Despite the importance of having an estate plan, a minority of Americans have their own plan in place. If you don’t have a plan, the State has a plan for you, and you probably won’t like it.
The purpose of an estate plan is twofold. The first is the traditional planning you probably think of, passing your property to the next generations. The other is the lifetime part of planning. The planning many people haven’t thought about. This planning is setting up control now and keeping control later if you can’t make rational decisions.
Both parts replace the State’s plan for you with your own plan.
Court Interference in Your Financial, Legal, and Healthcare Choices and Affairs While Living
Arkansas, like most states, has a process in place for a person to take over your decision making if you are mentally incapacitated. It’s called a “Guardianship.” The Judge may take away part or all your legal right to make decisions and give those rights to somebody else. The Court is “ripping away” your rights.
If you are incapacitated – unable to make your own rational decisions – family members may be forced into court to take over your affairs against your will. It may not be the family member you would pick to manage your affairs. Maybe it’s your daughter. The one that has a hard time managing her own finances.
The other issue with becoming a guardian is that the person must be qualified. By qualified, they must be 18, not have an unpardoned felony on record, and not be guardian to more than 4 other people among other qualifications. So, if you only have one child and they have been convicted of even a minor felony and not pardoned, they aren’t qualified to be your guardian. If you are a single parent, and all your children are under 18, they aren’t qualified to be your guardian.
You can stop this from happening by creating a power of attorney for finances, legal affairs, and healthcare.
Intestate Succession – “Probate Without a Will”
Something is going to be done with your property. And you don’t get a say in what it is.
Most states, including Arkansas, have a legal process in place to pay your final bills and expenses; settle disputes; and distribute your property. Without a plan in place, disputes over who gets what must be resolved by a Judge.
Without a plan in place, your family will have a more difficult time navigating the process. The Court will be in charge of the entire process from beginning to end.
Your family can expect this process to take about a year. It involves multiple trips to court for hearings. During this period, assets are frozen. Family can qualify for an allowance, but it isn’t very much.
The rules aren’t necessarily terrible. The State Legislature thinks the rules are the closest to what the average person would want done. However, most people would change these defaults some. For example, the rules say your children take first, then parents, then siblings. Maybe you want your siblings to take it all because your want to disinherit your child. You may want to give something to charity or a friend.
When the first person in a marriage passes, the process isn’t usually too bad if most of the assets are co-owned by both spouses. Ownership simply changes to the living spouse. However, when the second person passes, the process is long and a hassle for the remaining family. And, if both pass in the same accident, then the distribution of your property goes to Court.
Arkansas is different than some states in how the property is distributed. Your spouse gets one-third of everything but the real estate that isn’t co-owned. Your spouse gets a one-third “life estate” in the real estate that isn’t co-owned, including the family home. If your children are under 18, then the Court will force the assets into a Trust to be managed for their benefit. The Court also gets to pick the Trustee to manage the Trust. This may be a professional who will charge high fees to manage the Trust.
Intestate success is stopped with a variety of tools. One of the most common ways is the revocable living trust. A revocable living trust completes circumvents the courts. Another advantage is that you can maintain control over the assets after you’ve gone.
Life Support
While you may have thought about who will manage your money and who should get it, many people haven’t considered the possibility of being on life support for decades while their family fights over them.
Terri Schiavo was a young lady who had a heart attack. She was left in a permanent vegetative state. Her husband and her mother fought over removing life support for 15 years before life support was finally removed. This case involved 14 appeals and numerous filings. The autopsy revealed such extensive brain damage that she could never have been expected to wake up. (https://en.wikipedia.org/wiki/Terri_Schiavo_case)
And, if you review the section above on guardianships, your healthcare decisions may be taken over by a family member if you can’t make them.
For example, if you have a major stroke and are having troubles with decision making, a family member (or adult protective services) can step up and ask the Court for permission to make your healthcare decisions until you are capable again. It might not be the person you expected or wanted it to be.
If nobody steps forward to make decisions, then it is up to the social workers and doctors to make decisions, or to call Adult Protective Services. Adult Protective Services is a branch of the Department of Human Services in Arkansas that steps in to protect adults when nobody else will or can.
Create an advance directive (living will) and healthcare powers of attorney to make sure you don’t have to go through something like Terri Schiavo.
Family Fighting
Maybe the worst thing of all is hoping your children won’t fight, but they end up fighting over the little stuff – the sentimental stuff. Or they end up fighting over small sums of money because they feel it’s unfair that the State decided to evenly split the money between them.
You can read about how a family fought for years over a $1.50 Tweety Bird statue mom kept in the kitchen here https://www.cnbc.com/2017/10/10/7-ways-that-cheap-tweety-bird-figurine-can-screw-up-your-estate.html.
That is just one example of families fighting.
A friend of mine told me he and his brother fought over their dad’s estate. He said they literally fought over nothing. Their dad had very little, yet they fought over it.
While parents don’t expect or want their children fighting over their stuff, it happens. And it often rips families apart.
You can minimize the chance of family fighting by creating a comprehensive plan that includes passing of goods in line with your wishes and making your decisions now.
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