Almost Everyone Needs A Will
When you finally depart this earth, your assets will automatically go to your spouse and children, right? Not necessarily.
Don’t Put It Off
Some people think it’s bad luck — or just plain depressing– to think about the big sleep, but if you die without a will (called dying intestate) here’s what happens:
- Instead of the decedent choosing how the estate will be distributed, the state makes the decision.
- The Administrator of your estate — commonly known as the executor — will be appointed by the courts and may not be your first choice.
- The Administrator will often be required to post a fiduciary bond to cover the value of the estate. This is time consuming and means that the Administrator must lay out the bond premium from his or her own funds. If the Administrator has poor credit or financial problems, this may simply not be possible.
- The estate may not be divvied up the way you’d like. Without specific bequests, heirs could squabble over family heirlooms or whether to sell the family home.
- Although estates under $5.25 million are exempt from federal income tax — a number adjusted for inflation annually — state taxes commonly still apply at lower thresholds. Without estate planning, your heirs could owe a hefty chunk.
- If your assets are tied up in real estate or art, it could be tough to come up with funds for the IRS.
- In a nontraditional relationship — say, a domestic partnership — your better half has no legal status and no inheritance rights without a will.
With an estate involving real estate, stocks and bonds, a business, children or perhaps an ex-spouse (and maybe all of the above), it gets complicated fast. Some strategies to deal with a substantial estate:
- To decrease inheritance taxes for your heirs, you may choose to give away property before your demise.
- A trust protects assets and your privacy, too, since the contents aren’t a matter of public record, as they are in a will.
- Charitable contributions, besides supporting a cause important to you, can be a useful tool.
- Proceeds from life insurance, retirement accounts like 401(k)s, 403(b)s and IRAs, pass directly to designated beneficiaries without going through probate (the process to settle the will).
Key point: keep your beneficiaries up to date.
With modern families, there’s plenty to consider:
- Setting up a trust could be the right way to go. You’ll need to appoint a trustee — family member, friend or corporate fiduciary — to administer the trust.
- Young heirs unable to handle a large inheritance can benefit from the guidelines of the trust as they approach maturity.
- Children with special needs or other issues may require individualized attention through estate planning.
- Guardianship of your children will be decided by the courts absent a will naming the guardian whom you yourself choose.
- Children and stepchildren may be entitled to a portion of your estate, even in the case of relationships that ended long ago.
Once you’ve decided to make a will, it makes sense to complete these documents too: healthcare proxy, power of attorney and living will. Taking care of business now is sure to make things easier for everyone down the road.