Having a will is imperative to ensure that your money and belongings are distributed according to your wishes after your death. Wills can distribute property, name an executor and guardians for children, forgive debts and more. If you pass away without a will, your estate will be settled in accordance with state law.
What stops us from creating a will? Here are some possible reasons:
1. "I haven't gotten around to it yet." Most people don't like to think about death, which is understandable. But death is inevitable, and you want to be in control of all of the decisions related to your death (as well as funeral and legacy planning) and the distribution of your assets. Think of a will as homeowner's insurance or life insurance protection for your loved ones.
2. "I can't make my mind up what to do with my assets or who to name as an executor." While you may not be 100% decided on how to divide your assets, an imperfect plan is much better than the plan your state of domicile will create for you. Also, a will is revocable or changeable at any time by you.
3. "I don't want to spend money on a will until Congress and the President decides what to do about the estate tax." Wills can be crafted with enough flexibility so your surviving spouse can take advantage of some estate tax sheltering after your death if there is a need.
What Happens to Your Assets Without a Will
Without a will or other estate plan, intestate succession laws of your state decide which family members will inherit your estate and in what proportion. Under these state laws, assets typically are distributed using a hierarchy of survivors. For example, under New York law, assets will first pass to a spouse and children, and then to parents, then to siblings, and so on. If you want other individuals or organizations to inherit some of your property, or if you want to decide the proportions of your gifts, a will will ensure that your wishes are followed.
Here are some other scenarios that happen when you do not have a will:
- If you are married and own a large asset in your own name (such as a business), upon your death a portion of that asset may pass to your children (and may be subject to court supervision if the children are minors).
- If you are single with no children, your assets will pass to your living parents. That could cause an estate tax disaster for your parents.
- If you are single, the sibling you haven't spoken to in years may be eligible to become the administrator of your estate.
- If you are divorced and have a minor child, your ex-spouse may become the administrator of your estate (Don't let that happen!)
- If you are single with no children or siblings or parents, assets may pass to first cousins once removed, instead of your close friends and your favorite charities.
It is important to note that assets may be held in a certain form which would take precedence over a will. For example, if you jointly own a home or a bank account, the house and the funds in the account will pass on death to the joint owner - even if your will directs otherwise. Similarly, retirement accounts and life insurance policies are distributed to the beneficiaries you may designate on a beneficiary designation form, so it is important to keep them up-to-date.
Think of a will as another form of insurance to ensure that your assets are distributed in the way in which you want them to be to the people in your life who matter most. Creating a sound plan for distribution of your assets with a trusts and estates lawyer is one of the most important actions you will ever make