Downsizing and Estate Planning: 4 Things to Know

Downsizing and Estate Planning: 4 Things to KnowMy Divine Concierge team members have encountered more than one situation in which we were helping seniors downsize only to find ourselves having a discussion over estate planning. There is something about downsizing that causes people with no estate plan in place to start thinking about what will happen to their possessions once they die.

We are by no means legal experts, nor are we qualified to counsel people about estate planning. But we have learned enough over the years to explain some basic things. Please don’t construe this blog post as legal advice. Rather, use it as motivation to get your own estate in order as soon as you can. Downsizing or not, something has to happen to your possessions when you eventually pass on.

1. Some Assets Can’t Be Passed in a Will

One of the biggest mistakes people make is assuming that they have the legal right to pass on all their assets by way of a will. That is just not true. There are certain kinds of assets that can only be passed on to relatives through other means. Here are a few examples:

  • Life insurance benefits
  • Stocks and other securities held in a TOD account
  • Retirement funds (401(k), IRA, etc.) for which a beneficiary was previously named.

Most of these assets are assets in which the beneficiary was previously determined. For example, you are required to choose a beneficiary when you purchase a life insurance policy. The proceeds of that policy will go to your beneficiary at the time of your death even if you list someone else in your will.

2. Laws of Intestacy Vary by State

There are no hard and fast regulations determining what happens when a person dies without a will. Instead, laws of intestacy are determined at the state level. If you are planning to downsize by moving to a new state, are you aware of the laws in that state? You really should be.

You need to be advised of the laws of intestacy as well as your new state’s probate process. Even if you do have a will in place, it may be interpreted differently in your new state as compared to the state where it was drawn up. The only way to know is to educate yourself in the law.

3. Legal Definition of a Child

Downsizing is a good time to start thinking about passing on possessions and material assets to children and grandchildren. But know this: state laws define children and grandchildren differently. Definitions vary based on natural birth, adoption, step relationships, foster relationships, and so forth.

This is not to say that your will could not stipulate exactly what goes to each child and grandchild, regardless of your legal relationships to those children. But not understanding how state law defines children could lead to litigation if someone challenges your will after you pass on.

4. Legal Definition of a Spouse

The status of a spouse at the time of death can also cause probate issues. Once again, states define the status of surviving spouses differently. Definitions are influenced by things like same-sex marriage, common-law relationships, and couples who might still be legally married but living under a separation arrangement.

Downsizing is a good time to familiarize yourself with the laws regarding surviving spouses in your state. If you discover your current estate plan is not adequate to address your marital situation, you should get that fixed soon as you can.

It is amazing what comes up during discussions of downsizing. Estate planning is a topic we hear a lot about. We encourage all our clients to make the effort to get an estate plan in place long before it’s necessary. Doing so is the best way to protect your assets.

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