Death is as inevitable as unsolicited offers from credit card companies. Most of us acquire some property during our lifetimes. What should we do in contemplation of death?
First option: Do nothing. It’s free and it doesn’t take any effort. If you don’t have a will, statute provides one for you (dying intestate). Contrary to popular misconception, your belongings do not escheat to the state unless you have no close relatives. Your estate is basically divided up between spouse (if applicable), children (if applicable), possibly parents, or other relatives.
Second option: Create a will. A will has numerous advantages over dying intestate. With a will you can nominate a guardian for your minor children, select a personal representative in whom you have confidence, or create a testamentary trust whereby children would not receive a distribution at the age of maturity in Nebraska, nineteen, but at a more seasoned age, such as twenty-five.
Whether intestate or by will, your property will go through probate. Probate can be expensive and time-consuming, depending on the size of your estate. A personal representative steps into your shoes to wind up your affairs: inventory your assets; pay the costs of administration; pay your debts; and distribute the remainder to your beneficiaries. You can avoid probate altogether through several methods.
Third option: You can hold property jointly with right of survivorship. This is a very common method for spouses to hold real estate and financial accounts. Upon the death of one of the parties, their ownership simply dissolves, leaving the survivor as the only owner. While there are advantages to joint tenancy, there are some disadvantages. If you add children as a joint owner and they take everything you own, the police call it a “civil” matter. It may also lead to claims by their ex-spouses or creditors.
Fourth option: Payment on death provisions (“POD”) allows for property to pass without probate and without giving someone an immediate interest in your property. It is very common in financial accounts and the Nebraska Legislature recently created a similar provision for a revocable deed that provides transfer of real estate upon death.
Note: If you draft a will naming your spouse as a beneficiary and you subsequently get divorced, the law will treat your ex-spouse as if he/she predeceased you. In contrast, with joint bank accounts or payment on death beneficiaries, the right is contractual and does not end at divorce.
Fifth option: Trusts. If you have a special needs child; if spouses have children from prior relationships; for a large estate; if children have substance abuse problems; or a number of other circumstances, you might consider a trust. Trusts are a way of controlling assets even beyond death, with legal ownership residing in someone responsible and beneficial ownership residing in a beneficiary. Trusts avoid probate and can serve many beneficial purposes, but there is generally a greater expense in creating a trust then simply creating a will. It is also important to ensure that they are fully funded.
Whenever I draft an estate plan, I include powers of attorney for financial matters and powers of attorney for health care decisions, with a living will provision. This is to protect the client during a period of incapacity and prevent the need of going to court for a guardianship or conservatorship.
A good estate planning attorney can walk you through many issues in preparation of death or incapacity. Contact Berry Law Firm for a free initial evaluation.
by Perry A. Pirsch, Esq.
Berry Law Firm, PC
402-466-8444