Page 3 - Estate Planning 101 - 201312

Q&A DOING NOTHING

What happens if I die without having a If someone passes away without doing any estate planning, then state law will decide
Will or Trust? what happens to the estate. Following are some examples of how the assets are
distributed under most state laws:

1. If a couple is married with no children, the assets will pass to the surviving
spouse. If a couple is married and all of the children are the couple’s biological or
legally adopted children, then the assets of the deceased spouse will pass to the
surviving spouse.
2. If a couple is married but one of the spouses has children with someone other
than their spouse, the assets are divided: one-half to the surviving spouse and the
other half in equal shares to the children of the deceased.
3. If someone is unmarried with no children, their assets will pass to their parents.
If they have no surviving parent, the assets will pass to their brothers and sisters or to
the children of deceased brothers or sisters.
4. If someone is unmarried with children, their assets will pass in equal shares to
their children. The court will appoint a guardian/conservator to handle the assets of
any child under the age of eighteen (18).

The above examples do not apply to every state and many states have variations on the
above examples. Please refer to state specific laws when determining distributions
without a will or trust.

In many cases, the above distributions are not what people want. Additionally, the way
property is distributed under state law is through the probate process.

What is Probate? Probate is the legal process to determine who should receive a person's property and
assets at death. It is the only way to legally change the title of property when the owner
has passed away. Probate operates according to state law and can be a complicated and
expensive process. The AARP estimates that the average probate cost is 3-8% of a
person’s estate and lasts about nine months to two years.
Not all assets a person owns are subject to probate. The following assets are not subject
to probate as long as the named beneficiary is alive, over the age of eighteen (18) and
competent: bank accounts, brokerage accounts, life insurance policies and retirement
accounts (Pensions, 401(k), IRA (Individual Retirement Accounts), Annuities, etc.).
However, many assets such as real property, stocks, and accounts with improper or
incomplete beneficiary designations may be subject to probate.

Who will act as Guardian for my minor If there are any children under the age of eighteen (18) some essential questions need
children? to be addressed. For example: Who will raise the children if both parents pass away?
Who will manage any cash or assets the children might inherit? At what age will the
children inherit?

By doing nothing, the state will decide these questions and the answers may be different
than what most people want. For example, the state will decide the guardian and
conservator. Additionally, in most states children will inherit the property at age 18.
This is usually not the best age to receive a large amount of money.
What will happen to my home (Real If an individual owns property (either outright or mortgaged) and passes away without
Property)? any estate planning, the property must go through probate before it can be distributed
to the heirs.

ESTATE PLANNING 101