Did you know that you and everyone else in your state already have an estate plan? Yes you do, and it is absolutely free, at least at the outset. It’s a “default plan” and each state has one for its residents. Of course, every state’s “default plan” is somewhat different and, unfortunately, while these default plans may look objectively fair, they rarely accomplish what any one person would want. While the “default plan” may be free, and there was no work to set it up, it typically is very expensive in the long run. Relying on such a plan will likely tie up your assets, your family, and your heirs for a long time, and possibly cause resentments that can span generations.

The “default” estate plan was created by the legislature of the state in which you live, and signed into law by your state’s governor. As the legislature knew nothing about you, the state of your relationships, or what you would want done “if something happened,” it didn’t design the “default plan” especially for you. Under the state’s “default plan,” your wishes don’t matter, and you and everyone else who dies without a will — known as dying “intestate” — gets the same treatment — and it’s not pretty.

How the “Default Plan” Deals With Assets in Your Estate

Part of your state’s “default plan” involves a local judge selecting someone to serve as your Administrator or Personal Representative to take charge of your assets should you die without a valid will. That individual would usually have to buy a surety bond (a type of insurance policy), hire a lawyer and maybe an accountant, and gather your assets and hold on to them for a while.

The Administrator would, sometimes with the judge’s approval, pay the debts and taxes he or she thinks are owed, plus what often are considerable legal, accounting and other fees and expenses — including his or her own — and then distribute the remaining assets to the people your state’s “default plan” says should inherit them.

What About Your Children?

If you have minor children, a judge would determine who will serve as their custodian and guardian (especially if the other parent isn’t around) without having any idea as to what your wishes were. The judge would also decide who should manage any assets they inherit until they turn 18, at which point they would get their shares outright… all at once.

How About Other Family Members?

Because the state’s legislature knows nothing about you, your relationships and friendships, nor what you would like done with your assets, it set up a table that distributes your assets strictly on the basis of your family tree. For example, say you have two siblings that, by law, are entitled to inherit your estate, it won’t matter that you were very close with one and could not stand the other. Both would be treated equally.

The “Default Plan” Is Not Easy and Free

Although the “default plan” may seem easy and inexpensive — it requires no thought on your part and costs you nothing to set up — the results are rarely what you would choose on your own. Even if the state’s “default plan” would do exactly what you want in terms of distributing your assets, the free plan quickly becomes very expensive. If an accident or illness renders you incompetent, the local court will appoint a conservator for you, and if you die, the local court would appoint an Administrator or Personal Representative to deal with your estate. Any assets you had accumulated would be used to pay the costs of everything — including payments to court-appointed lawyers, appraisers, personal representatives, conservators, special guardians, and the like.

You can, however, scrap the state’s “default plan” and choose to create your own personal estate plan — one that reflects your wishes — and thereby take control of the process, determine who should inherit your assets, when the assets should be distributed, and who should have custody of your minor children… and usually save a great deal of money in the long run. Although some lawyers like to make creating an estate plan sound complicated, it really does not have to be. Nor does it have to be expensive.

So the best news is that with just a little advanced planning, you can scrap the state’s default plan and use a will, a trust, a durable power of attorney, and beneficiary designations to assure that your wishes will be known and carried out.

(The article was reviewed in January, 2024.)