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Why You Need an Estate Plan

A host of problems may be avoided with proper planning and a well-drafted estate plan.

BY STEPHEN P. RICKLES, J.D.

A host of problems may be avoided with proper planning and a well-drafted estate plan. If a person dies without a will, state law (the law of "intestate succession") will govern where some of his or her assets go, while other assets may pass directly to another. Examples of the latter include property held as “joint tenants with right of survivorship” and assets that pass under a beneficiary designation such as life insurance, 401(k) plan benefits, individual retirement accounts or bank accounts with a "pay on death" designation.

The laws of intestate succession vary from state to state and may not be consistent with your wishes. Assets may pass or be divided differently depending on whether the deceased is survived by a spouse, children or parents and whether the children are all children of both spouses. The only way to be sure that all of your assets will pass as you wish is to set forth your desires in a properly drafted will or trust document.

Although assets may pass to your minor children under the law of intestate succession, minor children cannot inherit assets directly. It may therefore be necessary to establish a costly and cumbersome court-supervised conservatorship to hold any such assets. The establishment of a simple trust under the terms of a properly drafted will would avoid the time and expense involved in such a conservatorship.

State law will also dictate who has priority to serve as personal representative or executor of your estate, which may be someone other than the person you would select, and may even be a creditor in some cases. The person named in a properly probated will has priority to serve in this capacity over others.

A will typically designates who will serve as guardian(s) of your minor children. Again, absent such a designation, people other than those you would choose may be appointed to serve as guardians of your children.

Under the laws of most states, a surviving spouse will inherit a substantial portion, or perhaps all, of your estate. If the spouse should remarry, your assets could be diverted to benefit his or her new spouse or the children of such spouse. The use of a trust could ensure that your assets benefit only your surviving spouse and your descendants.

Your children may be mature, responsible adults and you may have complete confidence in their ability to handle money or other assets that they inherit from you. However, if this is not the case, trust arrangements created under the terms of your will may serve to make assets available to your children and grandchildren for their needs, while protecting against the squandering of your assets.

Assets left directly to a child may be commingled with those of the child’s spouse and, as a result, may be subject to division by a court in the event of a divorce. Assets left instead in a trust for the child typically cannot be divided by a divorce court, although the growth in value of such assets after your death may be taken into account by the court in dividing other assets.

For these reasons it is crucial that you take the time to consider your goals and have properly drafted estate planning documents put in place to implement them.

Protective Life, issuer of the ADA Members Insurance Plans, is committed to helping you make informed financial decisions. This series on estate planning includes:

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