If an individual dies without having properly prepared an estate plan (meaning they died intestate), they can leave their family members feeling overwhelmed. There are a number of dangers associated with failing to put a well-thought-out estate plan in place that could make your family members feel as though they are drowning if you were to pass away. The death of a loved one is already a big enough emotional burden, but there are many other stressors that can arise from a poorly made estate plan, or dying intestate with no estate plan at all.
State Law Determines Estate Distributions
If you pass away without a valid will and/or trust, by default, much of your property will go to the heirs spelled out in your state’s intestacy law in the proportions determined by the law. In effect, the state will make a will for you if you fail to do so. This may not seem like a major concern until you consider the potential consequences: a major one being that loved ones you want to provide for, including your own children, could be disinherited.
The following are several situations in which loved ones could be disinherited if you die intestate:
- Step-children who have not been adopted will not be recognized as your children under state law. As a result, even if you still love and care for them, they will receive nothing from you unless you specifically include them in your will or trust.
- Children conceived after one parent’s death using assisted reproductive technology, such as frozen embryos, may not inherit from that parent under intestacy statutes, many of which do not address the rights of posthumously conceived children.
- In addition, although children of unmarried parents can always inherit from their mothers under state law, they may have to produce proof of paternity to inherit from their father dies intestate.
- A significant other with whom you have spent your life is unlikely to receive anything under state law if you are not married. Although state law does allow a spouse to receive some proportion of your estate, if you are not legally married to your partner—or your relationship does not meet the definition of common law marriage (at least in Texas), he or she will inherit nothing from you.
There are many other situations in which intestacy statutes are unlikely to achieve your wishes: for example, a special needs child may need a larger inheritance amount to pay for future care than an adult child who is not disabled. If you die intestate, there are no exceptions for these special circumstances.
You can ensure that everyone you wish to benefit from your estate will receive the money and property you want them to have by naming them and specifying the gifts you want them to receive in your will and/or trust.
Outright Gifts Do Not Protect Your Heirs’ Inheritance
Outright gifts that must be made if you die intestate provide no protection for your spouse or children, which is often problematic. Once they receive a distribution from your estate, the money and property they have received may not benefit them at all if they have creditors or ex-spouses who can reach it to satisfy their claims. In addition, if one or more of your children are irresponsible with money (i.e. spendthrifts), they could quickly squander the money and property you have worked a lifetime to save. These common problems can be addressed through the creation of certain types of trusts. There are a number of possibilities to consider, but two of the most commonly used trusts are those that distribute money and property in certain percentages at specific ages and discretionary trusts.
The trustee of a discretionary trust has the authority to make distributions to beneficiaries but is not required to make them. Because the beneficiaries do not have a legally enforceable right or entitlement to receive any of the funds in the trust, the money and property held by the trust are protected from their creditors until a distribution is made. The trustee of this type of trust should be someone you have confidence will make wise decisions regarding when and if distributions should be made since that person will have a significant degree of control over the trust’s funds.
Court-Supervised Probate Process
Failing to create a trust could mean that your estate will be tied up in a lengthy court-supervised probate process. Instead of being immediately available to provide for the financial needs of your family members, your money and property will have to go through the probate process, which could last for several months if your estate is not very complex. This is true even if you have a will, as probate can only be avoided if you die with no accounts or property in your name. Typically, this is accomplished by transferring all of your money and property into a trust or naming a beneficiary for your accounts and other eligible property.
In addition, it is important to keep in mind that if you have minor children, money or property that they inherit under state law or a will cannot be immediately distributed to them (nor should it be). Rather, because minor children are not legally able to control property, unless you have named someone you have chosen to fill this role in your will, a guardian may be need to be appointed by the court to manage the inheritance for them until they reach the age of majority under state law, at which point it will be distributed to them outright. Locating, screening, and appointing an appropriate person (who may not be someone you would have chosen) is a time-consuming process for the court. Further, the money and property you want to be used to care for your children will not be fully available to benefit them until the administration process concludes. Lastly, while the guardian will be supervised by the court, there is no guarantee that the court-appointed individual will use the money and property for the benefit of your children in the way you would have wanted.
Give Us a Call
Nielsen Law PLLC provides family focused estate planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information and to learn about our firm, please contact us.