The less you have, the more important it is to plan.
Do you own any interest in any piece of real estate, even heirs property?
Do you have a minor child?
Do you have a death benefit or a group life policy provided by your employer?
Do you have any educational loans for which another family member has co-signed?
Estate planning is something we do for other people.
As a brand new trust officer in the 1970's, I was assigned a "lingering" estate. An eccentric Charlestonian died, owning real estate in four states, with no children, no Will, and a group of intestate heirs in eight states, represented by nearly a dozen lawyers. Every time complete distribution neared, another of the forty-odd heirs would die, and things would stop until a new estate proceeding started for that heir. Some refused, because at each succeeding level a respective heir's share of the property seemed to make it less worth the trouble. The estate was in its fifteenth year when I became involved, and it is nearly certain the lawyers had received more than the beneficiaries. It piqued the elderly lady's sense of humor to consider all her distant relatives, thrown together in legal proceedings. In life, she was repeatedly urged to make a Will - to which she replied, "It's not my problem. I'll be gone."
Heirs property
"Heirs property" does not have to be a huge plot of rural acreage, handed down generation after generation without legal process. It can simply be your own family home, within one generation, if you fail to make a will, or fail to bring an intestate proceeding within ten years of the death of another person who owns an interest in it. If you own any interest in real estate at all, you will be creating legal fees for your descendants, who will not be able to sell the property without clearing the title. Sadly, it is not unusual for heirs to abandon property when they discover that the legal fees to cure title defects exceed the share they expect to receive. When family members know each other and are in contact, they can work as a group to share the expense. However, the cost of drawing a will is always going to be less than the expense of a court proceeding to clear title.
Assets held for minor children
Without a Will, minor children will inherit all of a single parent's estate, and half of a married parent's estate. But they will inherit the property in guardianship, the most expensive and cumbersome way to manage property for a child, and they will receive the property free and clear at the age of 18, when they are still inexperienced in the ways of the world, and may be susceptible to undesirable influences.
Guardianship is necessarily a protective proceeding, because the court cares intensely about protecting minor children. Bond is generally required, and the insurance premium is paid from the assets of the guardianship account. The guardian must keep complete records, and account to the Court for every item of income, and each expenditure.
If a surviving mother serves as guardian for her minor children, who, as intestate heirs, have inherited half of their father's interest in the marital home, she will have to obtain court approval if she wants to sell her house and buy another one. The expense of the proceeding, and of the guardianship itself, are unnecessary costs that reduce what is available to meet the needs of the family. This can be avoided - simply by drawing a Will.
Perhaps more disturbing to some divorced parents is the likelihood that, after death, the other parent will become the guardian of the minor's child's funds. The decision will ultimately be made by the Court, but a biological parent who is not found otherwise unsuitable is likely to be given priority. This possibility can be eliminated by naming a testamentary trustee to take responsibility for management of the property, and distribution ages can be staggered, so that children receive property when they are older - for example, a third each at ages 21, 25 and 30 - giving the child time to mature, to live and learn, should they make financial mistakes with the first round of money distributed.
Guardianship is necessarily a protective proceeding, because the court cares intensely about protecting minor children. Bond is generally required, and the insurance premium is paid from the assets of the guardianship account. The guardian must keep complete records, and account to the Court for every item of income, and each expenditure.
If a surviving mother serves as guardian for her minor children, who, as intestate heirs, have inherited half of their father's interest in the marital home, she will have to obtain court approval if she wants to sell her house and buy another one. The expense of the proceeding, and of the guardianship itself, are unnecessary costs that reduce what is available to meet the needs of the family. This can be avoided - simply by drawing a Will.
Perhaps more disturbing to some divorced parents is the likelihood that, after death, the other parent will become the guardian of the minor's child's funds. The decision will ultimately be made by the Court, but a biological parent who is not found otherwise unsuitable is likely to be given priority. This possibility can be eliminated by naming a testamentary trustee to take responsibility for management of the property, and distribution ages can be staggered, so that children receive property when they are older - for example, a third each at ages 21, 25 and 30 - giving the child time to mature, to live and learn, should they make financial mistakes with the first round of money distributed.
Miscalculating the estate
Virtually every adult has at one time or another completed a financial statement for a bank, in order to get a mortgage, or a car loan or credit card. It is not unusual for young families to perceive they have no estate at all - or even a "negative" estate - when in fact an untimely death would produce an estate worth hundreds of thousands of dollars through insurance benefits. It is also a statistical fact that young people are far more likely to die in an accident than to die from a disease. If a death results from an accident in which another party is at fault, there may be proceeds from a lawsuit allocated to the estate, which would then wind up handled in intestacy and guardianship. In considering what you own, the "snapshot" calculation should include all death benefits and insurance proceeds, as well as planning for any potential inheritance from other family members. (And don't rule out the possibility of winning the S.C. Education Lottery or the Clearinghouse Sweepstakes. It happens!)
Planning for liabilities is just as important as planning for assets.
Educational loans are a reality for most families. So are mortgages and car loans. The debts don't always disappear when you die. Secured debts attach to the property pledged, jeopardizing your survivors' security. And co-signers may still be on the hook. Level premium term life insurance is a cheap solution to protected against such a misfortune.
Even families with no debt will find that an unexpected death creates thousands of dollars in immediate expenses. If insurance is not a part of your current plan, you should reconsider. And when advisable, insurance proceeds can be structured to place them beyond the reach of creditors, through the use of special life insurance trusts.
Even families with no debt will find that an unexpected death creates thousands of dollars in immediate expenses. If insurance is not a part of your current plan, you should reconsider. And when advisable, insurance proceeds can be structured to place them beyond the reach of creditors, through the use of special life insurance trusts.