Estate planning is an essential part of financial planning that can help you protect and distribute your assets according to your wishes. However, many people neglect this crucial aspect of financial planning, and their families and loved ones are left with significant problems when they die. In the absence of an estate plan, laws come into play to determine how your assets will be distributed. This process is known as intestacy.
What is it?
Intestacy occurs when you pass away without a valid will or trust. State law will then determine how your assets will be distributed among your heirs, according to a predetermined order of priority. The surviving spouse or domestic partner usually receives the first priority, while the remaining assets are then distributed among your children or other close relatives.
However, if you don’t have a spouse or children, your assets may go to your parents, siblings, or other relatives, depending on state law. This can be a lengthy and expensive process, taking months or even years to complete. Additionally, the court will appoint an administrator to manage your estate, which can be quite costly, and their fees will be paid from the estate’s assets.
Intestacy can also result in your assets going to people you may not have chosen. For example, if you have a charity or a close friend you wish to leave a portion of your assets to, intestacy laws may not allow for this.
The Consequences of Intestacy
Intestacy is a thorny issue that can cause significant problems for your loved ones and heirs. One of the most pressing consequences of intestacy is the lengthy and expensive process of distributing assets. The court will appoint an administrator to manage the estate, which can be a costly affair and may reduce the overall value of the estate. This process can drag on for months or even years, causing additional stress and financial strain for family members and loved ones.
Another concern of intestacy is that the assets may not go to the intended beneficiaries. Intestacy laws dictate the order of priority for distributing assets, which may not align with the person’s wishes. Suppose a person wanted to leave a portion of their assets to a close friend or charity. In that case, intestacy laws may not allow for this, and the assets would instead go to family members according to the order of priority, potentially leaving the intended beneficiaries with nothing.
Moreover, the cost of the distribution process may reduce the overall value of the estate, creating additional headaches for the heirs. The court-appointed administrator may charge fees for their services, which can further reduce the estate’s value. This can be particularly problematic for small estates, where the distribution of assets can have a significant impact on the overall value. Therefore, it’s imperative to plan ahead and ensure that the assets are distributed according to the person’s wishes to avoid the pitfalls of intestacy.
What can happen to minor children?
If you have minor children, the court will appoint a guardian to take care of them. Unfortunately, the court may not appoint the person you would have chosen to be the guardian, which can be unsettling for both you and your children.
The process of intestacy can be lengthy and expensive, and it may take months or even years to distribute your assets. Additionally, the court will appoint an administrator to manage your estate, which can be costly, and their fees will be paid from the estate’s assets.
Another consequence of intestacy is that your assets may go to someone other than the people you want them to go to. For example, if you have a close friend or charity that you want to leave a portion of your assets to, intestacy laws may not allow for this.
Moreover, if you have minor children, the court will appoint a guardian to take care of them. However, the court may not appoint the person you would have chosen to be the guardian, which can be unsettling for both you and your children.
The backup plan
Proper estate planning is critical for ensuring that your assets are distributed according to your wishes after your passing. Without it, your loved ones may not receive what you intended for them, and the distribution process can be costly and time-consuming.
To avoid these issues, it’s best to consult with an estate planning attorney and create a valid will or trust that reflects your wishes. By doing so, you can ensure that your loved ones are taken care of and your assets are distributed as you intend.