Are There Minimum Property Requirements for Creating a Will or Trust?
You most certainly do not have to be wealthy for it to make sense to create a will or a trust. If you have any property whatsoever that you care about, that’s a good reason to create a plan. When you die without at least a will, the state you live in will try to divide whatever you leave behind to your surviving family members. And because the process known as probate, is a complicated and lengthy one, the government will charge your estate a percentage of its value for having to go through the trouble.
The cost of probate varies by state but in California, the court charges from 3% up to 9%, depending on the scope of your assets at the time you die. If you own a home, a car, have a bank account and maybe ownership interest in a business, that’s a considerable amount of money the state could charge to your estate just for the pleasure of making these personal decisions for you.
Intestacy is a term that basically means dying without a will. All states have intestacy laws that are default rules that give the government a roadmap for how to handle the disposition of your property. Usually, if you die intestate, the intestacy laws in your state will dictate that all your assets will go to your spouse and your heirs, but who gets what is determined by a judge who doesn’t know you or your family members, what -- and who -- matters to you, and what you would want to do with your property.
Perhaps you have a bank account that has exactly $10,000 and it would be easy to just split it down the middle to the two only living relatives you have. Five-thousand dollars to each person. Sure, that's an easy one. But what if you had a record album collection left to you by your grandfather? Or the wedding ring left to you by your dearly departed mother? Or the condo in Palm Springs that you purchased as a vacation home with a spouse during marriage which is now a rental property? How would the court know what you would want to happen to a real property asset and how would that get divided if you had an uneven number of children? What if there are children from both a previous marriage and a current one?
To assume that your surviving relatives would magically just know what to do to ensure your wishes are honored is pretty unrealistic and frankly, wishful thinking, even for the closest of relationships. And, how could you be certain that all your remaining family members would team up seamlessly the face of a crisis and work closely together peacefully to iron out your affairs without any conflicts or confusion?
Yes, it’s going to take some effort on your part to make sure you have a good plan in place, but the beauty is that you have the power to make those decisions now and you should while you still can. The alternative is that the court decides for you, and charges you for it.
Another important thing to keep in mind is that if you haven’t made a will or a trust, then it probably means you’re also not prepared with other decision-making documents that help people in your life know what to do in case you suddenly become sick or injured. If this happens and you either temporarily or permanently cannot make health or business decisions for yourself, your family will need to seek the help of a court to gain legal authority to make decisions for you. And again, the cost for the court’s time comes at a high price. These decisions not only affect your health and well-being but also your financial affairs. Unfortunately, creditors won't give you a break even during the worst of times. Too many distraught families are caught unprepared and become legally paralyzed when their central family member, who is a primary financial supporter and takes care of everyone else, suddenly dies or becomes incapacitated and needs someone else to step in and carry on with things. Most families don’t have the ability to crowdsource the funds needed to cover expenses in case you lose capacity – especially when your own resources are there but not available to anyone, including you.
It can be emotionally and financially devastating for spouses, partners or children of a loved one whose capacity is diminished or lost to learn that their only option is to seek a court’s intervention in order to do everyday things like help their loved one pay bills, communicate with banks, access and manage credit accounts, file income taxes, and other important business matters.
Creating a will, trust and other estate planning documents shouldn’t be based on how much property you own, but rather it’s a matter of how important it is to make sure that you and your loved ones are able to avoid the crisis sure to come from the lack of planning. Be sure to contact an attorney to discuss your many options and determine the right level of planning for your specific circumstances.