Estate Planning: Who Needs It?
Many people put off estate planning because they don't like to think about death. Death won't have to be on your mind for long, however, once you prepare documents such as powers of attorney, health care directives, wills, and trusts. You can then rest assured, knowing that if you are ill or gone tomorrow, a stranger won't be making decisions for you or your family, and only those people or organizations you care about will receive your wealth.
If you become incapacitated and unable to make decisions for yourself, and do not have a valid power of attorney or health care agent, a court may appoint someone to handle your affairs and perhaps those of your family. Generally, a court will appoint a family member or close friend if one is willing and able to serve. If no family member agrees, however, or if the court believes that the family member will not act in your best interests, the court may appoint a person who has no idea what choices you would have made in any given situation. This court procedure is called a guardianship (a person is appointed to take care of you) or a conservatorship (a person is appointed to take over your finances).
You can designate care givers or guardians for your children through proper legal documents if you have minor children and wish that they be cared for by someone other than the child's other parent if you are traveling, are ill, or die. Through a power of attorney, you can authorize someone else to conduct your personal affairs if you are out of town, in the hospital, incapacitated, or whenever you designate. Similarly, you can authorize someone to make medical decisions for you in the event your physician feels that you are not capable of making informed decisions on your own through a health care directive, living will, or a health care power of attorney.
Wills and trusts are used to transfer wealth at death. If you die without having prepared a proper will or trust, you are "intestate", and the law of the state where you resided at death will govern the distribution of your assets, which is accomplished through Probate. If you are a resident of Minnesota or Wisconsin upon death, are married and the only children you and your spouse have are children of both of you, or neither of you have children, your spouse will inherit all of your belongings. If your spouse has children from another marriage, Minnesota law requires that your spouse receive $150,000 plus half of the balance of your estate, with the balance going to your own children (which includes your adopted children). In Wisconsin, your spouse will get half and your children (including adopted children) will get the other half. If the children are minors, the property will be held in trust until they are of legal age.
If you are unmarried and intestate at the time of your death in either state, your descendants (children, grandchildren, great-grandchildren, etc.) will receive your property. If you have no descendants, then your property will be distributed according to those family members who are alive at the time of your death in the following order: your parents, your siblings or their children, your grandparents on both sides, your aunts and uncles or their children. If you have no family to receive your assets, the state will take everything.
If you want your money distributed that way, you don't need to write a will. However, through a will or trust, you can designate who should receive your property and how it should be given, and the court will follow your expressed desires. If you die with a will, assets you own in your name only will have to be distributed through an order from the Probate Court. The use of trusts instead of a will may avoid the need for probate court supervision of the distribution of assets upon death. Avoiding probate may save your family or loved ones from the public administration and possible delays in distribution which often occur in probate proceedings. Another use for a trust instead of a will is to reduce estate taxes. If you have a sizable estate, it may be subject to estate taxes of over 50%. However, through a proper trust you may be able to reduce the size of your taxable estate upon death and receive the benefits while you are still alive.
Estate planning is a wise and intelligent choice for you to make. Being armed with information should help you make the decisions that will work best for your family and financial situation. The peace of mind that comes from being prepared for your retirement years and beyond can make those golden years even more fulfilling and rewarding.
The information contained in this article is not intended to be legal advice or to create a contract between the reader and the author. The reader is encouraged to seek appropriate legal counsel and not to rely on the information contained herein.