Some make the mistake of thinking that estate planning is primarily about leaving behind an inheritance to designated beneficiaries. While a lot of it is about doing precisely that, there is more to it.
Estate planning is often misunderstood as a collection of financial tools and tactics exclusive to those with the money to invest in several properties and vehicles.
However, in reality, estate planning is available to anyone who owns anything, and when used wisely, it can prevent a lot of headaches in the distribution of assets after death.
What Is Estate Planning?
Through an estate plan, a person can:
- Ensure that their assets go to a charitable organization of their choice.
- Preserve and determine their legacy by distributing all they have accordingly.
- Assign others to make certain decisions while they are incapacitated (e.g. in a coma).
- Ensure that their pets continue to live enjoyable and full lives despite their ultimate absence.
There is so much more that an estate plan can do, in the hands of an experienced professional. Estate plans are more than just wills and deeds.
Living trusts, charitable trusts, living wills, and power of attorney documents allow you to fully shape how you want to continue to exert some measure of influence over the world around you after your passing. For example, doing good work with the money you have today by investing in the shelter of animals, the education of children, or the housing of the homeless.
You can use your money to start up a foundation, organizing it so that it continues to raise funds year after year long after you are gone.
A thorough estate plan gives the childless the opportunity to shape a different, non-genetic legacy through their hard-earned wealth, regardless of how much or how little they own.
When you choose to do nothing, it is all up to the state to interpret what to do with your remaining possessions.
There are certain rules and protocols that determine where what you own goes – and sometimes, that can mean distributing your assets to go to people you do not even know, or people you do not want to know. This is called dying intestate.
The simple truth of the matter is that, regardless of what a person owns, there is nothing a person can legally take with them beyond the grave. Everything they own now becomes a part of their ‘estate’.
A person’s estate is separate from who they are, and acts as an interim between them and ownership with an estate’s designated beneficiaries. When a person dies without leaving behind legally recognized instructions on what to do with their belongings, it is up to the state to interpret their own intestate laws and determine who gets what, and why.
It all starts in the probate process. When a person dies without a will, a court will appoint an executor or administrator (either a legal professional or someone within the deceased’s family) to compile all of the deceased’s assets, pay off any debts/liabilities/creditors, and distribute the rest according to the state’s rules of intestate succession.
In California, intestate succession laws deem that:
- If you die without children, siblings, parents, nieces, or nephews, but with a spouse, then the spouse gets everything.
- If you die without children, a spouse, or parents, but with siblings, then your siblings get everything.
- If you die without children, a spouse, or siblings, but with surviving parents, then your parents get everything.
If your live-in partner is not married to you, they do not have a claim on your property unless specified otherwise. It is also important to note that it is rare to have nothing that does not already have designated beneficiaries.
Property held in joint tenancy/community property, vehicles and properties with a transfer-on-death clause, payable-on-death bank accounts, retirement accounts, 401(k)s, life insurance, and any property within a trust doesn’t go through the intestate probate process, but is instead distributed to the designated beneficiaries listed for each asset.
Finally, if no one alive remains to claim any of what you own, including potential cousins, grandparents, nieces, and nephews, then whatever you still own is escheated. This means they claim it as government property, until someone comes forth with proof of heritage/rightful ownership. This rarely happens but is accounted for when it does happen.
Distributing Your Assets Without Designated Beneficiaries
So, we’ve made it clear that, even without children or immediate family members, it’s better to exert at least some control over where your belongings will end up after you die, to ensure perhaps that some of your life’s work will continue to go towards making other people’s lives better, or investing in something you’re truly passionate about, like a local sport, an association, or a cause you believe in.
An experienced estate planning professional can help you get started on that right away.
Not only can you invest in something through an estate plan, but you can start an organization with some of your remaining funds and ensure that the rest of what you didn’t use up between now and your passing will flow into keeping that foundation financed while it finds other ways to fund itself and keep up the good work.
Start by considering what you are passionate about. Once the wheels start turning, you will be surprised at just how many ways you could help affect change in the world after you are gone, just by financing the right people.
Another thing to consider would be giving someone power of attorney or creating a living will. These are documents that determine who gets to make medical and/or financial decisions in your name if you are not dead but are completely incapable of making such decisions, for one reason or another.
A living will can allow you to pick and choose what medical procedures you are okay with, and what medical procedures you would like to avoid in-case you are not capable of responding. Estate planning is as simple or complex as you want it to be. It is up to you to shape your legacy.