If you do not have a very complicated estate, you might assume that the process of creating an estate plan will be fairly straightforward. However, you might be surprised to learn about several different types of laws that could affect your approach to estate planning. These vary from state to state and sometimes from one jurisdiction to another, so it’s a good idea to make sure that you are aware of your rights and obligations locally as well as the rights and obligations of others toward you. It can be helpful to discuss these and other estate planning related issues with legal and financial professionals.
In some states, you cannot disinherit a spouse below a certain amount. You may also need to explicitly disinherit an immediate family member, such as an adult child, in some jurisdictions. If you fail to make this clear in your estate planning documentation, the court may award a certain standard amount to the relative anyway on the assumption that you did not intend to leave them out of the will.
Understanding Filial Responsibility
If you’re unfamiliar with filial responsibility laws, you are not alone. Many people are not aware that some states have laws in place that require adult children to take care of their parents financially if their parents are impoverished. You can review a guide that explains these laws and if they affect you, whether you are the parent or the adult child in any particular scenario. This obligation could affect how you approach estate planning.
Another common mistake that people make is forgetting about beneficiary designations. Usually, assets such as life insurance policies and retirement accounts are passed via these documents instead of using a will. If you have spent time and energy balancing saving and investing your money you should equally spend time putting processes in place for where that money will go once you are gone.
However, this can mean that people forget to change them when they go through a major life change, such as a divorce. You need to make the changes to the documents themselves as well, not to your will or trust because a beneficiary designation overrides a will or trust. It’s a good idea to keep a list of all your assets and estate planning documents and review them every few years or after any big life changes to make sure they are up to date.
When Trusts May Be Useful
Do you have a family member who receives government assistance for a disability or a similar reason that you would like to leave money to, but you do not want to affect their eligibility for benefits? Maybe you have a loved one who you fear will be irresponsible with an inheritance, or maybe you want to specify that your adult children must reach a certain age before they get access to their inheritance. Many often think about trusts as something that only concern wealthy people, and trusts can be expensive and complex to administer. However, you do not have to be rich to find yourself in situations like these, and in some cases, a trust may be the right answer for you.