We often discuss the benefits of estate planning. However, a discussion of what can happen when a person fails to plan is perhaps a more powerful way to stress the importance of proper planning, which Santa Barbara Estate Planning can help you with. Let's look at a few potential consequences of not having a plan of your own.
If a person passes away without a will or trust, his or her estate assets are distributed according to what is known as intestate succession. It is important to note that certain assets are not subject to intestate succession laws. These can include funds in an IRA, 401(k) or other retirement account; property owned in joint tenancy or tenancy by the entirety; proceeds from life insurance policies; payable-on-death bank accounts; and securities in a transfer-on-death account.
Most other assets are transferred according to intestate succession. As a result, “who gets what” follows a strict formula, with no regard to the actual emotional relationships between you, your spouse, your children, and members of your extended family. What you would have wanted is irrelevant to the state. Your assets must be distributed, and the state has devised a formula to do so.
This is particularly problematic in situations involving blended families. If you are divorced, will your current spouse or your ex-spouse inherent your assets? Without a plan, the state will decide. If you have children from both your first marriage and your second marriage, will your “first family” or your “second family” receive an inheritance? Again, the state will decide not you. And what if some of your children are not mature enough to manage a significant amount of money on their own? Unless you take steps to protect assets against the poor decisions of your children, their inheritances may well be squandered by the children themselves or lost to predators who prey upon their naivety.
Losing control over how your assets are distributed after death isn't the only negative consequence of failing to plan. You and your family may suffer physically, financially and emotionally while you are still alive. For example, a properly designed and implemented plan allows you to name people you trust to make medical and/or financial decisions on your behalf if you become incapacitated. Without a plan, someone will petition the court for the right to make these important decisions for you. The court could very well decide to choose a person or persons you would never have wanted to have such authority. The result? You may not receive the level of medical care you would have wanted. Conversely, you might be subjected to medical procedures you would not have wanted to keep you alive in an end-of-life situation. Similarly, financial decisions might be made about the management of your assets and life-savings that you would never have taken on your own.
Then there is the emotional impact on your family to consider. Your loved ones will be forced to make difficult decisions about your care. This is not only stressful for them, it often leads to infighting and hard feelings that endure for years. Disputes over your assets may also arise, leading to costly court battles and bitterness that can last a lifetime. Many families are torn apart by disputes over “what mom or dad would have wanted.”
Finally, if something terrible happens to you and your spouse, and you have minor children, who will care for and raise them? Proper planning allows you to give this authority to a person or persons you trust. Without a plan the court will decide. The court's decision could lead to your children being raised in a place and manner you never would have wanted.
As you can see, the failure to plan can have unforeseen and dire consequences. Don't settle for the state's estate plan. Put a plan of your own in place, one created by an attorney who focuses on estate planning. Many of our clients tell us that they experience a sense of relief and peace of mind following the implementation of their plans. Chances are, you will too. Give Santa Barbara Estate Planning and Elder Law a call to set up your plan, (805)946-1550.