What You Really Risk When You Lack An Estate Plan
Recently, while on my way to attend probate proceedings, I thought about the story of Holocaust survivor Roman Blum, a wealthy man who died without any known heirs or relatives. The New York Times had written an intriguing piece about this a few years ago. Blum's estate was valued at approximately forty million dollars. Without a will, and a deceased spouse and no heir, there was the possibility of the entire estate reverting to the State.
This is an extreme example. However, it highlights the importance of having at least a basic estate plan in place. Preparing a Will, a Living Will, a Health Care proxy and a short form Power of Attorney will go a long way. Here's why:
A will can direct how assets are distributed.
If you do not have a will, the State in which you are domiciled (your permanent home) at the time of your death will determine how your assets are distributed. For example, suppose you are married and have one child. If you die intestate (without a will) in New York, according to the New York State Estates, Powers and Trusts Law, your estate will be distributed as follows: fifty thousand dollars and one half of the estate passes to your spouse and the remainder to your child. If you have small children, this could mean that your minor child has inherited a substantial amount of money. A will affords you the opportunity to create a situation whereby a trusted adult, often a "trustee," "custodian" or "guardian," in legal terms, manages the assets for a child and distributes them to the child at a time specified by you, the parent.
You can name a guardian for your minor child if you are a single parent.
You can name a guardian for your minor children in your will. The death of a parent is a traumatic experience for a child. Naming the person that you wish to raise your children in the event that you die is one way to help your child deal with the loss of you, the parent. Children fare much better when there is certainty and stability in their lives. Naming a guardian may also lessen inter-familial conflict after your death. There is much less conflict when the wishes of the deceased are clear.
Your end of life wishes are known to all.
By creating a Living Will your wishes are clear. A living will is a document that describes in detail how you want to be cared for when you are no longer able to make medical decisions for yourself. Living wills inform family members and healthcare professionals of your wishes regarding artificial measures used to keep you alive in a situation where there is little or know hope for recovery.
Medical Professionals and Family Members know who is responsible for making medical decisions for you when you are unable.
A Healthcare Proxy is the person named by you who makes healthcare decisions for you when you are unable. This person should know your wishes regarding medical treatment. Your Living Will will reflect those wishes.
A Power of Attorney will enable your Agent to complete financial transactions for you if you are incapacitated.
Giving a trusted friend or family member power of attorney protects you if you are incapacitated. The New York Short form Power of Attorney gives you Agent the authority to pay your bills, buy and sell property, and complete other financial transactions on your behalf. In a situation where you are unable to pay your mortgage for instance, the power of attorney could be exceptionally useful.
For a detailed and useful overview of the essentials of estate planning for you and your loved ones, see our e-Guide on Estate Planning.