The Pros & Cons of No Estate Plan
You’ve heard that you need a will or living trust, but you aren’t quite sure why. You remember Aunt Sally who died without a will and can’t remember any consequences. Things seemed to resolve on their own and it was no big deal that she didn’t have a plan in place, right? Well, that depends.Everyone—young or old, single or married—should create an estate plan, but not everyone does. In fact, studies show that over half of all Americans do not have an estate plan. Not to worry, leave it to the State of California to come the rescue.
California’s Default Estate Plan
California’s Probate Code governs intestate succession—a set of laws that outline how a person’s assets should be distributed if they did not leave their own instructions. The state will consider your spouse, children, parents and siblings when you have not. For some, the state’s default rules are sufficient to represent their wishes. For others, the state’s rules do not capture their specific family dynamics or their desires for how property should be handled upon death.
This does not mean that the state’s rules are entirely bad. When you pass away without a will (or even with one), your estate must go through probate. Probate is the process by which your affairs are wrapped up—someone is appointed as your executor to handle the probate, creditors are provided notice of your death so that your final bills are paid, beneficiaries receive notice so that they can obtain their inheritance, and the court monitors the entire process. Some people like the idea of having the court system involved to monitor how things are handled. Others do not prefer this idea and would instead prefer someone in their family or a friend handle their affairs when they are unable to. Additionally, probate proceedings are public. If you’re a private person, you may not like the idea that any one and everyone can discuss your business openly in court.
Attorney’s Fees in Probate
The State of California’s default estate plan is not without cost. The default rules provide for attorney’s fees and personal representative fees. Currently, attorneys and personal representatives are each entitled to a percentage of the value of your estate: 4% of the first $100,000 of the gross value of the probate estate, 3% of the next $100,000, 2% of the next $800,000 and 1% of the next $9 million. In California, a modest estate including a single property and a few bank accounts could easily rack up tens of thousands of dollars in probate expenses. This means less money for the people of your choosing and more money for people you may not even know!
At the end of the day, whether or not to create an estate plan is a personal choice. The State’s default plan is a “one size fits all” estate plan, but many times the State’s plan simply does not fit. The best thing to do is sit down with a licensed Estate Planning Attorney who will listen to your unique family situation and the things important to you and will draft an estate plan that represents your desires. You may choose not to create an estate plan altogether or simply to just not create one “right now”. No matter what your decision, know that the State of California has a plan for you and the only way to free yourself of the government’s choices is to make them for yourself. The choice is yours.