Post by Mei Ling Lin
ByThe National Association of Financial and Estate Planning
Why Do Estate Planning?
Dying Intestate.
We need to do estate planning toavoid dying "intestate". Dying intestate means dyingwithout having created either a will or a trust whichprovides instructions for passing your estate on to yourheirs. Dying intestate is like taking your property andattempting to throw it to your heirs on the other side ofa deep chasm, a chasm which is filled with hazards.These hazards (probate, creditors, con-artists, lawsuits,judgments, lawyers, and death taxes) can damage muchor most of the value of your estate.
All property owners have done some estate planningfor the distribution of their estate to their heirs whetherthey are aware of it or not. Without a will or a trust theinheritance laws (laws of intestacy) of your state willdetermine how your property will pass to your heirs. Ifyou have no heirs that fit the state's formula, the assetswill be taken by the state. Often times the state'sformula and rules for moving assets to your heirs willnot be what you would have chosen if you had donesome planning.One of the best ways to get your estate over theintestate chasm is to build a bridge to your heirs,otherwise known as a trust. This provides for the estateto be taken safely over the financial risks which areposed by probate, creditors, con-artists, lawsuits,judgments, lawyers, and death taxes. Let's evaluatesome of these financial risks to better understand howand why to avoid them.
Problems With Probate.
If you die with anyproperty titled in your personal name, there must be aprobate process for that property (assuming the estate is above a minimum size). Probate is the state's legalprocedure for handling two major functions for yourestate. (1) Identification of the rightful heirs to theestate and the share size that each heir will receive, and (2) getting the legal title of the property out of yourname and into the name of the heirs. Having a willdrawn up in advance of your death will take care of thefirst function, identification of the rightful heirs and theirshare.
With no valid will for your estate the state will useits own formula for determining heirs and their share.But even with a will the re-titling of your property stillmust be handled through a court administered probateprocedure. When someone is dead the only way thattheir property can be legally re-titled in the heirs' namesis by a court order in a court supervised process.
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