When research into the subject is conducted, the results indicate that the majority of Americans have not executed all of the necessary estate planning documents. Why do so many people go through life without an estate plan? Some people simply feel as though it is not important for most of their lives, because wills and estate plans are one and the same. You can just draw up a will when the end is near, and that’s the long and short of it. Plus, if you never get around to it, wills and estate plans are really unnecessary anyway, because things will just fall into place naturally. After all, the government is set up to handle everything, isn’t it?
This is a widely held perspective, but when you actually understand the facts, you may see a vastly different picture. What would happen if you died without an estate plan? Let’s look at some of the facts.
The Condition of Intestacy
If you die without an estate plan, you die intestate. Under these circumstances, certain types of property transfers would organically take place.
There is a legal condition called joint tenancy. A joint tenant is a co-owner of property. If you own property, you can add a joint tenant, and this person would become the co-owner of the property.
The joint tenant would inherit your portion of the property if you died intestate.
This can seem like a perfectly suitable arrangement, but there are a number of drawbacks that go along with joint tenancy. For one, you cannot spread the value of the property among multiple different family members.
For another, the portion of the property that is owned by the joint tenant could be attached while you are still living if the joint tenant was to run into legal or financial problems.
Insurance policy proceeds would be distributed to the beneficiary if you died intestate, but you have other options. You could place the policies into an irrevocable life insurance trust, and this could provide added flexibility.
Payable on death accounts can be opened at banks and brokerages. With this type of account, you name a beneficiary. The beneficiary would inherit the assets in the account after you die.
Once again, this is not a sound estate planning solution, because there are severe limitations that go along with payable on death accounts. A true estate plan would allow you to take more comprehensive steps to provide for everyone that you love.
Assets that are in your direct personal possession at the time of your death would be distributed by the court under intestate succession rules if you were to die without any type of estate planning documents at all. In the end, your assets would probably not be distributed in accordance with your true wishes.
In this post we have looked at a few of the reasons why wills and estate plans are necessary, but there are others. If you go through life without an estate plan, you are ignoring one of the core responsibilities of adulthood.
Simply avoiding intestacy is one of the reasons why estate planning is a must, but there are many other considerations that you should be aware of when you are contemplating your legacy. Estate taxes can enter the picture for people with financial success, and there is a state-level estate tax in Connecticut. Your real property is part of your estate for tax purposes, and in Connecticut, the exclusion is just $2 million. This is the amount that you can transfer free of the death tax on the state level. Any portion of your estate that exceeds this amount is subject to taxation.
Spendthrift protections should also be taken into account. If you die intestate, or if you leave direct inheritances through the terms of a simple last will, there would be nothing stopping the inheritors from squandering their inheritances. On the other hand, with the proper planning, you can provide for your loved ones in a safe and secure manner
If you don’t know where to begin, our firm can help. We offer no obligation consultations to people in the greater Hartford area, and we would be more than glad to sit down with you, get to know you, and become apprised of your family and financial situation and your overall objectives. Ultimately, we can explain your options to you so that you can make fully informed estate planning decisions.
To get the ball rolling, you can send us a message through our contact page or give us a call at 860-548-1000.
- Is In-Home Care for Elders Covered by Medicare? - February 7, 2023
- Is Estate Planning Only for the Rich? - January 19, 2023
- How Do You Plan Your Estate When You Have a Business Partner? - January 5, 2023