reviewed or changed, and as a result, assets are transferred to unintended beneficiaries, such as an ex-spouse.
Minimally, your estate plan should include a will, durable power of attorney, health care power of attorney, and living will. For assistance in creating your estate plan, contact us at (626) 696-3145.
