This is part of an ongoing series of articles about estate planning and succession planning, written by Joe Maier, JD, CPA, Senior Vice President, Director of Wealth Strategy
When neighbors, colleagues or cocktail party participants learn I am an estate planning attorney, many ask a common question: “Do I need an estate plan?” And my answer is always the same: “No, but you want one.” This post explains why.
First, it is important to understand what an estate plan does. Fundamentally, it is a strategy to take care of the people you care about (including yourself). An estate plan has a few key goals:
Even if you haven’t formally crafted an estate plan, you essentially have one. Because of mortality (or, as characters on Game of Thrones might say, valar morghulis), the law must provide who property passes to when someone dies without a formal estate plan. Likewise, because financial and health care decisions need to be made, the law provides a process to ensure critical decisions get made if there are no documents governing who the decision makers are and the process they are to follow.
Under the laws of intestacy, if a person dies without an estate plan, his or her property passes to the person that the state determines is the “closest relative.” For example, under Wisconsin law, that person is, first, the surviving spouse, then the children, then the grandchildren, etc. In my experience as an estate planning attorney, this is a very common order of distribution.
Under the laws of guardianship, if someone is unable to make decisions for himself or herself because of an inability to communicate or a loss of capacity, someone else must make financial and health care decisions. The process of choosing that decision maker is known as “guardianship appointment.” Someone, generally acting through an attorney, petitions the court to be appointed as the “guardian of the person” (the health care decision maker) or the “guardian of the estate” (the financial decision maker).
If the parents of minor children pass away, the children are legally incapable of making their own decisions and managing their own assets. Therefore, those children need to have a guardian of the person and a guardian of the estate appointed. If there is no estate plan to provide the judge with guidance to make those decisions, the judge must decide who (generally a family member) should be appointed to each role.
Given the information provided above, there are numerous valid reasons for crafting an estate plan.
So, do you need an estate plan? No. Do you want an estate plan? Absolutely. By taking the time to personally craft an estate plan, you can ensure the right people are making the right decisions at the right time about the right property to maximize the happiness of those you love.
In future posts, I will cover how this can be done and done well.
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