Why Homeowners Need Estate Plans
Many people, when they hear the words “estate planning,” don’t think it applies to them. “I don’t have an estate to plan!” they may say. I think this comes about from the use of the word estate. It makes us think of the show Lifestyles of the Rich and Famous where Robin Leach showed us massive estates and talked of the excess spending by the ultra-wealthy.
But according to Merriam-Webster, the simple definition of estate is “all of the things that a person owns.” Thus, your estate is the sum of your stuff: your home, your bank accounts, your stocks and bonds, your cars and boat, and your personal property. Big or small, most adults have an estate of some sort.
When you buy a home, it is part of your estate. You need to have a plan to take care of this asset you have put time, money and your heart into!
One of the first things I talk to clients about is planning for incapacity. What will happen to your home if you become incapacitated and are unable to handle your own finances? Who will pay your mortgage, keep the electricity on and keep things running? If you need the money from a sale of the house, who will sign the listing agreement or the deed to transfer title? With a proper estate plan, you will have appointed someone to take care of those things and they will have the estate planning documents they need to take care of your home, sell it, and take care of you.
Second, what will happen to your home when you die? Without a proper estate plan, it might not go to who you want to have it. Here’s an example: If you are married and have children from a previous marriage, and your home is only in your name, are you aware that your children from the previous marriage are entitled to your interest in the house? Your spouse may only be entitled to his or her own community interest in the home. If you want your spouse to have the home, you must have an estate plan that provides for that. If you want your spouse to have the house, but want your children to share in the proceeds after your spouse is gone, you can’t do that if you don’t have a plan. Without an estate plan, if you pass away first, it’s up to your spouse to decide where the proceeds go. If your spouse doesn’t have an estate plan, the law says that the house or the proceeds goes to his or her heirs, whoever that may be – but it isn’t going to your children without a written plan.
For a single person with more than one child, it is important to have a Will appointing who will handle the estate. Without a Will, all three children have an equal right to serve as personal representative of your estate. If they all agree on who should serve, no problem. But if there is any disagreement, it could cause delays in getting control over your affairs and hard feelings among your children at a very difficult time for them.
A good estate plan can also help you avoid court proceedings called probate. A Will alone won’t do that, because a Will doesn’t transfer title to your home on your death. The Will only directs who will get the property, and appoints a personal representative. In most cases, your personal representative will have to apply to the court to be appointed and officially authorized to handle your “estate.” Only after they are appointed will they be able to transfer your home or sell it and distribute the proceeds.
An estate plan is a necessity for all homeowners! My office offers a free consultation to assess your situation and discuss what kind of estate plan is right for you. Call us at 602-375-6752 or email Libby@libbybanks.com or see our website at libbybanks.com. For more education on estate planning, attend my seminar on October 12, 2017 at 6:00 p.m. at the Mesquite Public Library north of Paradise Valley Mall.