Estate Planning: Asset Distribution
In the first two articles in this series, we discussed the general importance of estate planning and why ACCFS would be involved in this topic. We shared that it is because of the resulting relationship difficulties we see that arise from improperly planned and poorly communicated estates. In the second article we explored the health care aspects of estate planning. We continue this series by discussing asset distribution.
Much like our discussion on health care began with the importance of having a health care power of attorney in place; we want to mention the necessity of having a durable power of attorney in place also. This individual(s) is given the authority to make financial decisions if you are incapacitated. This person may or may not be the same as your health care power of attorney. Having this individual in place simply ensures that your financial obligations can be addressed if you are unable to do so. He or she may be given complete control of your assets, or you may limit their control as you see fit. The authority of the durable power of attorney ends upon your death.
“For where a testament is, there must also of necessity be the death of the testator. For a testament is of force after men are dead: otherwise it is of no strength at all while the testator liveth.” Hebrews 9:16-17
As this Scripture indicates, a Last Will and Testament has no power while the testator, the individual writing the will, is living. At the point of death, the executor of the will or the trustee of the trust has some limited authority based upon the laws of the state of the deceased. The point to realize here is that in the absence of estate planning or a properly completed will, the courts will assign someone to execute the laws of the state. Every state has its own process for the orderly distribution of an estate for which there has been no last will and testament written. As we have mentioned in earlier articles, it is highly unlikely that the state’s succession process will provide what your wishes would have been so foresight and planning in this area can help alleviate much potential difficulty.
In addition, special consideration needs to be given to minor children who may not be old enough to manage their portion of an estate. In such cases, trusts may need to be established for guardians to use as they raise your surviving children.
We will not go into the many details in which estate planning can be done. However, there are four main ways you can direct the distribution of your assets upon your death:
- Do nothing.
- Place the bulk of assets into joint tenancy (co-ownership usually with a spouse).
- Execute a will detailing asset disbursement.
- Establish a revocable living trust.
Perhaps the only time when the first option has any validity is in the case of an elderly individual with no assets and no minor children. Otherwise, one of the remaining three options should be considered according to individual needs and preferences.
“…keep and seek for all the commandments of the Lord your God: that ye may possess this good land, and leave it for an inheritance for your children after you for ever.” 1 Chronicles 28:8b
The principles of fairness and equity in the disposition of assets can scarcely be overstated. As this Scripture indicates, we generally leave an inheritance for our children as well as giving to charities of our choice. However, when children or other relatives are treated unfairly in a will without just cause, irreparable harm can result. We mention “just cause” because there may be extenuating circumstances (health issues, special needs, etc.) where an individual may be treated differently, but those cases are rare. Much heartache and family dissention arises from inequitable or poorly written wills and the lack of open, frank communication with family members ahead of time. Put yourself in the place of the child who was “forgotten” or “slighted” in Grandpa’s will or, worse yet, in Dad’s will. One way to avoid this difficulty is to make distributions by percent by lineage. For instance, “20% of the estate is to be divided equally among all grandchildren and 80% equally among my children.” A good biblical example to review is the story of Joseph and the consequences of his father showing favoritism to one of his sons over the others (see Genesis 37:4). Without over simplifying, it is important to think through potential stumbling blocks and long term relational difficulties which can result from the practice of favoritism.
“Then shalt thou understand righteousness, and judgment, and equity; yea, every good path.” Proverbs 2:9