In my last post I discussed what estate planning is and why you should do it, but what happens if you don’t estate plan? When someone fails to estate plan the results can be disastrous. Assets may be subject to enormous estate taxes or probate fees. Substantial delays in the receipt of a beneficiary’s inheritance may arise causing cash flow and expense payment problems. Family disputes can blossom. Finally, lawsuits amongst beneficiaries can be caused by a failure to plan.
A good example of the problems caused by a failure to plan is demonstrated when an individual dies without a will. When an individual dies without a will the probate court will distribute that individual’s property using a special “intestate” formula. The results of this formula usually do not match the decedent’s goals. Here’s an example of what could happen in that case:
Patti and Steve have been married for many years and have two young children. Steve owned $120,000 worth of assets (let’s say a house in this case) which he kept solely in his name after he was married. Steve thought he would live forever and never had a will or trust prepared. Suddenly Steve died. The property which was solely in Steve’s name must go to probate and then the probate court must decide who shall inherit the house using the intestate formula. In Ohio, for example, this would mean that Patti would inherit the first $60,000 plus 1/3 of the remaining estate ($20,000). The two children would inherit 1/3 of the remaining estate equally ($20,000.00 each). If Patti wishes to receive sole ownership of Steve’s assets she must convince the two children to give up their interest in their inheritance. This will probably cause additional delay, cost, and emotional stress for Patti.
Had Steve and Patti created an estate plan with a will or trust, they could have ensured that Patti would inherit the house first.
Fact: six out of ten people do not have valid wills. In my next post, I will discuss the first step in estate planning – goal setting.
This article is part of the eFuneral Resource Center and was written by Timothy J. Forrestal, an accomplished Cleveland, Ohio-based attorney with an impressive track record in the fields of elder law and estate planning. He is a member of the National Academy of Elder Law Attorneys, the Estate Planning, Trust and Probate Section of the Ohio State Bar Association, the AARP Legal Services Network and the Better Business Bureau. For more information, please visit www.forrestallaw.com. The Forrestal Law Office Medicaid Planning Team offers help in the following areas: Division of Assets, Medicaid Planning, Living Trusts, Powers of Attorney, Estate Planning, Living Wills, Nursing Home Planning, Guardianships. Those thinking about end-of-life should visit eFuneral.com for help researching, planning, and arranging a wide variety of funeral-related services.
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