Who Needs an Estate Plan in 2023?

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Who Needs an Estate Plan in 2023?

Most people group “estate plans” under the same umbrella as “retirement plans,” as something only older adults need to worry about. However, this could not be further from the truth. Retirement plans are more effective if you begin them while you’re young, and every legal adult can benefit from an estate plan. 

However, there are some people for whom an estate plan is particularly important. If you’re not sure whether you need one, keep reading. We’ll discuss these plans, what happens if you don’t have one in place, and how to tell if you need to prioritize planning. 

What Is an Estate Plan?

An estate plan is a collection of documents that cover your legal, financial, and medical wishes if you are incapacitated or deceased. The most basic component is a last will and testament, which provides specific instructions on how you want your assets to be distributed after you pass and to name a guardian for your children if you have any. However, a plan produced with the help of a skilled attorney normally includes multiple other documents, such as:

  • Powers of Attorney: You can name a trusted person who can act on your behalf if you’re incapacitated. You may grant one person full power of attorney or assign financial and health care powers to different people depending on your preferences.
  • Advance medical directives: Also known as a living will, your advance directive provides instructions to your next of kin or your power of attorney about what kind of medical care you want if you’re incapacitated or permanently unconscious. You can use it to dictate whether you’re placed on a ventilator, if you want to be resuscitated should your heart stop, and other important medical matters. 
  • Trusts: Many estate plans include trusts to protect assets from taxes. You can also use them to maintain more control over how your assets are used even after you’re no longer around. 

These items allow you to make the legal, medical, and financial decisions that matter most while you still can. 

What Happens If You Don’t Have an Estate Plan?

Of course, many people die without a will or other documents in place. This is known as dying “intestate,” or without a testament. When this happens, the decedent’s estate is managed according to California’s intestate laws. 

The local probate court will first assign an administrator to the estate. The administrator is usually the decedent’s next of kin, such as a surviving spouse, parent, adult child, or sibling. This representative is then responsible for:

  • Identifying and notifying any surviving heirs of the deceased
  • Notifying the Social Security Administration and the IRS of their passing
  • Cancelling credit cards and other accounts
  • Taking an inventory of the estate
  • Having the assets appraised

Once this is done, the representative uses the estate’s assets to pay any remaining debts and taxes. Then, they will work with probate to determine the best way to distribute the remainder according to state inheritance laws. There are detailed rules for who can inherit in intestate situations based on the surviving heirs. The order of precedence is as follows:

  • Spouses and registered domestic partners (regardless of legal separations)
  • Children
  • Grandchildren
  • Parents
  • Siblings
  • Aunts and uncles
  • Nieces and nephews, 
  • Grandparents
  • Great-aunts and uncles
  • Cousins
  • The family of spouses who predeceased the decedent
  • Legally unrecognized romantic partners, friends, step-children, step-parents, charitable organizations, and other groups not listed above do not have the right to inherit

In context, this leads to complex outcomes. For example, here’s what inheritance looks like if there is a surviving spouse:

  • If there are no other surviving heirs, the spouse receives all assets.
  • If there is one child or grandchild, the spouse receives all community property and half of the separate assets. The child or grandchild gets the other half of the decedent’s separate property. 
  • If there are multiple children or grandchildren, the spouse receives one-third of the separate property, and the rest is divided equally among the children.
  • If there are no children but surviving parents (or no parents but siblings), the spouse receives half the separate assets, and the parents (or surviving siblings) receive equal shares of the rest. 

However, deciding which assets go to whom quickly becomes difficult. In many cases, intestate cases with multiple potential heirs lead to probate challenges as the heirs dispute how the representative should distribute the assets. This can drain the estate of funds and significantly strain family relationships.

Do You Need to Start Estate Planning?

The whole point of estate planning is to avoid the stress and legal hazards of intestacy and ensure your last wishes are followed. That’s why every legal adult would benefit from having one. For example, if you have any assets you want to make sure go to a specific person, you need a will at minimum. However, certain groups have more to lose if they do not have a plan. People who benefit most include:

  • Parents and step-parents: If you have children or step-children, you need to have a will at least to clarify how you want your separate assets to be divided. 
  • Entrepreneurs: If you want your business to live on, you should have an estate plan that addresses matters like succession. 
  • Artists: All creators need wills to name who should benefit from their copyrights and how they want their works to be used. 
  • People without next of kin: If you do not have a will or any qualifying heirs under California intestate law, your assets may be claimed and sold by the government. Your estate plan lets you name a friend or favorite organization instead.  
  • “Black Sheep”: If you do not get along with your blood relations, you need a comprehensive estate plan to ensure people you trust are in charge of your health, well-being, and assets when you’re no longer able to make decisions. 

If you’re wondering whether you need an estate plan, the answer is almost certainly yes. The first step is to get in touch with a skilled California estate planning attorney like the experts at the CC LawGroup. Schedule your consultation today to discover how we can help you draft a plan that fits your needs.