Sometimes, making choices is difficult, either because we have insufficient information, or because we don’t want to have to choose between competing interests. Estate planning is one of those situations when failing to make a choice can result in unintended, negative consequences.
For example, if you fail to make the choice to have a will prepared and properly signed, intestate succession laws decide who will get your valuables after you die. In Indiana, those rules are in Indiana Code § 29-1-2-1. For a person who is married at the time of death who has surviving kids of that marriage, the spouse is entitled to half of the estate, and the children are entitled to half.
Upon the death of a person who is married at the time of death with no children of that marriage, but who is survived by a child from another relationship, the surviving second or subsequent childless spouse shall take only an amount equal to 25% of the remainder of:
(1) the fair market value as of the date of death of the real property of the deceased spouse; minus
(2) the value of the liens and encumbrances on the real property of the deceased spouse
Ind. Code § 29-1-2-1(c). In addition, a subsequent childless spouse is also entitled to a surviving spouse allowance of $25,000, as a claim against the decedent’s real and personal property.
But keep in mind, there are other important choices to be made in estate planning other than a will.
Have you thought about who will benefit from that life insurance policy you purchased in 1995? Or what will happen to the balance of your savings and checking accounts? And what about what remains of your 401(k)-retirement account? These are the kinds of decisions that are often made in the moment: when you purchase the life insurance policy or when you set up accounts at your local bank. And 20 years later, that choice might not be the right one for you or the loved ones you leave behind. If you don’t remember who you named as a beneficiary or distributee of your accounts, you should do so now.
As with failing to have a will, failing to make a beneficiary choice can have unintended, negative consequences. If you fail to name a beneficiary of your 401(k), for example, any funds in the account at the time of your death will go to your estate. Depending on the balance of the account together with your other assets, that failure to decide may have significant tax consequences.
Why choose? First, so that your property goes to the persons or entities you wish, rather than to whom the Indiana legislature determined is appropriate. Second, to take care of the people who are currently your family members. And finally, to ensure that any outdated choices you have made (such as a now-deceased sibling as a life insurance policy beneficiary), won’t cause unintended consequences.
We make choices every day. Be sure you make the choice to plan your estate, preferably with the guidance of an experienced estate planning attorney.
Melissa (De Groff) McCarty is a partner at Kroger, Gardis & Regas, LLP, where she helps clients make all manner of estate planning choices.