If you are like the majority of people in America, you have done no estate planning. This means you do not have a signed will. Just because you do not have a signed will, does not mean you do not have a “will”. You just didn’t write it. Your state legislators did.
In the absence of a signed will, Michigan statute determines who will get what after you are gone. So even if you think you do not have a will, you actually do. I do not know about you, but I would rather leave instructions for my stuff after I am gone, rather than letting the folks in Lansing make that decision.
If you are not married and you die without a will, your property or “stuff” would first be divided equally among your children. If any of your children predecease you, that child’s share would go to his or her children, then grand-children, etc., until a living descendant is found. If a predeceased child has no then living descendants, that child’s share would be divided among your other living children or their descendants.
But if you have no living descendants, your stuff would go to your living parent(s). When both of your parents have predeceased you, distributions then go down the bloodline. Your estate would then be distributed to your siblings, then to nieces and nephews, etc., until a living descendant of your parents is found.
If your parents have no living descendants, then up to your grandparents and back down the bloodline until a living relative is found. If still no living relatives are found, then up to your great-grandparents and back down. Only if you had no living relatives, would your stuff end up going to the state unclaimed property fund.
Married persons present other issues. You may have been married for a number of years. Most long-term married couples generally want some variation of the “Honey, I love you” plan, which is “Honey, I love you. I leave it all to you. The kids can have it after we are both gone.”
Unfortunately if you have no written will or trust, this may not be what happens. If you and your spouse have joint biological or adopted children and you died without a will or trust, your surviving spouse would only get the first $215,000 of your probate assets in 2013. The rest of your estate would be divided into two equal shares, one share for your surviving spouse and the other share to be divided between your then living joint children and the descendants of any deceased joint children. This is not a “Honey, I love you” plan. If your primary asset was your home, your surviving spouse may have to sell the home just to pay off the kids.
There is often an unwelcome surprise for your children in short-term second marriage situations. Most of the people with whom I have dealt who are in short-term second marriages, want their separate property to go to their own respective children. This oftentimes is not what happens when there is no planning.
For example, let’s say you died without a will or trust after a second marriage to Thor, your Swedish personal trainer, or Bambi, your aerobics instructor, who is much younger than you and outlived you. If your children are not also children of Thor or Bambi, then Thor or Bambi would keep the first $143,000 of your probate estate in 2013. One-half of the rest of your estate would go to Thor or Bambi and the other half of the remainder would be divided among your biological children and/or their descendants.
I know of one case in which a widowed fellow died two weeks after remarrying. He did not have a will. His new wife received nearly one-half million dollars of his assets for this two week marriage and was in control of the entire estate administration. The kids only received a little over $300,000. This is only about 40% of the entire $800,000 estate they would have received two weeks earlier, before the marriage. I very much doubt that their father intended that his new bride was going to get so much of his estate.
The best way to assure that your property would be going to your children or other beneficiaries instead of Thor or Bambi, is to firstly have a properly drafted will or trust based estate plan. And secondly, have Thor or Bambi sign a pre- or post-nuptial agreement. With this agreement, Thor or Bambi would waive any claim he or she would have against any of your property upon your death. In this way, your entire estate would go to your children or other beneficiaries instead of some or all of your estate going to Thor or Bambi or their kids.
In long-term second marriages, You may consider Thor or Bambi’s children as your own, or even more so than your own kids. You may want all your and Thor or Bambi’s children each to receive shares of your and Thor or Bambi’s estate. This is a variation of the “Honey, I love you” plan. When one of you dies, the survivor of you would have use of the entire marital estate. Only after you are both gone, would each of your respective kids have a share of the entire marital estate.
If you and Thor or Bambi did not have a will or trust, this may not happen. If you died first in 2013, your children would only receive one-half of the assets titled in your sole name at the time of your death which are in excess of $143,000.
The rest of the marital estate including property owned jointly with Thor or Bambi would go to Thor or Bambi. Upon Thor or Bambi’s death, all of the property now in Thor or Bambi’s name, would only go to Thor or Bambi’s children or other heirs. Your children would receive none of these assets.
You can enter into a contractual agreement with Thor or Bambi in your will or trust, which assures that all the children receive a share. This contractual agreement in your will or trust is not the same as a pre- or post-nuptial agreement. In a pre- or post-nuptial agreement, you and Thor or Bambi typically waive all claims to each others’ estates.
With this contractual agreement on the other hand, you and Thor or Bambi usually would both agree in your wills or trusts to first leave everything or a certain amount of assets to each other. When both you and Thor or Bambi are gone, you both provide that everything would be distributed to both your and Thor or Bambi’s children. You and Thor or Bambi also agree in a separate provision in your will or trust, to not change your will or trust. This agreement to not change your wills or trusts locks in the distributions to each other first and then when you are both gone, to all the kids of both of you.
If you are married, it is extremely important to have your estate planning documents in place to make sure that the persons you want to benefit are those for whom you have provided. With second marriages, it should be made clear whether or not Thor or Bambi or their children are to receive any share of your estate.
With a properly drafted estate plan, you can make sure that you are in control while you are alive and well; you and your loved ones are taken care of in the event of your mental disability; and when you are gone, you give what you have, to whom you want when you want the way you want
By: Matthew M. Wallace CPA, JD
Published edited December 1, 2013 in The Times Herald newspaper, Port Huron, Michigan as: If there is no will, there still is a way