You die, and someone else picks up the pieces -- unless you have them all arranged in advance. It might not be possible to plan everything about that most certain yet unknown of dates. However, planning things right can sure make it easier for those left to help straighten things out afterwards.
You’ll sleep better at night knowing that you have things arranged to minimize their trouble afterwards. What you need is simple: 1) a will, 2) a "living will" (advance medical directives or instructions to doctors), 3) durable power of attorney and medical power of attorney, and 4) a living trust. To the extent that the will and the trust may have specific purposes to help others ("beneficiaries") such as your surviving spouse or children, an attorney will act knowing that he or she has a duty both to you, to make sure that the documents are made up in a way that will cause things to go the way you intend them to go, and to the beneficiaries you intend to benefit from your will.
If you don’t have a will, the state you live in will decide what happens to your property after you die. Plain and simple. But it can take them a long time to decide it, and meanwhile, the affairs of your estate suffer and the people you leave behind have a hard time filling in the blanks. Sure, the state can decide what happens, for instance, to your children, in case you or, worse yet, both you and your spouse, die. But everyone would like to have a say in what happens to their own children, and parents usually know best who could take care of them, if worse came to worse, or who should manage their money for them until they turn 18, in case, for instance, your estate leaves enough to have someone spend it for them.
A Last Will and Testament can be prepared with or without a lawyer. It would be better to have a self-prepared will than none at all. Then you can at least designate who should be guardian of your child, who should get your diamond ring, etc. But that self-prepared will had better be done under the guidance of one of the better self-preparation programs or books, or it could be flawed. Whether you have enough witnesses, whether they have to notarize or can just sign as witnesses, whether each page needs to be initialed or not, knowing these things for sure probably requires having it prepared by a legal professional. Besides, a smart and sympathetic enough estate attorney can discuss things with you and field ideas with you, something you won't get in books. Thus, a Last Will and Testament can be made up with an attorney helping with little or no discussion, cost at the low ranges usually being $200.00 to $400.00, but if you want conversation and the chance to chat a bit to field your ideas and the attorney's ideas back and forth some, be better prepared for $500.00 and up for the Last Will and Testament. If you have more than barely minimal assets, you really should get some conversation and advice, too. But getting one prepared from a program quickly is very likely better than having none, at all.
As for the "living will," it is really an advance medical directive instructing doctors, while you can still talk and while you can still be assumed to be in control of your capacities, what you would like to happen to you in case you are in something akin to a vegetative state. Would you like to give it a chance, in case you might be revived, in a few months or years, to stay on life support equipment? Or would it be more your preference to pass away, say, have them "pull the plug?"
We generally may know already what a durable power of attorney and a medical power of attorney are. They allow you to make decisions now as to who you would like to take care of making decisions about your life and medical care after you become incapable of deciding such things for yourself, say, mentally disabled or unconscious. You don’t want to wait until people claim you are senile to try and make these documents up, because like most other documents, it will be assumed you were incapable of making a decision for yourself once that point is reached, if at all.
Among other things, you might want to let your family know what kind of funeral arrangements you would prefer if you knew you were going to die. Obviously, it’s too late once the services are needed. Letting them know now and even going that extra step of something like pre-paying for the arrangements might make it more certain that your wishes while alive will be respected once you are not so much alive. Make sure and consider in advance how your loved ones feel about this, however. For instance, opting for cremation when you know your spouse or children would prefer the catharsis of a full burial and a plot at which to bring flowers on Memorial Day does not make sense, if you care how they feel.
If you want a little more control over your finances and particularly if your estate is worth a lot of money, you should consider what is called a "living trust," which you can manage as trustee until you die, and then your designated "successor trustee" takes over. With a living trust you can designate trusts for children instead of having it all go through the probate court, for instance. You can also create things like the QTIP trust or other trusts that will save money by drastically cutting taxes for your spouse and other chosen beneficiaries.
An estate planning attorney can advise and help create and set up other trusts, such as GRITS, GRATS and GRUTS. These are not some kind of bizarre food, but are rather Grantor Retained Interest Trust, Annuity Trust, or Uni-Trusts. They are irrevocable, or they are of no gift tax savings value, at all, and if they don't qualify according to strict guidelines that the lawyer should know, creating one will be deemed a taxable gift of the property in the trust. The creator of the trust (the client of the estate planning attorney) retains a qualified income interest in the trusts and yet does not have responsibility for a gift tax on the "present value" of the payments due under the trusts, if they're done right. With a GRAT (annuity trust) the Grantor / client has the right to a fixed annuity each year out of the trust. With a Uni-trust, the Grantor / client has the right to receive a fixed percentage of the principle, each year. Either way, the Grantor / client chooses a beneficiary to receive whatever is left at the end of the trusts.
Of course, whoever you give it to can do anything they want with it, and that's not what you worked so hard at preserving it for. This could leave the children without much of anything, sooner or later. They could get the money and then get sued and lose it all if they don't have good insurance. Or, they could get divorced and the spouse manage to finagle them out of a good portion of it. Maybe the spouse would deserve it, that's beside the point. End the family dynasty, unless the not-blood-related ex-spouse really bought into the idea. Much of estate planning is getting around the dangers of paying too much tax. Of equal if not greater concern should be preserving the wealth over the generations and gaining maximum utility out of it.
Whether you are preparing a Last Will and Testament or a Living Trust, you need to be advised to do some simple stuff like inventorying your assets and liabilities, so you'll know WHAT you may be able to pass on to someone else or to your "Estate." In the case of a Living Trust, things must be re-titled to make the Living Trust the owner. You still have control over it until the day you die, but this way, since the Living Trust will be the technical owner, as of the time you die nothing needs to change except that your designated "Successor Trustee" takes over the management of it in the way directed by the Living Trust. Life insurance which you intend to be controlled by the Living Trust after it pays out on your death must have Change of Beneficiary forms, and you in all likelihood need to make these changes on forms that the insurance company itself provides, naming and carefully identifying your Living Trust as the designated beneficiary. In most cases, a full service Living Trust attorney fee will include consideration of changing titles and beneficiaries, which is why it would cost more to see an attorney and do it right than to do it just from a book or program of some type.
Details as to the exact provisions of a Last Will and Testament and a Living Trust can get pretty complicated, at the middle to upper property wealth levels. Things like giving gifts annually, to reduce estate taxes at death, may so much spoil the recipients it wouldn't be worth giving them an inheritance, even though some taxes are saved. They could get so used to wasting money that they never had to earn that they make sure and blow it all once they receive the "final installment." Setting up versus not setting up a charitable remainder trust so you can somehow help your children while helping your favorite charities, too, requires professional help. This legal help can keep you from giving a huge chunk of it to the government, the world's biggest charity, for it's "general funds" as administered by the Treasury Department and determined annually by Congress and the President -- taxes. You may figure the government has enough money to play with, already, and you'd prefer to target yours a little more specifically. You need a trained professional estate attorney to help with that.
Things like putting aside money in a "generation-skipping" trust for grandchildren may preserve your dynasty into the centuries, while preventing the money in that particular trust from being taxed both on the death of your children and on your own death. If you just give it all to your children, not only might there not be any left by the time your grandchildren are full adults, but even if there is enough money to stretch that far, it will be taxed by the government both on your death and on your children's death(s). If the children are already provided for, there are many good reasons to separately provide for the grandchildren. This is not only an act of love for your grandchildren and their successors, but it is another act of love you as parent are showing to your own children. Besides, it could save hundreds of thousands of dollars in taxes. If they all somehow honor you, it's a way of "living forever" by money in addition to genes.
Putting all these things in order while young and healthy is not only a good way to make sure you are financially healthy, but helps immeasurably with both the logistics of getting your matters put straight upon disability or death, and saving legal and trustee fees for the cost of doing so later. One of the examples will be checking the designation of beneficiaries on all your financial accounts, such as bank accounts, life insurance policies, retirement accounts, etc.
Whatever documents you make up, be sure and let all of your family know where they are. They could be in safekeeping somewhere. To be of any effect, people must be able to find them; the originals will be important, not just copies your attorney may keep.
I hope I've convinced you to see the estate planning legal specialist in your area. By the way, none of the above nor any of this website is to be construed as legal advice or relied upon without consultation with a qualified legal professional estate attorney licensed in your state, who can best advise you and plan for your specific situation.
Hawaii Probate if You Die Without a Will