Many people make the mistake of thinking that a will is only necessary for individuals with complex estate plans. This is a common misconception. However, there is a reason that a will is one of the simplest estate planning tools available to Californians. Anyone can benefit from having a last will and testament. Once you understand what happens to your estate if you do not have a will, you'll likely agree.
According to an article in USA Today, 64% of Americans don't have a will. Many of those without a will simply believe there is no urgent need for a will, while others claim they don't need a will at all. However, the importance of preparing a will cannot be understated. If you die without a will, you are considered to have died “intestate.” Because you died “intestate”, the assets that would have been controlled by a will are distributed according to state intestacy laws.
Under California's intestate succession rules, how your property is distributed depends on whether you have a spouse, children, and who are your next closest relatives. It also depends on the amount of community property you may have with a spouse as well as your separate property.
For example, if you have children but no spouse, your estate is distributed equally to your children. If you die with a spouse, but no children, siblings, or parents, then your spouse inherits everything. If you die with a spouse and children, the spouse will inherit your community property and your separate property is divided between the spouse and children, depending on the number of children.
Without a will or estate plan, you have no control over who gets what property after you pass away. This could result in property going to unintended individuals. Estranged siblings who treated you poorly during your life may benefit from your estate while a loving cousin is left with nothing. It is also important to remember that according to California's intestate laws, adopted children, half-siblings, and children conceived before your death may share equally in your estate.
If you die without siblings, parents, grandparents, children, or a spouse, the courts will try and determine your next closest relatives, and distribute your estate to the “next of kin in equal degree.” However, if no relatives are found, your property will “escheat” to the state, meaning any property will generally be sold and the money will go to the State of California. Not a great solution for most of us.
Even if you never prepared a will, not all of your property will pass through intestacy. Many common assets have a beneficiary designation which will control where the property will go after death. This includes life insurance proceeds, payable-on-death accounts, retirement accounts, and property in a living trust. Some people make the mistake of designating a certain beneficiary when they first set up their account and never changing the beneficiary. This could end up leaving the assets to an ex-spouse or a deceased family member. If all the primary and contingent beneficiaries have died, the property will usually go back to the estate and distributed accordingly. Thus, it is important to update your beneficiary designations whenever a significant family event occurs (marriage, divorce, birth of a child, death of a named beneficiary).
Making a will does not need to be a complex or expensive process. However, taking the time to create an estate plan can ensure your property is distributed according to your wishes. If left to the state to decide, none of your property will go to your dear friends, non-registered partners, or charities you care about. This is something to think about.
If you have any questions about how to begin estate planning, Butterfield Schechter LLP is here to help. We will answer all your questions and make sure your estate plan will take provide for your loved ones and keep your best interests at heart. Contact our office today with any questions on how we can help you succeed.