Do You Need A Will? The Answer Is Probably Yes
Do I Need A Will? The Answer Is Probably Yes
Why You Need A Will
Over half of American adults do not have wills, according to a survey published by Lexis-Nexis in 2007. The poll surveyed 1,018 adults and over half of them (55%) didn’t have a will. The situation is even more preoccupying in minorities’ ranks, as only one in three African American adults (32%) had a will, an only one in four Hispanic Americans (26%) had a will.
Many people reason that they don’t need to bother with estate planning because if your estate is under $600,000, your heirs may be exempt from paying estate taxes, but that doesn’t mean that you don’t need a will. Successful estate planning involves transferring your assets to your beneficiaries quickly and with minimal tax consequences. Therefore the process of estate planning includes making an exhaustive inventory of your assets and making a will or establishing a trust, with an emphasis on minimizing taxes.
Adding up your assets can be an eye-opening experience. If you happen to own a home, investments (including 401k’s and IRA’s), and life insurance policies, you may be surprised to find yourself in $600,000+ territory. Yet, even if you estate is less than $600,000, estate planning may be necessary to be sure your intentions for the disposition of your assets are carried out.
What Happens If I Don’t Have A Will?
If you die without a will (“intestate”), you leave what is known as “intestacy”. Simply put, your estate will end up in probate court and many important decisions will be not only be out of your hands, but also out of your family’s. Under normal circumstances, you’d name an executor, a trusted friend or a family member who’s responsible for determining taxes, assets, bills, and debts to be paid on your estate. Without a will, the court becomes the executor and your estate is divided under state laws. Since your assets are distributed according to a legal formula, the end result might be that your assets do not end up with the person you would have chosen. In many states, your property will be distributed as follows:
First, all your joint property will pass to your spouse (if you have one). Second, your separate property will pass according to these rules:
If you have a spouse, your spouse receives:
- All of your property if you have no children, parents, siblings, nieces or nephews
- Half of your property if you leave one child or one or more parents, siblings, nieces or nephews
- One third of your property if you leave two or more children
All property not given to a spouse is distributed to the following persons in this order:
- Your children
- Your parents
- Your brothers and sisters or if they are not living, their children (i.e. your nieces and nephews)
- Your grandparents or if they are not living, their children (i.e. your uncles and aunts)
- Children of your deceased spouse
- Relatives of your deceased spouse
- The state of your legal residence
While many people believe the Government takes their assets if they die without a will, this is simply not true. As you can see from the previous breakdown, it could only happen if you’re living with no next of kin.
What Are The Most Important Components Of A Will?
Wills are typically broken into two parts. Specific bequests include specified property, such as specific amounts of money, real estate, and stocks that are left to a designed beneficiary. The residue is everything else, or everything not specifically defined, and will normally go to the primary beneficiary of the estate, usually a spouse, children, or both. Only property in your name at the time of your death can be passed on to your heirs.
How Often Should I Update My Will?
Whenever there’s a major change in the tax laws, you should consult a professional to determine its eventual impact on your will as it currently stands, and make changes if necessary. Here are other times when it’s important you revisit your will:
- you divorce or remarry
- you have a child
- you move to a different state
- one of your heirs dies or has a permanent change in health
- the executor of your will or the administrator of your trust dies or becomes incapacitated, or your relationship with that person changes significantly
- the value of your assets changes significantly (winning a lawsuit, the lottery, getting a windfall…)
How Do I Provide For Minor Children?
If you have minor children, you should make sure you name a trusted relative or friend as the guardian who will be responsible for the “person and property” of the minor child.
How Much Does It Cost To Have A Will Drawn?
It totally depends on the complexity of the estate. The process of drawing up a will can range from $50 to $5,000, depending on how complicated it is. Often he amount of property is not as important as the family circumstances
For the record: we all die. There are great self-help products out there to help you get a will drawn out, as well as low-priced but competent professionals that will walk you through the process. There’s no minimum asset requirement for leaving behind a valid will, so it doesn’t matter if you don’t think you don’t have much. And of course, in some cases, you might turn out to have more than you think you did. In any case, it’s important to name guardians for your minor children (if any), and clearly state your wishes with regard to how your property is to be distributed.
Unless you have a valid will at the time of your death, the way state law decides to distribute your assets is the way it will happen, regardless of wishes you may have expressed when you were alive. You can’t take it with you, according to the adage, so stop living like you’re planning to.
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