Make financial decisions based on your wishes
Some shun having an estate plan arguing that state laws of intestacy are probably fair. The drawback is being forced to probate the assets, which is a matter of public record in the probate proceeding, and subjecting your wealth to unnecessary administrative costs.
Additionally, and unfortunately, these persons may have unwittingly also engaged in some "accidental" estate planning by holding title to assets in the wrong way or incorrectly designating beneficiaries to insurance, retirement or annuity accounts. For example, joint tenancy is a form of ownership with an inherent estate planning component. If you hold property as a joint tenant, i.e., a real estate or a bank account, upon your death the asset held in joint tenancy will pass to the survivor without offset for other sources of inheritance. Whoops: accidental estate planning.
Let's consider four different estate planning scenarios--some on purpose and some by accident. For each scenario, assume you have three children, and your intention is to leave the totality of all of your assets to children equally.
First, if you die without being married and without an estate plan, your goals [in hindsight] could be accomplished by virtue of state intestacy laws.
Even though you have not spent a dime on estate planning, your assets would have to be exposed to thousands of dollars in attorney and filing fees and expenses, not to mention the delays associated with probate and its inherent loss of privacy.
Secondly, you could engage in multiple estate plans, all operating at the same time, simply by specifying different heirs within IRA/401(k) beneficiary designations and/or insurance policy/annuity beneficiary designations and/or by holding property in joint tenancy.
If this is done without mistake, this may accomplish bypassing probate and dividing your assets between your children. However, there are several weaknesses. It subjects you to constant "rebalancing" of your estate to make sure everything is equal and it would be nearly an absolute improbability to assure that all of your children are equal. The home is held with Child 1, a savings account is in joint tenancy with Child 2 and personal property is held in joint tenancy with Child 3. As a function of convenience and in order to avoid probate, the joint tenant child would receive the house and it would be to the exclusion of the other children. If the house has $100,000 in equity, the equity would belong to the child named as the joint tenant. This child would experience no "step up" in basis at the time of death so, in order to treat them fairly, you would have to increase the amount to this child over the other two remaining children and predict the date of disposition of the house with accuracy.
There will be some other unfairness as it relates to the rebalancing of your designations. For example, the real estate may have spiked in value while the value of the IRA has declined since the last time that you rebalanced the estate. Additionally, there is some fundamental unfairness with regards to the liquidity as well. Real estate is inherently less liquid than securities. While being a beneficiary of a life insurance policy or annuity is rather liquid, there is a time delay associated with access to the funds.
Third, a traditional will equally distributes your estate without constantly rebalancing, though you would still be exposed to the expense and loss of privacy associated with probate.
Compare the points listed above with the fourth alternative-having your assets pass to a revocable living trust. With a revocable living trust, you, as the trustee, have absolute control over the assets and your successor trustee can pass the assets in accordance with your wishes. All of this is accomplished without the delay, expense and loss of privacy associated with probate.
You run your business with a plan and purpose; you don't plan on accidental success. Treat your estate planning the same way; formulate a plan, adjust the plan as needed and execute. Your family will be thankful for it after you are gone.