It might be grim to think about your own death, but when it comes to estate planning, procrastinating can be a very costly mistake.
Look at Zappos’ founder Tony Hsieh, who died last year. Despite a net worth of $840 million, Hsieh didn’t have a plan in place for his estate. Following his death, his family requested that a judge name his father and brother as special administrators of his estate.
And that’s the main issue with not having a will in place: if you don’t make plans for your estate, your loved ones will have to. That can be a time-consuming, expensive and stressful process.
Here’s a closer look at that process:
What happens to your estate if you don’t have a will: Who it goes to
If you die without a will, you are what’s known as “intestate.” In that case, your estate will most likely end up in probate court.
(Note: While this is commonly what happens to intestate situations, it can vary by state. Check your state’s intestate laws for more information.)
If you have joint accounts or have named a beneficiary on certain assets, those will typically transfer automatically. In many states, your estate would also automatically go to your spouse, or to your children or parents if you’re single.
Having a will in place is also particularly important if you’re a parent, because it determines who will have control over your children’s inheritance until they turn 18. If you don’t spell it out, that money would go to their appointed guardian, who may not handle it the way you want them to.
The probate process
Whether you have a will or not, your estate will still have to pass through probate to be processed. Having a will in place can make that process much quicker and easier.
The will means that you can tell the courts who gets what, and still have a say in these decisions when you’re gone. But without a will, the court will make those decisions on your behalf, and you might not like what they decide.
What about trusts?
Living revocable trusts can simplify the probate process for those assets that don’t have beneficiaries. A revocable trust means that you’re the one in charge of it, while an irrevocable trust gives control of your estate to someone else while you’re alive.
The benefit of a revocable living trust is that you can make any changes to it that you want when you’re alive, and when you die, those assets do not have to go through probate. The downside to these kinds of trusts is that they can be a bit more expensive than a basic estate plan.
Whatever you decide, make sure you work with professionals who you trust to help you create an effective estate plan.
Estate Planning in New Hampshire and Massachusetts
One benefit to creating an estate plan in New Hampshire is the lack of an estate or inheritance tax, which would make things easier on your beneficiaries. That being said, having a revocable trust in place can still make the probate process much simpler and more affordable.
In Massachusetts, there is a $1 million estate tax in place, which does include life insurance proceeds. In this case, setting up a trust would help to reduce some of that estate tax burden, along with streamlining the probate process.
How to organize your estate
Having an estate plan in place is so important for making sure your loved ones are taken care of after you’re gone. But a lot of people forget that a disorganized estate plan can be frustrating and confusing for their beneficiaries.
Losing someone is a stressful time, so making your estate plan easy to understand is a huge help. By organizing your estate plan, I mean keeping all important information in one place that’s easy to navigate.
Do you need help preparing an estate plan? Contact me today to set up a meeting to talk about your goals. You can also download my free ebook for physicians for tips and information about getting your finances on track.