Unfortunately, that is not always the case.  State laws do very, but if you die without a will (intestate), the inheritance from your estate will be divided among your spouse and children.

In Arkansas, if you have a spouse but no children, all of your assets pass to your spouse if you have been married for more than three years.  If you have a spouse but no children, only one-half of your assets pass to your spouse if you have been married less than three years.  If you have a spouse and children, your spouse will receive one-third of your assets and the remaining two-thirds will pass to your children.  If you do not have a spouse or children, then your assets will pass to your parents, then brothers and sisters then other relatives such as nieces, nephews, aunts and uncles.

Regarding land, if you have a spouse and children, your spouse will only receive a life estate in one-third of your land.  A life estate means that your husband or wife owns their share of the land only for their lifetime.  They do not have the right to say who gets the property at their death.

This is not what most people want to happen with their assets.  However, in reality, is it exactly what will happen with no planning or poor planning.

I wanted to speak to some of the more common “heir-ors” out there.  I’ll start with one of the big ones and address more in 2012.

Heir-or #1:  Only Rich People Prepare Estate Plans

Do you own anything?  If so, you need a will.  You see, a will allows you to designate who will receive your property should anything happen to you.  Continuing without one ensures that all of your assets will be distributed under the terms of your state’s “intestate succession” laws.  That means your money and property could end up with family members you haven’t spoken to in years instead of who you’d really like to see control your assets.  Failing to have a will in place is simply a decision to trust your assets to government bureaucrats who do not know you from Adam.

Do you have children?  If so, you need a will.  You will be able to name a guardian to take care of your children should you not be able to.  Without having this guardian clause in a will you will not be able to take part in the decision making process and a judge will decide where your children will live and who with.

Even if you think your situation if pretty straightforward, you may feel more comfortable hiring an estate planning attorney to help guide you the process.

A Gun Trust is a special purpose revocable living trust. A Gun Trust is written
to hold only firearms.

http://www.forbes.com/sites/peterjreilly/2011/09/22/gun-collections-pose-special-estate-problems/

Inheritances that are held in trust can be protected from claims by a spouse if your child or grandchild were to divorce.  The assets held in trust would most likely be viewed as not being joint marital property.  Additionally, if your child or grandchild has creditor problems the assets held in trust could possibly protect those assets from being levied upon or subject to a lien or claim.

Leaving those assets in a your revocable trust for children or grandchildren with health problems or who may be too immature to handle a large sum of money are also excellent reasons to have the trust distribute the assets.

To recap, here are the advantages of having inheritances remain in the trust and be distributed pursuant to the terms of your revocable trust:

• Protect inheritance against claims by child’s creditors or spouse
• You can choose to spread receipt of an inheritance over as many years as you direct
• You can choose to provide your child with an income for his or her lifetime, with the remainder passing on to your grandchildren

As always, this is not legal advice and should not be construed as such.  I am always available to discuss estate planning, and trusts specifically, with you and your family to see what would be a good fit.

Name: Warren E. Burger

Age: 87

Died: June 25, 1995, Washington, D.C.

Cause: Congestive heart failure

Estate Mistake: Even though Warren Burger was once the Chief Justice of the United States Supreme Court, the 176-word will he left his two children failed to empower his executors and did not plan for estate taxes.

His $1.8 million estate lost $450,000 in federal and state estate taxes.  The estate was tied up in probate of which court costs and attorney’s fees took more out of the estate.  Additionally, even more money was spent because of expenses in going to empower the executors in probate which could have been avoided if the will had granted those powers automatically.

Name:  Heath Ledger

Age:  28

Died:  January 22, 2008, New York City

Cause:  Probable drug overdose

Family:  Daughter

Estate Mistake:  Ledger had a will when he died of an overdose in 2008, but it was drafted in Australia before he found huge success and fathered a child in the United States.

His will did not reflect any of this, so a reported $20 million went to his parents and siblings.  His family said they would give the entire estate to Ledger’s former girlfriend, Michelle Williams, and their daughter.

Name: Anna Nicole Smith

Age: 39

Died: February 8, 2007, Hollywood, CA

Cause: Probable drug overdose

Family: Daughter

Estate Mistake: The model turned “public curiosity” left a will, but it was apparently a poorly drafted document that accidentally disinherited her daughter.  Her will had specified leaving out any “spouse and others’ heirs, including future spouses and children.”  Her 20-year-old son had died shortly before Smith’s death.  A court eventually made Smith’s daughter the sole beneficiary and named a guardian, which Smith did not do in her will.

Another estate case Smith was involved in still lives.  Smith had married 89-year-old billionaire J. Howard Marshall II shortly before he died in 1995.  Her claim to the estate made it all the way to The United State Supreme Court and is still bouncing in appeals.

Estate planners need to ensure that certain children and grand-children are not unintentionally disinherited.  Additionally, current spouses sometimes need protection from existing descendants and many times the assets need protection from former spouses.  Premarital agreements, or prenuptial agreements, can also protect assets for descendants when a family becomes “blended”.

Estate planning for blended families can morph into the more important goal of asset protection.  Trusts are always an appropriate tool to ensure assets are protected and pass to intended heirs.  Ensure that your entire family is taken care of when you plan for your estate.

Huge plantation estates were held in trusts for generations ensuring they would not fall to anyone outside of the family.  Families who were concerned about son-in-laws for their daughters had the daughter’s property held in trust so the the wealth would not be lost through marriages.

 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1398522

Problems can arise when disabled individuals inherit an estate.  Their assets usually rise above the “limits” and benefits will cease until the inheritance is sold, spent and used up.  The special needs trust allows you to protect your loved one’s benefits while supplementing their needs.  The trust is merely a container used to hold property and money that will supplement your loved one’s government benefits-whether they are Supplemental Security Income, Medicaid or another program.

These programs have limits to what a disabled person’s income and total assets must be.  A person must have less than $600-$800 of monthly income and less than $2,000 worth of total liquid assets.  If a disabled person’s income or assets rises above those limits then their income and health care they receive from those government programs will cease.  Fortunately, special needs trusts are a widely accepted and legal estate planning tool that will allow a disabled person to use their inheritance as a supplement for their special needs.  The disabled person cannot be the trustee of the trust.  I usually recommend a corporate trustee as following special needs trusts can be complicated.  There are many rules to follow to ensure the trust operates properly and benefits are not lost.

Special needs trusts are very complicated to draft.  It is a good idea to use your entire team of estate planning professionals (life insurance agents, financial planners, accountants, corporate trustees and attorneys) to ensure you are making the right decision.  As always, please do not ever hesitate to contact me to discuss this and any other estate planning need or goal.

Kris Boyd; (501) 372-1616; kris@krismboyd.com