No one likes to think about their own mortality, but in an economically driven world, it’s important to consider where assets will go after death.
An “estate” is just a legal term for someone’s money and property. Technically, anyone who owns anything has an estate. The legal term really comes into play once someone dies. Their money then becomes officially an “estate” that gets divided among their survivors.
Estate planning is necessary for the surviving loved ones to have peace of mind. Not only is it helpful in the event of a death, but it also plans for any incapacitating event. A good plan made beforehand gives loved ones a road map for what to do next.
Here are some important steps to take when estate planning:
1. Create a Will
The need to protect one’s family is universal. While we all do it as much as we can in life, a will is the way to do it after death. A will is a document that outlines what happens to someone’s estate after they die.
One advantage of a will is that it can be very specific. Someone can choose exactly who gets what. A will can divide money by percentages or exact amounts. It can state who gets the children in the case of tragedy. It can be so specific that it hands off sentimental items that have little monetary value.
A will, while finalizing and solidifying the distribution of physical assets, also has emotional advantages. A well-written, well-planned will can keep the peace in the family after someone’s death. Instead of bickering and going after each other legally, everyone will know exactly where they stand and exactly what they received.
Probate is the legal process that validates the will. Courts go through the will to determine that, yes, the deceased created this document and it is official. Afterward, the court appoints an executor.
Being an executor is a big job that needs to be taken seriously. It’s a lot of work. First, the executor needs to take care of the deceased’s leftover bills. The executor is also responsible for the remaining assets. It’s up to them to keep the property safe and protected. They are also responsible for having the assets appraised. From there, they must distribute the assets according to the deceased’s wishes. The whole process takes a lot of time and a lot of paperwork. Executors also need to be prepared for pushback.
Family members who believe they have been unfairly left out can pursue legal action. In this pursuit, they may go after the executor if they believe them to be untrustworthy.
The executor can be named in the will or appointed by the court. They must be at least 18 years old, of sound mind (according to the court), bonded by a private insurance company, have a good credit rating, and have no criminal record.
When someone doesn’t have a will, their assets go through intestate succession. Intestate succession is the process by which the state of Ohio divvies up someone’s assets for them. It is a mostly fair system, but it takes the decisions away from the people involved.
To divide assets via intestate succession, Ohio uses a specific chart:
- The deceased was unmarried and had children – The children have everything split among them equally.
- The deceased was married with no children or parents – The spouse receives everything.
- The deceased was married, and the couple had children – The spouse receives everything.
- The deceased was married and had children with another person – For one child, the spouse receives the first $20,000 in property and 1/2 of everything left over. The child gets the rest. For multiple children, the spouse gets the $20,000 in property and 1/3 of the rest, while children split the other 2/3 among themselves.
- The deceased was married and had more than one child – The spouse, if they are the legal parent of the child or children, receives the first $60,000 in property and 1/3 of everything left over. The children or descendants split the remaining 2/3 among themselves.
- The deceased was not married, had no kids, but had parents – The parents receive everything.
- The deceased was not married, had no kids, had no parents, but had siblings – The siblings split everything among themselves.
Looking at this chart, it’s easy to see why estate planning is important to do now. If someone had little to no relationship with the people in their inheritance chain, they could be leaving out people who were important to them.
2. Create a Living Will
There could come a time when making reasonable, independent decisions is no longer possible. This is why people need a living will. A living will is a way of managing assets when someone is still alive but cannot act on their own behalf.
In it, people can create a plan for who will make choices for them, how those choices will be made, and which choices cannot be made. Some people may want to be kept alive as long as possible, regardless of whatever physical shape they’re in. Others will want their loved ones to allow them to go if they are in a vegetative state. A living will outlines how long and to what extent someone should be kept on life support.
Perhaps someone will always want a portion of their money to go to a certain charity, or there is a business into which they never want to invest. Someone can use a living will to make these decisions now, while they have the faculties to make them. Another advantage of a living will is that, when the person dies, the probate process can be avoided.
In less dire situations, where someone is functional but can’t be trusted to make good decisions, the living will can name who is designated as power of attorney.
3. Give Power of Attorney to a Trusted Individual
When it comes to their assets and health, people need someone they can trust. They need a friend or family member who is likely to stay healthy and make fair choices for them. This is where power of attorney comes in. Giving power of attorney is an important part of the estate planning process. It puts assets and wellbeing into the hands of someone who can care for the person and look out for their best interest.
Power of attorney can be given at any time. Someone can hand over power of attorney when they are completely functional, or they can reserve that power in the event of future incapacitation. The transfer of power can be outlined in a living will.
Financial Power of Attorney
Financial power of attorney gives control of someone’s assets to another party. The person with financial power of attorney pays someone’s bills, makes choices about investments and savings, may sue on behalf of the other, etc.
Healthcare Power of Attorney
Healthcare power of attorney makes someone responsible for another’s health-related matters. They are in charge of decisions about drugs, surgeries, doctor visits, etc.
A living will can get someone only so far. It is helpful in guiding a decision about life support, but it doesn’t account for immediate healthcare choices. Someone composing their living will can attempt to cover all possible healthcare scenarios, but that’s just not realistic. The healthcare power of attorney will help make decisions for someone when new health problems arise.
Financial and healthcare powers of attorney can be granted in any formation. Healthcare is granted to one person, financial is granted to another, or both can be granted to the same person. One power of attorney can be granted while the other isn’t.
4. Find a Secure Location
Once the documents are all signed and the ink is dry, it’s time to put them in a safe place. They can be left with the person who has or will have power of attorney. Perhaps a trusted lawyer would be willing to keep them. They can be locked away with the key or combination given to a good friend. The important thing is to put them somewhere they won’t be altered. An unscrupulous person with access to these documents could change them, benefitting themselves. Make several copies and give them only to people with the best intentions.
If you need help planning your estate, we can help. We have free consultations, and there is never any risk involved. Call today at (937) 403-9033 or contact us online.