Here on the AgingOptions Blog, we’ve written many times about the importance of preparing proper estate planning documents well in advance, and the need to keep them up to date as your stage of life and your family circumstances change. Through our associates at Life Point Law, we’ve heard more horror stories than we can count of families torn apart and estates thrown into chaos, simply because of inadequate or outdated wills and trusts.
This recent article from CNBC , written by reporter Deborah Nason, provides what we think is good food for thought concerning the pitfalls your family will face should you die intestate – that is, without a will. Nason quotes experts who make the point that as many as two-thirds of U.S. adults have no will, and their grieving family members will likely face potential chaos when it comes time to settle your affairs. Differing state laws combined with turbulent family dynamics can leave heirs with conflict and expense that could have been avoided with the right advance planning.
Two-Thirds of Americans Haven’t Prepared a Will
“What happens if a loved one dies without a will?” the CNBC article asks. “Millions of us are bound to find out, as two-thirds of American adults have no will, according to a recent Caring.com study.”
We checked out the study, and the reasons for this failure to plan make interesting reading. Based on the Caring.com analysis:
- 40 percent of people have no will because they haven’t gotten around to preparing one;
- 33 percent say they don’t have enough assets to make a will worthwhile;
- 13 percent say the cost of preparing a will is too high;
- 12 percent say they don’t know how to go about getting a will prepared.
What’s more, while adults 55 and older are by far the most likely to have estate planning documents in place, more than half of this critical age group still haven’t taken this important step, the survey reveals. These pre-retirees especially are flirting with legal disaster.
When There’s No Will, the Courts Step In
Vid Ponnapalli, a New Jersey financial planner, told CNBC’s Nason that if a person dies without a will (a circumstance called intestate) then the probate process will decide what happens with their property. He adds, “But while the court distributes the property, it is ultimately up to the survivors to claim their rights to it.”
Usually, when there’s no will, the probate court will appoint an executor for the estate, and this executor will follow whatever process is defined by the laws of the state where the deceased lived. Ponnapalli explains, “Generally speaking, this process, as a first step, involves identifying the kinship, aka bloodline, of the deceased. This process can take a lot of time and puts the burden on children to prove to the court that they are your offspring.”
Court Decisions Can Be Unpredictable
With all that said, there is no predictable path that a court will take if there is no will. This leads to a lot of uncertainty, according to Andrew Schwartz, senior vice president of Madison Planning Group in New York. “Equal and fair are two different things,” he remarks. “To the courts, equal is equal [numerically]. You don’t know how they will divide your assets.”
Schwartz provided Nason with these other factors to consider in not having a will:
- Different heirs, different objectives: “For example, if a child or grandchild had special needs, a court decision may disqualify their special needs fund.” In other words, the child’s need for support could go unmet in a court ruling where there’s no will.
- Addiction issues: “In this time of pervasive opioid issues, an heir could blow through an inheritance,” Schwartz said. “Without a will, how do you make sure they’re taken care of?” A will or a trust can safeguard heirs and protect their interests.
- Long distances: Can family members travel to the court? Or do they need to hire an attorney and/or a financial advisor from that area or state? A valid will can prevent an undue burden on loved ones.
- Locating the deceased’s records: The family needs to find the deceased’s proof of residency and understand what account statements exist, who the accounts belong to and how they are held —individual name, business, joint, retirement, real estate, partnership, and so on. In a complex estate, this can be time-consuming and lead to errors and omissions.
- Differing state laws: For example, not all states recognize domestic partnerships or common-law spouses. If you die without a will, your estate is at the mercy of state law.
Mark Dutram, president of Bayview Private Wealth in Florida, adds that child custody can also be an issue with intestate cases. “For example,” Nason writes, “if the deceased had custody of minor children, it would be up to the court to choose a guardian to care for them and a conservator to oversee their assets.” The court may rule in a way you would not have wanted.
Difficult Decisions Compounded by Grief
The emotional ramifications of an intestate situation for the deceased’s loved ones can often end up being one of the more important factors. “Your loved ones will already be in a state of trauma,” Dutram explains, “the last thing you’d want is a complicated process for them to administer your estate. The family will need to determine … what [the deceased] would have liked.”
“And,” he adds, “friends and acquaintances may come out of the woodwork for handouts of the deceased’s effects, like vehicles.” This only compounds the potential stress.
Specific Steps When a Loved One Dies With No Will
These tips were provided to NerdWallet for this article by Sabine Franco, managing attorney at The Ambitious Legacy Firm in Hempstead, New York. We have also included these verbatim, as we believe they are valuable pieces of advice:
- Secure the home: Restrict access if necessary, change the locks, take videos of everything and forward the mail.
- Contact the funeral home: Ideally, let there be a family representative for this. Get death certificates, but don’t let them get into the wrong hands. Death certificates can provide a lot of access to personal documents and/or assets.
- In the home, look for legal documents: Seek out real estate deeds, insurance policies (is there an asset attached?), bank statements, retirement accounts, tax returns (to see income and assets). Also look for names of a financial advisor, accountant, lawyer, or other professionals who would know about the deceased. The more you know, the better.
- Call the county court and ask for the Surrogate Court: They will explain the process and the forms to fill out. They usually require an original death certificate.
Nason concludes with the always-valuable wisdom: when in doubt, consult the experts. “Often,” she writes, “an individual can handle the process alone, but if there are conflicts within the family, large numbers of assets or certain types of assets (such as a business or intellectual property), you should engage a trust and estates attorney.”
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(originally reported at www.cnbc.com)