Is It Better Not to Have a Will?

When a person dies, estate and probate law govern how assets are distributed. If the person who has died has a properly prepared will, they have set up a “testate inheritance.” Their last will and testament will guide the distribution of their assets. If they die without a legitimate will, they have an “intestate estate,” as explained in a recent article titled “Testate vs. Intestate: Estate Planning” from Yahoo! Finance.

In an “intestate estate,” assets are distributed according to the laws of inheritance in the specific legal jurisdiction. The decedent’s wishes, or the wishes of their spouse or children, are not considered. The law is the sole determining power. You have no control over what happens to your assets.

Having a will prepared by an experienced estate planning attorney who is familiar with the law and your family’s situation is the best solution. The will must follow certain guidelines, including how many witnesses must be present for it to be executed property. A probate court reviews the will to ensure that it was prepared properly and if there are any doubts, the will can be deemed invalid.

Having a will drafted by an attorney makes it more likely to be deemed valid and enforced by the probate court. It also minimizes the likelihood of illegal or unenforceable provisions in the will.

Debts become problematic. If you owned a home and had unpaid property taxes or a mortgage and gave the house to someone in your will, they must pay the property taxes and either take over the mortgage or get a new mortgage and pay off the prior mortgage before taking ownership of the property. Otherwise, the executor may sell the home, pay the debts and give any remaining money to the heir.

Liabilities reduce inheritances. If someone has a $50,000 debt and very kindly left you $100,000, you’ll only receive $50,000 because the debt must be satisfied before assets are distributed. If the debt is higher than the value of the estate, heirs receive nothing.

Note that a person may use their will to distribute debts in any way they wish. Family members erroneously believe they are “entitled” by their blood relationship to receive an inheritance. This is not true. Anything you own is yours to give in any manner you wish—if you have a will prepared.

Another common problem: estates having fewer assets than expected. Let’s say someone gives a donation of $500,000 to a local charity, but their entire estate is only worth $100,000. In that case, the $100,000 is distributed in a pro-rata basis according to the terms of the will. The generous gift will not be so generous.

If there is no will, the probate code governs distribution of assets, usually based on kinship. Close relatives inherit before distant relatives. The order is typically (but not always, local laws vary) the spouse, children, parents of the decedent, siblings of the decedent, grandparents of the decedent, then nieces, nephews, aunts, uncles and first cousins.

Another reason to have a will: estranged or unidentified heirs. Settling an estate includes notifying all and any potential heirs of a death and they may have legal rights to an inheritance even if they have never met the decedent. Lacking a will, an estate is more vulnerable to challenges from relatives. Relying on state probate law to distribute assets is hurtful to those you love, since it creates a world of trouble for them.

Reference: Yahoo! Finance (Sep. 22, 2021) “Testate vs. Intestate: Estate Planning”

How Does Probate Work?

Probate is a court-directed process to examine the last will and testament, authorize the executor named in the last will and give the “all clear” to the executor to go ahead and carry out all of the directions in the last will. However, it’s not always that simple—and sometimes, it can get extremely complicated.

A probate judge also oversees cases when there is no last will, explains the article “How Do Probate Judges Administer Estates?” from Yahoo! Finance. If there is no last will, the estate is considered “intestate,” and the court appoints an administrator to manage the estate.

Most probate cases are decided using the laws of the state. The probate judge may also be involved in guardianship and mental competency cases. In some states, the probate court oversees adoption cases instead of a family court. However, the main responsibility of the probate judge is overseeing estates.

Probate includes the process of determining the last will’s validity, ensuring that bills and taxes are paid and property is distributed according to the deceased’s wishes. However, if there is no last will and no family member petitions the court to contest the last will, the probate judge’s involvement in the estate (and the family’s life) becomes far more extensive.

Here’s how it works.

The executor of the estate files the last will with the probate court. The probate court has to be sure there are no objections to the last will, like a possibility that someone may claim that the last will was not knowing and voluntarily made by the decedent. In the most intense cases, the judge may have to declare the need for litigation. However, if there are no objections, the executor is approved. The next step is for the executor to get a tax ID number from the IRS and open an estate bank account.

The executor next notifies all interested parties about the last will. This is done by placing classified ads in local newspapers. All possible heirs must be notified, whether they are mentioned in the last will or not, and if they can be found. Creditors have a specific time period to submit claims against the estate through the probate court.

Inventory of all assets must be done, and a total value assigned to the estate on the date of death. The inventory is filed with the probate court and provided to heirs. This is a lot of work, and the executor must be diligent. It may be necessary to hire professionals to value assets, like real estate. Many people work with an estate planning attorney to ensure that the estate is properly valued.

If the last will is contested, the probate judge reviews evidence and hears arguments. The process can take years, depending on the complexity of the estate. The probate judge issues rulings and opinions.

If there is no last will, the judge appoints an administrator of the estate to conduct the duties of the executor as described above. With no last will, the probate judge invokes the law of intestate succession, which in most states, means that the order of inheritance is based on the relationship between the deceased and the next of kin. If there are estranged family members, they may end up inheriting most of the estate, regardless of their relationship with the decedent.

Having a last will prepared by an experienced estate planning attorney permits you to make the decisions about your property, spares your family from potentially losing everything you have worked to attain and saves your loved one’s time, money and emotional hardship.

Reference: Yahoo! Finance (Aug. 31, 2021) “How Do Probate Judges Administer Estates?”

What Happens If an Unmarried Partner Dies?

If you, like so many others, found yourself settling the affairs of a loved one in the last 18 months, you may be well aware of the challenges created when there is no estate plan. The lack of planning can create an enormous headache for loved ones, explains a recent article titled “3 Estate Planning Tips for Same-Sex Couples” from The Street. If this is true for married couples, then it’s even more important for unmarried couples.

Planning for incapacity and death is not fun, but unmarried couples in serious relationships need to plan for the unknown. Even married same-sex couples may face hostility from family members, including will contests and custody battles over children. There are three key issues to address: inheritance, incapacity and end-of-life care and beneficiary designations.

If a partner in an unmarried relationship dies and there is no will, assets belonging to the decedent pass to their family, which could leave their partner with nothing. With no will, the estate is subject to the laws of intestacy. These laws almost always direct the court to distribute the property based on kinship.

A will establishes an unmarried partner’s right to inherit property from the decedent. It is also used to name a guardian for any minor children. Concern about the will being contested by family members is often addressed by the use of trusts. When property is transferred to a trust, it no longer belongs to the individual, but to the trust. A trustee is named to be in charge of the trust. If the surviving partner is the trustee, he or she has access and control of the trust.

A trust helps to avoid probate, as property does not go through probate. A will also only goes into effect after the person who created the will passes away. A revocable living trust is effective as soon as it is established. Trusts allow for more control of assets before and after you pass. The trustee is legally bound to carry out the precise intentions in the trust document.

Establishing a trust is step one—the next step is funding the trust. If the trust is established but not funded, there is no protection from probate for the assets.

Incapacity and end-of-life planning allows you to make decisions about your care, while you are living. Without it, your unmarried partner could be completely shut out of any decision-making process. Here are the documents needed to convey your wishes in an enforceable manner:

Healthcare power of attorney (proxy). This document allows you to name the person you wish to make healthcare decisions on your behalf. You may be very specific about what treatments and care you want—and those you don’t want.

Healthcare directive. The healthcare directive lets you designate your wishes for end-of-life care or any potentially lifesaving treatments. Do you want to be resuscitated, or to have CPR performed?

Durable financial power of attorney. By designating someone in a financial power of attorney, you give that person the right to conduct all financial and legal matters on your behalf. Note that every state has slightly different laws, and the POA must adhere to your state’s guidelines. You may also make the POA as broad or narrow as you wish. It can give someone the power to handle everything on your behalf or confine them to only one part of your financial life.

Beneficiary designations. Almost all tax-deferred retirement accounts and pensions permit a beneficiary to be named to inherit the assets on the death of the original owner. These accounts do not go through probate. Check on each and every retirement account, insurance policies and even bank accounts. Any account with a beneficiary designation should be reviewed every few years to be sure the correct party is named. Estranged ex-spouses have received more than their fair share of happy surprises, when people neglect to update their beneficiaries after divorce.

Some accounts that may not have a clear beneficiary designation may have the option for a Transfer on Death designation, which helps beneficiaries avoid probate.

Review these steps with your estate planning attorney to ensure that your partner and you have made proper plans to protect each other, even without the legal benefits that marriage bestows.

Reference: The Street (June 2, 2021) “3 Estate Planning Tips for Same-Sex Couples”