Why Should Smart Women Worry About Estate Planning?
Death. It isn’t the kind of thing that anyone likes to think about, much less discuss. Even an episode of Grey’s Anatomy, when its fictional character is “checking out,” is enough to make many of us well up with tears or cover our eyes and shudder. Death is morbid and distressing; it’s also a fact of life. We’ll all die one day. And then what?
That’s when things get really confusing and complicated. There’s much to do: paperwork, taxes, retirement plan rollovers, insurance policies, and more paperwork—not to mention lots of legal and financial mumbo jumbo. True, you could do nothing and let your loved ones deal with the mess when you’re gone. However, if you’re like most women, that’s the last thing you want to do. Whether you have a husband, children, siblings, or aging parents, chances are you spend a good deal of time caring for others. Why would you want to do any differently in death?
Women today aren’t just caregivers. We’re entrepreneurs, successful professionals, and savvy investors. (Remember, we can bring home the bacon and fry it up in a pan!) We control more than half the private wealth in the United States. We outlive our male partners, on average, by four to seven years. We need to be aware of what we have and what we want to do with it. We’re in control of ourselves, our bodies, and our minds. We also need to be in control of our pocketbooks and what we do with them at the end of our lives.
Why You Need to Plan
Unfortunately, you need more than good intentions to have your wishes carried out. When the law is involved, telling your loved ones what you want means nothing—and that doesn’t even consider the miscommunications that can occur when you fail to put something in writing. I had the great honor of clerking for two distinguished jurists my first year after law school. The most important thing I learned was that there are always three versions of every event: yours, mine, and what actually happened. We all perceive and remember things differently. Why leave your intentions open to misinterpretations when you can record exactly what you want in an estate plan?
What do I mean when I say telling your loved ones means nothing? We live in a society governed by laws. These laws are designed to protect us, which includes protecting our assets when we’re no longer living. When you die, your loved ones can’t simply walk up to your banker and say, “Mom has died. Can you divide the assets among the children?” If only it were that simple! Regulations and other rules require your local banker to prove that you are, in fact, deceased. To do this, your loved ones can simply provide a death certificate. But there’s more. The banker must be sure that the person making the request has the legal authority to do so. This legal authority is usually conferred by a local court after your Will is admitted to probate (more on probate in Chapter 6, “What’s a Will? What’s a Trust? How Do You Use Them to Put Your Plan in Place?”). The person who receives the authority is the Executor or Personal Representative you’ve named in your Will. Or, maybe the banker needs a copy of an original Trust document showing who serves as Trustee if your assets are titled in the name of a Trust. Regardless, you have the power to give this authority to act to someone after your passing. If you’ve left no Will, the Court will appoint an individual to be the Administrator or Personal Representative of your estate—and it won’t necessarily be the person you would have chosen.
If none of your family members, friends, or other trusted associates is deemed to have the legal authority to act on your behalf, it’s likely that you’ve died intestate. Dying intestate means that you’ve left no Will naming an Administrator or Personal Representative for your estate. If so, in most states, the law will determine who that individual should be. Often, the authority is granted to a surviving spouse, or, if you’re unmarried or widowed, to your children, or if you have no children, to a parent or sibling. Chances are, these are the individuals you’d want to carry out your final wishes and handle all the paperwork and legal whatnot. But what if you were on the brink of divorce from your husband? Or your kids can’t balance a checkbook let alone file tax returns?
Equally important is what happens to your property if you die intestate. In the Sunshine State (Florida), if you’re married and die without a Will—and you don’t have any children, grandchildren, or great-grandchildren (otherwise known as descendants)—your husband would receive anything that doesn’t have a beneficiary designation or isn’t a survivorship account. If you’re married and have descendants that are also your husband’s, he’d receive the first $60,000, plus half of your remaining estate; your descendants would receive the other half. If your descendants are not your husband’s descendants, your descendants would receive half and your husband the other half. If you’re not married, your assets pass to your descendants, and if you don’t have any, to your parents. If your parents aren’t living, your assets go to your siblings or their descendants, and if none, to your grandparents or their children (your aunts and uncles), then to your cousins, and then to the “kin of your last deceased spouse” (that means step-children or in-laws!). Finally, if you have no living relatives, your estate passes to the State of Florida to be used for the state’s school fund.
In my home state, New Jersey, the laws of intestacy are a lot like Florida’s, with several notable exceptions. First, if you’re a registered domestic partner in New Jersey (New Jersey allows homosexual couples and unmarried couples over the age of 62 to register as domestic partners), your domestic partner is treated as a spouse. Second, if you’re survived by a husband and no descendants, your groom receives the first 25 percent of your estate (but not less than $50,000 or more than $200,000) plus three-quarters of the balance of your estate, with your mom and dad getting the rest. If your folks aren’t living, your husband gets it all. Third, if you don’t have any living relatives, then your step-children or their descendants will receive your estate. What some of you may find disturbing is that these step-children don’t have to be your last husband’s kids.
Here’s an example: Remember your delinquent stepson from your first marriage to what’s-his-name? You know, the one who has never held a steady job, used to sleep (and drool!) on your couch, and once spent time in the slammer for peddling drugs? Depending on where you live, he could technically get a slice of your pie if you died intestate and aren’t survived by a husband, children, grandkids, parents, and other living blood relatives. While the scenario may sound far-fetched (especially if you have a big brood that’s likely to survive you), it just goes to show that it’s in your best interest to draw up the necessary documents so you can be absolutely certain of where your money will end up.
Worse, for many people, than who receives your assets as a result of intestacy is what happens to the funds for your small children if you die without a Will or Trust. In New Jersey, the funds for a minor child are held by a local court in a minor’s account. First, the court controls and invests the assets. They do a terrific job, but it seems to me an investment professional might be able to make those funds grow a little bit more because they have more flexibility in selecting investments. Second, and the most frightening of all, is that your children will receive their share of your estate at age 18! In all my years of estate planning, I’ve yet to meet a client who thinks her children would be able to handle large sums of money at 18. If you plan, you can have the money for your wee ones held in trust to any age or ages you would like. Talk about incentive to start your estate planning today!
The key to all of this is you—what you want to do and what you want to have happen when you die. I thought about the best way to get this point across and decided that there is no sugar-coating my message: You need to be proactive to achieve your goals. And I repeat, your goals. As you continue to read this, remember that your estate plan is your plan. There is no need for guilt, angst, or any one of those other complexes we, as women, are particularly good at feeling. Create the plan that reflects what you want. Period.
We’ve all heard horror stories about greedy children denying proper care to an ailing parent so they can get their inheritances or ne’er-do-well in-laws circling the dying matriarch waiting for their share of the pot. While that still may happen, what actually happens is up to you. Let the vultures hover all they want. If you have a plan in place, your plan remains in place even if you become incapacitated. In the unfortunate event of crooks who trick unsuspecting, incapacitated women into changing their plan (it happens more than you can imagine), if you have a prior plan in place, a court should hold that the prior documents prevail.