Many people believe (mistakenly, I might add) that if one spouse dies, everything automatically goes to the surviving spouse. Let me assure you that is most often not the case. If that is what you want to happen, please don’t assume that your estate will automatically go to your spouse when you die. You have to take affirmative steps to be sure that will happen. To be sure, assets owned jointly with your spouse, like bank accounts and real estate, do go to the survivor if properly designated, but if you don’t have an estate plan, your spouse may end up having to share assets with other family members.
If you die without an estate plan (the legal term for this is dying intestate), the laws of the state in which you live will determine where your assets go. Each state has its own unique set of laws that determine what will happen to your estate if you don’t have a plan. Under Mississippi law, only if you have no children does your spouse get everything. Otherwise, your spouse and your children will divide everything in equal shares. If you have no spouse, the children divide everything in equal shares. If there is no spouse and no children, then the law looks to other living relatives such as your parents or siblings, then nieces and nephews, aunts and uncles, and on down the line, and the group of people who are most closely related to you will inherit your assets in equal shares.
In addition to distributing your assets after death, without a truly complete estate plan, you need to consider what could happen if you become incapacitated. While your spouse may be able to access your joint bank accounts and make health care decisions for you, what happens if your spouse is also incapacitated? It is important to have back-up plans. Even if your spouse is fine, depending on how your finances are set up, your spouse may not be able to access all of your assets without a power of attorney specifically authorizing it.
To avoid these complications it is important to make sure you have at least the most basic estate planning documents in place. The most basic estate planning document is a Last Will and Testament. If you do not have a will directing who will inherit your assets, your estate will be distributed according to state law, which, as noted, gives only a portion of your estate to your spouse. If you have minor children, a will is also the document in which you can name a guardian for those children. If you have a will, you are certainly better off than if you have nothing, but remember that contrary to what many people think, a will must still go through probate, a lengthy and expensive court proceeding, before it has any real force or effect.
The next most important document is a durable power of attorney. A power of attorney allows the person you appoint — your “attorney-in-fact” or “agent” — to act in your place for financial purposes if and when you become incapacitated. Without it, if you become disabled or even unable to manage your affairs for a period of time, your finances could become disordered and your bills go unpaid, and this would place a greater burden on your family. Even if you have a power of attorney, you should be aware that some banks simply do not honor powers of attorney (including at least one with offices throughout the state of Mississippi). Under Mississippi law, they are not required to do so, meaning that your family might have to go to court for appointment of a conservator, a process which takes time and money, and is a terribly burdensome process. All of these are complications that could have been easily avoided by doing good advance planning.
Similar to a power of attorney, an advance healthcare directive appoints an agent to make health care decisions for you when you can’t do so for yourself, whether permanently or temporarily. Again, without this document in place, your family members might be forced to go to court to be appointed as guardian over you. Include an advance directive as part of your plan to not only name your agent, but to guide him or her in making decisions that best match your wishes for prolonged medical treatment, provision of artificial nutrition or hydration, and pain relief in your last illness.
You should also consider using a trust as a part of your estate plan. Your trust allows you to name the person or persons to manage your financial affairs, who will take over only in the event of your incapacity or death, but you may also name someone to serve as co-trustee with you so that they can immediately help to manage your finances, providing for a truly seamless transition in the event of your incapacity. The authority granted by a trust also can’t be denied as is the case with a power of attorney.
Trusts offer many options providing how they are structured and providing for what happens with your property after your death. There are several different reasons for setting up a trust, the most common of which is to avoid probate. If you establish a revocable living trust while you are alive, any property in the trust passes to the named beneficiaries at your death, saving them time and money. If you have beneficiaries that you might not want to receive all of their inheritance right away, your trust can specify what those beneficiaries receive and when. Certain trusts can also result in tax advantages both for the donor and the beneficiary, and still other types of trusts may be used to protect property from creditors or to help the donor qualify for Medicaid benefits to pay for a nursing home stay. When the drawbacks of wills and powers of attorney along with the benefits that go along with using a trust are explained to most potential clients, the majority will agree that a trust provides clear benefits to their family, and will opt to do their estate planning using a trust.
Please don’t assume your spouse is automatically protected when you die, or can automatically act in your place in financial or health-related matters if you become incapacitated. With no plan in place, both of you may find yourself at the mercy of the court system. Call to arrange your consultation with R. Kelly Kyle or Elizabeth L. Wynn to make sure your family is protected, and that you have all the estate planning documents you need.
