|
Going Back to the Basics:
The Impact of Dying Without an Estate Plan
Most of our clients already have an estate plan, we know this. However, this month we offer a refresher as to why this is such important information. Not only is this topic relevant on a personal level, but it is important information for you to be able to share with your friends and loved ones also. Let's take a few moments to go back to the basics.
Most of us expect that tomorrow will be another day like any other. But, as Euripides said, “no one can confidently say that he will still be living tomorrow.” In fact, thousands of people die in the United States every single day. Some of them die of long-term illnesses. But many of them die unexpectedly from accidents, heart attacks, and other tragedies.
Let’s look at what would happen if you died without planning in advance. First, if your death were preceded by a period of incapacity, your family might not be able to access funds that were needed during your illness. Without a Durable Property Power of Attorney, financial institutions and other companies and organizations (Social Security Administration, utility companies, etc.) will not speak with anyone trying to assist you. Next, if you had not legally expressed your wishes regarding your end-of-life care, your family might not be able to carry out your wishes. A Health Care Power of Attorney, Advance Health Care Directive, Health Care Proxy, or Living Will would be needed to empower the person whom you designate to assist you.
After your death, the probate court would appoint an executor or administrator for your assets. In some states this can be a time-consuming and expensive process. Often, this process can be made less burdensome if you had planned with a Trust. With a Will the choice is yours as to who will serve as the representative of your estate and final wishes. But, in the absence of planning, there are no legal instructions regarding the disposition of your assets. In other words, you would be “intestate.”
When you die intestate, the distribution of your assets is set by a pre-determined list for intestate succession that varies from state to state. Typically, it is some combination of your spouse, descendants, and family of origin. But, without a valid Will, you do not get to specify who gets what or how much. You have to rely on what your state has set as the default for distribution. This may be far from what you have in mind. For example, if you have an unmarried partner, he or she would get nothing. If you are separated but not divorced, your spouse would still inherit from you.
Additionally, if the state is in control of how your hard-earned assets are distributed, disputes can arise. Having a Will can protect your loved ones from undergoing a legal battle at an emotional and challenging time. Having your wishes expressed also mitigates the potential for familial tensions.
Even more importantly, without a Will, you would have no input into who will raise your minor children or provide assistance for an adult child with special needs. State law and the judge will determine that for you. Of course, the judge would not be privy to your experiences and may make a different decision without the benefit of your guidance. A Will also presents the opportunity to designate financial care of your children and give you control over their lifestyle in the event of your passing.
Unfortunately, the question is not if you will die, but when will you die. When you die, you can leave a plan to achieve your goals and care for your family, or you can leave it to chance. Your family and your hard-earned assets are too important to pass without your direction. Working with an estate planning attorney can ensure your wishes are protected upon your passing. This includes the distribution of your assets and the care of your children. Proper planning can even help minimize estate taxes.
At the federal level a tax is placed on the transfer of property following one’s passing. This estate tax is based on the fair market value of all your assets. The IRS allows for some deductions including debts, and expenses related to the administration of the estate. Additionally, there is a deduction available for property inherited by your surviving spouse. Estates that are valued at less than the federal threshold would be exempt from this tax. In 2024, the IRS has set the threshold to be $13.61 million.
At the state level, there are 12 states (and the District of Columbia) that have an estate tax. Proper estate planning can help mitigate the impact of these taxes on your heirs or beneficiaries. In every case, the threshold for the state-level estate tax is lower than the threshold [CS1] for the federal estate tax. The following states have an estate tax:
You never know when you will die, but with proper estate planning you will always know those most important to you are protected. A Will provides security for your loved ones and their futures. Ensuring you have properly planned for the future will protect the legacy you wish to leave.
| 
