When I would tell people that I was working on a book about estate planning, many of them looked at me quizzically because they weren't sure what I meant. Others said, "Oh, that's not something I need, because I don't have an estate."
Contrary to popular misconception, you don't have to own a big house to have an estate. Your estate consists of everything you own when you die, including your home, personal property, investments, bank accounts, retirement plans and any interests in a family business or partnership. Beneficiary designation forms control who gets retirement accounts, along with life insurance proceeds. For most other assets, you need a will or living trust that says who gets your stuff. [More from Forbes: The 25 best places to retire in 2012]
If you die without a will or living trust ("intestate," in legalese), state law will determine how most of your belongings are distributed, and the result may not be what you would want. These laws establish a ranking of inheritors. Some newer laws say everything will go first to the spouse, then to children, parents and siblings.
But showing is better than telling. So I like to send people to a wonderful, free, interactive website that shows exactly what would happen in their situation if they died tomorrow without a will. The site is mystatewill.com. On the map of the United States at the top of the homepage, click on the abbreviation for your state—it includes all states (plus the District of Columbia) except Louisiana. Without asking for your name or any other identifying information, it steps you through a series of questions. Then it tells you what would happen if you die without a will. [More from Forbes: 5 retirement questions you're too afraid to ask]
The site is the brain child of Kurt Nilson, a 40-year-old lawyer in Johnstown, PA, who started it in 2004 as part of launching his own law practice. At the time, the site offered do-it-yourself estate planning documents. Nilson has since sold that part of this business, but maintains the "Intestacy Calculators" (kept up-to-date) on the site as a public service.
I used this free program to see what would happen in New York if I die tomorrow without a will and my husband and son survive me. My husband would automatically inherit the house, since we own it jointly, along with our joint bank accounts. He'd also get the proceeds of my life insurance and my retirement accounts, since he is the beneficiary. [More from Forbes: How to get your retirement back on track]
But what about my separate assets? Under New York law, if I didn't have a will, my husband would get $50,000 and one-half of everything else I leave behind that's not jointly owned or covered by beneficiary designations. Our 15-year-old son would get the rest. But since he is a minor, my husband would be the custodian of those funds until our son turns 21 (in some states this age is 18). At that point, he can spend the funds as quickly or on whatever he wishes.
That division could also lead to an awkward situation if my husband ends up short of funds even as he is the guardian of my son's inheritance. [More from Forbes: Nine things women should know about estate planning]
I made sure none of this would happen by signing a will shortly after my son was born.
Like many married couples, my husband and I postponed planning until we had a kid. But as I indicate in an article for the July 16, 2012 issue of FORBES magazine, that can be a mistake. In fact, simple estate planning should be a rite of passage for every 18-year-old, and evolve with wealth and relationships. For a life-stage guide, check out my story, "The Real Estate-Planning Crisis Isn't About Taxes."