One Reason To Get An Estate Plan In Place: Avoiding Intestacy
Sometimes people are more motivated by avoiding negative consequences than by achieving positive ones.
This psychological dynamic could conceivably occur in many different areas of human endeavor.
For our purposes, in this post, let's apply it to estate planning. We will discuss what happens when someone dies without an estate plan.
In very basic terms, what happens is that the property of someone who dies without a will or other estate plan is distributed according to the terms of the intestacy statute. A commonly used legal term for this is intestate succession.
Michigan and other states each have statutes that dispose of the property according to specified laws of descent.
The Wall Street Journal reported on an example of this last week. A wealthy woman in her 60s who had no spouse or children was interested in leaving the bulk of her estate to her church.
Her financial adviser encouraged her to create a trust in order to accomplish that purpose and avoid probate. The woman was initially reluctant to do this. But then the adviser pointed out that if the woman did not take action to create an estate plan, her property would pass through intestate succession.
In this case, that meant her property would go to her estranged brother. The woman clearly did not want this. As a result, considering the possible negative consequences of intestate succession became a spur for her to take action on finally creating her estate plan.
This is only one example. But it illustrates the need to be strategic about estate planning decisions - not just to avoid negative consequences, but to create structure so that your intentions can be honored.
Source: The Wall Street Journal, "When a Client Has No Estate Plan," Austin Kilham, April 18, 2014