A recent study found that 55 percent of adult Americans do not have a will. What happens if you die without one?
The Legislature, through statutes it enacted, will determine how your property is distributed among your heirs. If you have no heirs, your property will pass to the state. A court will choose a personal representative for your estate. A court will choose a guardian for your minor children. If your minor children receive property from your estate, a court may appoint a supervised conservator to manage the childs estate. If your estate is subject to estate tax, the government will decide how to use your tax dollars rather than your favorite charities.
If you choose not to get a will, you are thereby appointing courts and politicians to decide how your property will be distributed and who will care for your family members upon your death.
They may not do it the way you or your family would want, and thus your intended beneficiaries may suffer as a result of your failure to do some basic estate planning.
Obtaining a will provides a simple fix to the problem of unintended consequences. If you have executed a valid will, the disposition of your property and the appointment of your fiduciaries will be controlled by the terms of your will. Through your will, you can decide how and to whom your property will pass. With a will, you can choose a trusted person to be the personal representative of your estate. You can choose a loving guardian for your minor children. You can choose a financially savvy trustee to manage your estate for the benefit of your heirs. Through a will, your wishes and intentions can be fulfilled.
Through a will, you can minimize or avoid estate taxes, so that more of your property goes to your surviving loved ones and your favorite charities, rather than to the government. If the combined estate of a married couple would be taxable if held outright by the surviving spouse, you can create a bypass trust in your will, to use the estate-tax exemption of both spouses. For second marriages, a trust can be utilized to ensure that your surviving spouse is cared for during her life, with the remainder estate passing to your children, rather than the children of your surviving spouses former or subsequent spouse. Through your will, you can make gifts to charity to support good causes while reducing or eliminating estate tax liability. But if you die without a will, none of your estate will go to the charities you support, it may not pass to your loved ones as you would wish, and your estate may be subjected to estate taxes that you could have avoided with a little planning.
Estate planning can also be accomplished through a revocable living trust, or RLT. Such trusts are often touted as necessary probate avoidance instruments. While you can avoid probate with an RLT, this is not a sufficient reason to use one instead of a will, because probate in Colorado is simple and cost-effective, and the additional cost of setting up and administering a revocable living trust may exceed the cost of probate. RLTs may be advisable for people who hold property in multiple states, or for people who need a trustee to manage their property during their lives. However, for most people, a will-based estate plan will generally suffice.
In addition to a will, your basic estate-planning package should include a financial power of attorney, a medical power of attorney, a living will, and instructions for handling your body and your funeral or memorial service. A financial power of attorney appoints an agent to manage your property, accounts, business interests, and other affairs in the event you become disabled, incompetent or disappear. A medical power of attorney appoints an agent to make decisions regarding your health care and medical treatment, and specifies any anatomical gifts. A living will declares that if you have an incurable, terminal condition and have been comatose for at least seven days, as certified by two physicians, life-sustaining procedures shall be withdrawn. Additionally, you can direct whether artificial nourishment shall be provided for comfort or to alleviate pain. The living will prevents the situation where a comatose person is kept alive for month or years while the family fights about whether to withdraw life support.
Estate planning is not just for the wealthy. A basic estate plan is cost-effective and ensures that important estate decisions are made by you or the trusted fiduciaries you appoint, rather than by courts and politicians. Additionally, providing clear direction and authority as to your property and body disposition, medical treatment and fiduciaries, removes pressure from your family members and potential for conflict in emotionally charged situations.
In preparing your estate plan, consult a competent estate planning attorney, and a CPA if necessary to assist with tax and financial planning. Beware of will and trust mills promising cheap, stock documents off the Internet to resolve your affairs. These document may not supply the expert advice you need and may not fulfill your intentions.
Geoff Craig is a Durango native and attorney practicing in the areas of water rights, real estate, business law and estate planning. Reach him at firstname.lastname@example.org or 259-8978.