As an estate planning attorney, it should come as no surprise that I often encourage people to plan ahead for retirement, death, and creating a lasting legacy. After all, I earn my living by helping people do just that!
But there’s also more to it than that. Planning can help make major life transitions simpler, more efficient, and less stressful for you and your loved ones. You or your loved ones may be able to manage without a proper plan in place, but your experience will likely be more expensive, less efficient, more frustrating, and more prone to conflict. Let me illustrate with four examples.
Who Manages Your Finances if You Become Incapacitated?
Plan A: One of the four key estate planning documents that every Californian needs is a durable power of attorney (DPOA). With a DPOA, you can appoint someone to manage your finances, and that appointment can continue (or become effective) if you become unable to manage your finances for yourself. This can help make sure you stay on top of bills while you are incapacitated.
Plan B: Although you can do some limited planning without a DPOA—such as by using a joint bank account, for instance (which is a bad idea!)—ultimately, your loved ones will need to petition a court to open a conservatorship, enabling them to fully manage your financial affairs. As I’ve explained before, a conservatorship is an expensive, court-supervised process, and should be avoided if possible.
Who Makes Medical Decisions for You If You Can’t?
Plan A: Another key estate planning document in California is the Advance Health Care Directive (AHCD), which enables you to grant a person of your choice power to make medical decisions for you when you are unable to. The AHCD also lets you give instructions limiting that person’s power.
Plan B: Without an AHCD, if you become incapacitated, your loved ones’ only recourse will be a conservatorship—the same as is needed for your financial affairs. And at that point, it will be too late for you to make major decisions about your own medical care for yourself and provide instructions.
Who Cares for Your Children?
Plan A: One of the advantages of having a will is the ability to nominate a guardian for your children if both you and their other parent die while they are minors. You know your children and their needs best, and this allows you to appoint someone who you trust to do what’s best for them.
Plan B: If you lack an estate plan naming a guardian, the court will have to locate and appoint a guardian for your children without your input. This can lead to family conflict as relatives fight over who will get to care for your children, causing further trauma to them so soon after losing you.
How is Your Property Distributed if You Die Without a Plan?
Plan A: With a will or living trust, you can dictate precisely who receives your property, and when. If properly structured, you can even avoid probate, which in California is an expensive and time-consuming process.
Plan B: Without an estate plan, your property will be distributed according to the rules of intestate succession. You won’t get any say in it. Plus, although your heirs might be able to agree to a disposition other than what state law calls for, that prospect could also introduce conflict among your loved ones.
Plan A is Better
I’ve been calling these alternatives to estate planning “Plan B,” but they really aren’t “plans” at all. More accurately, they are makeshift solutions to unexpected events, and are unlikely to achieve your goals—and much more likely to waste your money. The far better option is to spend a little bit now to hire an estate planning attorney and develop a comprehensive plan that works for you.