When it comes to estate planning for families or individuals, inheritance plans are a key element. Even though an estate plan represents much more than simply planning ahead for inheritances, a good inheritance plan is a vital part of every plan. Today we are going to take a look at some essential inheritance planning issues you need to understand before you begin the estate planning process. As you and your attorney go about crafting a plan that meets your individual needs and desires, you may also come across other issues that might require clarification. You should always feel free to ask your attorney about any concerns you have, or if you have any questions.
Inheritance Planning Requirements
First, let’s define an inheritance plan. Simply stated, it is a decision about who gets what, when and by what method. In order to craft an effective inheritance plan you have to meet some basic requirements.
First, you have to be able to understand what you own and make decisions about how you want it distributed after you die. This is known as being of sound mind. Most people meet this requirement, but those suffering from mind altering medical conditions, such as Alzheimer’s disease, may not.
Second, you have to be at least 18 years old.
Third, you have to make your inheritance decisions known in a legally recognized manner. There are a handful of tools you can use when you want to make an inheritance plan, including a last will and testament, revocable living trust, and even transfer on death assets such as life insurance policies or financial accounts with beneficiary designations.
Not Having an Inheritance Plan
The most important reason you want to have an inheritance plan is because, should you fail to create a plan of your own, your inheritance wishes will not be honored. Every state, including Kansas and Oklahoma, has specific laws that effectively pre-determine what your inheritance choices are. Bottom line – if you don’t have a plan the state will create one for you. And, if you don’t make an inheritance plan that complies with state legal requirements, any inheritance wishes you have will be ignored.
Let’s say, for example, that you make it known to your family how you want to distribute your property after you die. You assemble everyone at Thanksgiving dinner, tell them what you want, and make your wishes known as explicitly as possible. Unfortunately, you don’t follow up your declaration by creating an inheritance plan that complies with state legal requirements.
In this situation, the state’s inheritance plan would apply to you. The state’s plan is known as the law of intestate succession and it will determine who inherits your property. Because you failed to set your decisions out in an enforceable manner, state inheritance laws will dictate how your property is repeated after you die regardless of who you told or how you told them. Believe me, your beneficiaries will probably not be happy with you or the state’s plan.