During a client’s initial consultation, the client will always ask “Do I really need an estate plan? My children and/or spouse is just going to get everything anyway.” This question leads to an interesting discussion and the answer is one that many people are never ready to hear. Yes, if you do not have an estate plan your children and/or spouse will receive the estate; however, there is another “person” that comes along and takes from your hard earned money and dictates who, what, where, when, and why your assets are to be divided. This “person” is called the State.
The State comes in and appoints a personal representative to administer your estate. This personal representative may not have any affiliation with you or it could be a person you do not like. The personal representative’s job is to ensure that the entire estate is accounted for and that nothing is missing. This means they compile all your bank accounts, stock portfolios, 401k accounts, personal belongings, and the list goes on. The personal representative now has to compile a list of the personal debts that you may have; unless you are married or have co-owned debt then it will fall to the co-signor to continue paying. The personal representative will satisfy all the debts before dividing the estate.
The division of the estate is conducted in a “per stirpes” manner. This means that each individual will receive an equal share of the estate. If you are married, your spouse will receive everything. If you are divorced or single, the State will locate your “next of kin” or relatives to divide your estate equally. For example, you were divorced and never had children; but you had a brother and a sister. Your sister is still alive, but your brother passed away before you. Your brother also had 2 children your niece and nephew, who are questionable individuals. Your brother and sister would have been entitled to one-half each of your estate. However, your brother is not alive and his portion will go to your niece and nephew. Your sister will receive her one-half and your brother’s one-half portion will be cut in half as well and your niece and nephew will each receive one-quarter of your property.
I forgot to mention the personal representative also gets paid. The personal representative is entitled to a percentage of the entire estate. This percentage decreases the larger the estate becomes.
Let’s recap what just happened because you chose not to establish an estate plan: 1) the State names a personal representative, this person may or may not be related to you or you may dislike the individual; 2) the personal representative will compile your assets and satisfy any debts you had; 3) the State will dictate who in your family receives what part of your assets; 4) your assets could go to a family member you do not like or never wanted to receive anything from you; and 5) the personal representative will receive a percentage of your assets as payment.
Based on this information, it is highly recommended that you sit down with your attorney and establish an estate plan or as we at Campanile Law, LLC. like to call it a Legacy Plan. Make sure you take the time and spend the money to keep the State out of your assets and to avoid your assets being given to relatives you may not have an affinity for.