Estate planning is the process of drafting documents that set out instructions regarding what happens when a person dies or becomes disabled. Many individuals procrastinate when it comes to their estate plan. However, procrastination can cause significant issues, including:
In some situations, a decedent’s estate may not have to go through the probate process. This is possible when the decedent does not own assets in his own name at the time of his death. Many individuals like to avoid the probate process because it is time-consuming and expensive.
Assets may be transferred outside of the probate process through a variety of mechanisms when careful planning has been utilized. Transfer on death forms can be used to transfer proceeds in financial accounts to the named beneficiaries. Retirement accounts and life insurance policies can include beneficiary designations. Beneficiary deeds can help transfer real property. Title transfers can sometimes list a beneficiary. Owning assets as joint tenants with the right of survivorship allows the surviving owner to take over the decedent’s former share. A trust can transfer other property from the decedent so that he or she does not technically own it at the time of death.
When a person dies without proper planning, his or her beneficiaries may not receive some of the benefits associated with careful planning. For example, a divorce may result in an asset being split between the spouses. Creditors may be able to attack an inheritance. When a person plans ahead, he or she may be able to prevent these occurrences from happening.
If a person dies without a will, the laws of intestacy apply. These are the default laws that establish who will inherit and in what sum. Many individuals are not aware of how the intestacy law works. They may assume their spouse will inherit everything whereas in reality only a percentage of the property actually goes to a surviving spouse. Individuals who are not close to distant family may not realize that these individuals may inherit their property.
When a person procrastinates, he or she may miss the opportunity to create valid plans. Designations like powers of attorney can only be established when the principal has capacity. Therefore, he or she may not be able to later name an agent of his or her choosing if the principal becomes incapacitated.
Having a durable power of attorney and healthcare proxy in place often prevents the need for a full guardianship case. Guardianships are restrictive in nature because they eliminate the ward’s autonomy. Someone else is appointed to make decisions for him or her. When a person waits to become incapacitated before planning for the future, it is often too late.
A person may have a life insurance policy, retirement account or other financial holding in which a beneficiary may be listed. However, the listed beneficiary may have died, become incapacitated or otherwise become ineligible to receive the asset. By procrastinating and not updating these forms, there may be no named beneficiary if a contingent or successor beneficiary was not listed. This may result in the asset going to the estate and being subject to claims by creditors.
Likewise, if a trustee was named and no successor trustee was named in a trust, the trust may not have anyone in place to administer it. This may result in costly legal expenses as different individuals vie for this position or seek to dissolve the trust immediately.
If a beneficiary designation was not changed, the decedent’s asset may go to an ex-spouse, ex-partner, estranged child or other unintended beneficiary whom the decedent may not have wanted to receive his or her property.
When plans are not made regarding a person’s possible incapacitation or death, there is often family discourse. Family members may not agree about what the individual would have wanted under the circumstances. Family members may contest a will because they think that it was a product of duress or undue influence.
Failing to plan often results in increased legal expenses. Lawyers often charge more for contested cases or complicated cases.
Contact the Law Office of William Reinhardt, Jr. at 718-377-8880 to discuss the proper plan for your estate.
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