Do I Need An Estate Plan?
Estate Planning, simply put, is a plan to distribute your assets after your death. However, many people think estate planning is just necessary to minimize the impact of Federal Estate Tax. With the recent changes in the tax code which raises the individual estate tax exemption to over $11 million, many people ask, “Do I still need an Estate Plan”? The answer is --- yes. Estate planning is not for just the rich and famous. Anyone who cares about where their assets will go after they die, even without thinking about taxes, needs to have an Estate Plan. Estate planning may range from a simple standalone will to more comprehensive plans that involve a revocable trust, pour over wills, powers of attorney, and advance health care directives.
Deciding how to distribute your assets upon death is about as fun as deciding on burial plots. We don’t want to think about our own mortality and may just assume our family members will take care of it once we’re gone. Unfortunately, if you die without a will or trust, your family doesn’t get to decide how to distribute your assets. It is decided by the “laws of intestate succession” outlined in the California Probate Code.
So, what happens if I die without a will or trust? The answer is --- it depends. Certain assets will pass to certain persons via the form of title. For example, your house --- if titled in joint tenancy --- will pass to the joint tenant (likely to your spouse). But, most likely, not all your property is titled that way. Since California is a community property State, married couples will also have community property. Community property is all property acquired during marriage (with some exceptions). Community property belongs to both spouses (1/2 to each). If you die without a will, the laws of intestate succession provide that all community property passes to the surviving spouse. So far, so good.
But, what if you have what is known as “separate property”? Separate property is property that one spouse may have owned before marriage or inherited / received as a gift during marriage and chose to keep as separate property. If you die without a will or trust that directs how to distribute your separate property, the laws of intestate succession will decide how that property is distributed.
So, how is separate property distributed under intestate succession? First, it does not necessarily all go to the surviving spouse. If you have children, a portion of the property goes to the decedent’s children. You might say, “That makes sense.” But, what if you have children from another marriage? Intestate succession will dictate that part of the decedent’s separate property will go to all children, including those from previous marriages. Again, this may make sense. But, it also may lead to some unexpected or unintended results.
Suppose you have one grown child from a previous marriage and one small child from your current marriage. You also have separate property (stock you inherited from your uncle) that you’d like to see go to your spouse and small child for their care. With a will or trust, you simply specify that information in the document. But, if you die without a will ---- the law dictates that 1/3 of the separate property stock will go to your spouse and 2/3 will be split by BOTH your children. Not your intent.
This is just one example of an unintended consequence. An estate plan that dictates how your assets will be distributed ensures your intent is clear and prevents unintended consequences. Don’t let putting off drafting an estate plan alter your intentions on how to distribute your property.
If you have estate planning questions, contact me at firstname.lastname@example.org.
Please note, this article is intended to provide “legal information” only and does not constitute “legal advice.”