Personal Finance > Insurance
Is your family covered?
No matter your age or assets, estate plans are a good idea, as is life insurance for dependents.
September 4, 2002: 1:34 PM EDT
By Jeanne Sahadi, CNN/Money Staff Writer

NEW YORK (CNN/Money) - The events of Sept. 11 may have left you feeling that a lot in life is out of your control. But that day also taught us there are some things we can -- and should -- take charge of.

Among the lessons: Being young is no excuse not to have a will, especially if you're married with kids. Neither is being single. And if you're living with a partner, have a child out of wedlock or simply have family members who don't get along, you have all the more reason to legally document how you want your assets handled when you're gone.

The largest number of victims who died or were missing in the attacks on the World Trade Center were between the ages of 30 and 42, according to the New York City Office of the Chief Medical Examiner. Estate planning attorneys and financial planners who are working with some of the victims' survivors said a large percentage of their cases involve estates of those who died without wills -- a condition known as dying intestate.

And even where there was a will, there often was not adequate life insurance in place for those whom the deceased supported.

Prevent undue hardship

Of course, many who lost loved ones on Sept. 11 are eligible to receive special compensation from a federal victim compensation fund, the decedents' employers and various charities. Also available are college scholarships and tax breaks, including a federal estate tax exemption up to $8.5 million for each victim's estate.

For most who lose family members unexpectedly, though, extensive compensation is often an anomaly. That's why it's critical to make adequate provisions for people who rely on you financially, and to document who you want to get your assets.

Even if you're not the breadwinner, an estate plan will head off legal struggles, and very often emotional ones as well. By not making your wishes clear, "you may leave your family members with such conflict....It can affect their relationships for the rest of their lives," said certified financial planner Peter Traphagen of Oradell, N.J.

Dying without a will

Die without a will and you leave it up to a state court to decide who gets your assets. Those decisions may not reflect -- or even come close -- to what you would want.

Getting finances in order
Money 101: Estate planning

If you die intestate and you're:

Married with kids: Typically, a state court will divide your assets between your spouse and children. But if your children are minors, there is no guarantee their inheritance will be controlled by their surviving parent.

In New York State, for instance, a surviving parent may be considered "the natural guardian for the child's person but not the child's property," said Ann Pinciss Berman, a trust and estates attorney in Manhattan. That often means every time a parent needs to tap some of the inheritance for the child's benefit, he or she will have to petition the court.

This problem can be circumvented somewhat if most of your property is jointly held with your spouse. In that case, the assets automatically go to the surviving spouse. But a will lets you set up a trust for your kids to ensure some money you leave is used for their benefit alone, especially in the event your spouse remarries.

Another good reason to make a will: it lets you name a guardian for your children. Should both parents die without a will, a court steps in to appoint a caretaker for your kids.

Married, no children: Your spouse will be entitled to a portion of your estate, but just how much depends on state law. If you have blood relatives, they may be entitled to a portion as well.

Unmarried, no children: Your surviving parent(s) will be first in line to get your assets. That's not always the best thing. All the assets of one woman who died on Sept. 11 are going to her mother and father, who don't need the money and whose own estates will be taxed more heavily as a result, Traphagen said.

If you're engaged or are living with a boyfriend, girlfriend or domestic partner, that person often will have no claim on your assets in the eyes of the law unless you've named them as beneficiaries on your insurance policies or retirement accounts. The fiancee of one man who perished on Sept. 11 is receiving money from his estate only because the man's parents decided to give her a series of annual tax-free gifts, said T. Randolph Harris, a New York City estate planning attorney.

Unmarried with kids: If you have children, state law often requires your entire estate go to the children in the absence of a will. In a case involving a single man who died on Sept. 11, a claim has been made against his estate that he was the father of a child born out of wedlock. If it's proven he was the father, rather than his parents inheriting his assets, Harris said, "The entire estate, including the Victims Compensation Fund money, could go to the alleged child."

Breadwinners need adequate life insurance

A will is not the only thing you should have if you're a breadwinner for others.

Parents should sit down and say, 'What if I die? What if you die? What if we both die? What happens to our children?" Traphagen said.

In answering those questions, calculate how much life insurance you need. Ideally, Traphagen said, you want enough to provide your family with living and housing expenses, college educations, and a retirement fund if you have a stay-at-home spouse.

"It's so cheap, it's crazy not to get a 20-year policy," said Traphagen, who does not himself sell life insurance. For $70 a month, he noted, a non-smoking, 35-year-old man in good health can take out a $1 million life insurance policy. That same policy for a 35-year-old woman would cost just over $58 a month.

Delay doesn't pay

It's tempting to think that if you don't have much in the way of assets or income there's little point in making a will. Think again. Should you die in an accident, terrorist attack or other tragedy, your estate may be the recipient of settlements, awards, workers' compensation or other large sums of money. "You just never know," said Tiela Chalmers, a San Francisco attorney who helped coordinate pro bono legal services for families directly affected by Sept. 11.

Expressing your last wishes doesn't have to bleed you dry. A basic estate plan -- including a will, a living will, a health care proxy and a power of attorney -- can cost as little as $500, or much less if you choose a do-it-yourself route. One source is NOLO, a publisher of self-help legal information. It sells an updated will and estate planning kit tailored to the laws in your state.

Whatever you choose, it's worth the effort. If Sept. 11 taught us anything, it's that the worst can happen when you least expect it and having a plan in place can lighten the load on your loved ones.  Top of page

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