Do I still need estate planning if I'm not wealthy?
Updated: Mar 15
You may be thinking, “Estate planning is only for rich people. I don’t need it.” You are wrong. Even people who aren’t rich need estate planning. I’ll explain the reasons why:
1. If you own any real property, your heirs will have to probate it if you don’t have an estate plan.
Probate is the process where after a person dies, the decedent’s heirs go to court and ask the judge to order a distribution. Generally, even the simplest probate case will take several months and cost hundreds, or even thousands, of dollars.
If you have real property, and you don’t have a will, your heirs will have to go probate court and ask the judge to distribute the property under the laws of intestate succession. If you have real property, and you do have a will, your heirs will have to go to probate court and ask the judge to distribute the property according to the terms of the will.
So, generally, I advise my clients to create a “will substitute” that will enable them to pass their property on to their heirs, without going through probate court at all. For more information on will substitutes, click here.
Because real property will go through probate if you don’t have an estate plan, it may be more of an advantage for a person who is not wealthy to create an estate plan. I have had clients who own a very small amount of real property that is of little value. But the property must still go through probate. If a piece of real property has little value, then probate may actually be more expensive than the property itself.
2. You may own other types of property that need to be probated if you don’t plan your estate.
You may have a bank account, stocks, bonds, mutual funds, an IRA, or an insurance policy. Often, you can ask the financial institution holding these accounts to place someone else on the account as a payable on death beneficiary. But if you don’t name a beneficiary, these accounts may have to go through probate too. Talk to your financial institutions and see what you must do to transfer this property upon your death. Again, under such circumstances, it may be more beneficial for someone who is not wealthy to have an estate plan. If the account has little value, the cost of probating it may be greater than the value of the account.
3. You may own property that you don’t know about.
A lot of people own property and don’t know it. There probably isn’t anyone in the United States who can say with absolute certainty that they are aware of all the property they own. Someone else may have placed property in your name. You may be owed unclaimed money. A relative of yours may have passed away, and you may be entitled to inherit from them under the intestate succession law. So, it’s possible that you actually are wealthy and don’t know it. You should prepare an estate plan for that reason.
4. You may become wealthy in the future.
Even if you’re not rich now, you may be later on. Better to plan your estate now, so that if you become wealthy, your heirs will be taken care of.
5. Even if you die owning a small amount of property, your estate could be entitled to property after you die.
For example, suppose you die in an accident, your heirs may be allowed to sue for wrongful death. Or there may be someone who passed away, and you are entitled to inherit from them, but their estate was never probated. If their estate is probated after you die, the heirs that you name in your estate plan will be able to inherit the property.
6. You may need to nominate a guardian for a minor child or an adult child with special needs.
Estate planning isn’t just about money or property. If you have a minor child, or an adult child who has special needs and requires someone to care for them, you should nominate a guardian for them so that a person you trust will end up caring for them. If you don’t nominate a guardian, they could end up in the care of someone you don’t approve of.
7. You may want to write an advance directive, a living will, a do-not-resuscitate order, or a power of attorney.
In an advance directive, you describe how you want to be cared for if you become unable to make medical decisions for yourself. In a living will, you state whether you do, or do not want, life sustaining treatment if you have a certain medical condition. A do-not-resuscitate order is just that – an order saying that if you stop breathing or your heart stops beating, you don’t want to be resuscitated. In a power of attorney, you designate someone else to make decisions for you if you become incapacitated. For more on advance directives, living wills, and do not resuscitate orders, click here. For more on powers of attorney, click here and here.
Obviously, your need for an advance directive, living will, do-not-resuscitate order, or power of attorney can be just as important, whether you are wealthy or not.
Would you like to discuss your estate plan? Contact the Persaud Law Office today.
The Persaud Law Office has handled estate plans for many people. If you have questions about what type of estate plan is best for you, feel free to call our office.
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