Even those with the most minor amount of property and assets should seriously consider creating an estate plan. In fact, estate plans are only for asset division upon your death. They can provide security for your children in the form of assigned guardianship if you passed away or became too incapacitated to care for them. An estate plan allows you to assign power of attorney or medical proxy to handle your legal or medical decisions of you are unable to make coherent decisions.
Wills and living revocable trusts, the lifeblood of estate planning, can ensure the most simple assets, like a baseball card or stamp collection to large estates, vacation homes or luxury vehicles are inherited by who you see fit.
But what if you pass away without an estate plan, specifically a living will. This is called dying “intestate.” Each state has their own “intestacy laws” – a legal process that determines who inherits what property, of someone who fails to procure a will before their death.
As stated, all states have their own process but most follow the same general guidelines listed below.
- If you have a surviving spouse and children, they will inherit your property ans assets.
- If you don’t have a surviving spouse or children, your parents will inherit your property and assets.
- If your parents passed away before you, your siblings will inherit your property and assets.
- If you have no siblings or they have also predeceased you, your nieces and nephews with inherit your property and assets.
The drawback of putting all of your property in a will
The terms of a will state that property must pass through probate before it can be inherited by your selected beneficiaries. This can be troublesome for your heirs because probate is a long process that often lasts between six to nine months and in really complex cases, can last years. During probate, your loved ones have limited, or zero access to what they inherited until the process is complete. Another point to understand when creating a will is that when the terms are entered into probate, they become public information.
The benefit of living revocable trusts
Property that you feel you’re beneficiary should be entitled to right away without having to withstand probate should be put into a living revocable trust. Funded trusts avoid probate, but how?
- bank accounts and real estate: Take your name off of the assets and replace it with the name of your trust.
- Life insurance, retirement accounts and investments: The name of the trust is listed as a beneficiary.
Once you have fully funded your trust, you no longer own that property, your trust does, which allows said property to bypass the probate process.
Understand that it’s best to create an estate plan that includes a will and living revocable trust because both documents have different purposes and protect different property and assets.