The purpose of estate planning is to provide clear direction into how your assets and possessions are to be distributed to avoid a lengthy and expensive process later in the event of incapacitation or death. Providing a will and assigning a Power of Attorney can ease the burden on your loved ones as they navigate the probate process when that time comes.
What happens to your assets or possessions without estate planning?
According to New York state law, if a person is deceased without leaving a will, the state will determine the distribution of your assets. Generally, there is a common-sense hierarchy for an inheritance, depending on the surviving members of the family, such as spouses, children, siblings, parents, and grandparents. However, to put the distribution of assets from the state into motion, the decedent’s closest beneficiary will have to open an estate and oversee the probate, and, sometimes, this is a lengthy process.
A Power of Attorney during incapacitation with assets that have the beneficiary or beneficiaries listed on the holdings themselves, such as bank accounts, houses, and cars, can be accessible. However, this does not help in the distribution of possessions.
If you become incapacitated and cannot pay your bills, estate planning becomes very critical. Any debts from unpaid bills will have to be subtracted from your estate after your passing. Because the bills were unpaid, late fees, penalties, and interest may have accumulated during that time, leaving your beneficiaries with a reduced inheritance when the estate is probated. To avoid issues regarding money owed, a POA may be assigned to empower a trusted family member or friend to pay bills on your behalf.
After your passing, without a will, no one will have access to the money in those accounts until the estate is opened and closed, typically taking about 15 months. Filing fees, executor fees, and attorney fees can also add to the amount that the beneficiaries would be responsible for.
Your house is a big asset. Passing this along to beneficiaries without a will causes challenges, especially if there is more than one beneficiary. The issue can become further complicated if one of the beneficiaries wishes to live in the house while determining how the others are compensated.
If you have cars, settling financing obligations and selling the cars will be very difficult for beneficiaries without a will. Depending on how long the probate lasts, windows of opportunities for selling the car can come and go while waiting for a conclusion.
Planning your estate
A POA in case of incapacitation will help you settle matters through a trusted friend or family member that you know will act as you would normally see fit. Having a will can ensure that your assets are distributed as you wish and prevents your beneficiaries from entering into long probate processes that can diminish the value of your assets. It can also help avoid tension within the family if your estate can be settled quickly and clearly.