Some people plan their estates carefully. Some people don’t have an estate plan at all. That’s called dying intestate. In that situation, the state in which they live at their death has a default plan for them which determines who gets their assets. The state’s plan might suit them, or it might not suit them at all.
For example, Fred was unmarried and had a girlfriend of 5 years, Ethel. Ethel had a daughter, Lucy, whom Fred adored. Fred’s parents and grandparents had died, but he had two siblings, his brother, Jeremy, and his sister, Amy. Jeremy had treated him very poorly when he was growing up. Jeremy never bothered to call when needed. He never visited. Amy had special needs. Jeremy never helped with her care or visited her. When their parents died, Fred made an attempt to repair the relationships among the siblings, but those attempts were rejected by Jeremy. Yet, if Fred were to die without a plan, where do you think his assets would go under intestacy? They’d go equally to both his siblings, including Jeremy with whom he was not close. Neither Ethel nor Lucy would get anything.
The fact that half Fred’s assets would go to Jeremy would be bad enough. But, the other half of Fred’s assets would go to Amy outright. This would kick Amy off her public benefits like SSI and Medicaid.
But Fred could have planned and avoided these problems. First, he didn’t have to leave anything to Jeremy. Fred could have left a portion of his assets to Amy in a Special Needs Trust, a manner that would have allowed her to keep her public benefits. Fred could have left whatever portion he thought was appropriate for Ethel and Lucy.
If you opt out of intestacy by planning, you can pick whomever you want as your beneficiaries. You aren’t required to choose your family, although many people do. You can pick exactly whom you wish to get your assets, like Fred chose Ethel, Lucy, and Amy. You can also decide on contingent beneficiaries. In other words, if Amy, Ethel, or Lucy died before Fred, whom should get those assets? What if the intended beneficiaries all die before Fred? Sometimes, people leave their assets to their intestate heirs, otherwise known as their heirs at law. This may result in the assets going to cousins or even more remote blood relatives. Sometimes, if the intended beneficiaries predecease them, people choose to benefit their favorite charity rather than some distant relative they may have met only once at some family reunion.
Some people have chosen their beneficiaries in rather unusual ways. For example, Luis Carlos de Noronha Cabral da Camara selected people at random from a telephone directory. However you wish to choose your beneficiaries, seldom would it be exactly the same as the default under state law. Make your own plan so that you can be sure your hard-earned assets go to whom you want and in a manner that will benefit them the most.
Stephen C. Hartnett, J.D., LL.M.
Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128