Why Do You Need A Will Or Living Trust
Do You Have a Will?
Do you have a will? According to Kiplinger's Magazine, over half of American adults don't. Other sources list this number as high as 70%. For the purpose of this article, "a will" refers to any form of valid estate planning, including the use of living trust documents, pour-over wills, traditional simple wills, and others.
Do you have any children living in your home?
If you pass away unexpectedly, your minor children will need a guardian. If you die intestate (without a will), the state you live in gets to choose who this guardian will be. Usually this process follows a set order of precedence, rather than based on the relationships you have with your relatives.
Let's face it—most of us have relatives we wouldn't allow to babysit our children for a few hours, let alone taking over the task of rearing and loving our precious children. Creating a will ensures that your children will be provided for, loved, and raised by the responsible person of YOUR choice, not a state-appointed judge.
For many people, the primary concern of estate planning is financial, but this emotional preparation, more than any other reason, will help you sleep better at night, even if you have NO assets to leave your children.
After you designate a guardian, consider how your children will be financially cared for. With a will, or even better, a living trust, your assets can be passed on more quickly for the care and well-being of your children, and you will have more say in the way your money is spent on their futures.
If you have children living with you at home, you need a will.
Do you want to control who gets your assets?
When a person leaves behind belongings without leaving an estate plan (intestate), the state in which you live decides who your heirs will be, based on who THEY define as being next of kin, according to that state or country's order of precedence.
An order of precedence is the order in which the state considers who your close relatives are, and thus, who gets the money from your estate. If you have a blended family, step-family, divorce with custody issues, special relationships with non-blood relatives, etc., the state's idea of precedence may not match your own.
If you want to control who your heirs are, you need a will.
Do your adult children get along with each other?
If you die without a will, and there is money left in the estate after the state takes its share, do you trust your bereaved family to "sort it out?"
Remember that part of the grieving process is anger. In families with messy and unresolved estate problems, this anger may get funneled toward each other. Feelings may be intensified. Your estate could become the battleground for warring family factions. Even the fairest-minded people may resent having to become embroiled in even a friendly dispute about your estate.
To avoid disputes among your heirs, you need a will.
Are heirs capable of managing a windfall?
If you are fortunate enough to leave a sizable estate to your heirs, your adult children may not be at an age where they can responsibly manage the nest egg you have given them. Imagine a 20 year old college-age adult receiving an inheritance of $30,000. Would they blow it on a fast car? Furniture? Wii games?
If you are the sort of person who would like to see your inheritance make a difference to your heirs, keep in mind that most young adults are very different people by their late 20s. With a will or living trust, you can designate the age at which your heirs inherit. Without a will, many states will give your money to your heirs as young as age 18. Wheeee!
If you would like to control WHEN your heirs receive their inheritance, you need a will.
Would you like the government to reduce the amount of money your heirs can receive?
Without a will or estate planning tools like a living trust, your heirs could receive half of their anticipated inheritance.
The government charges fees for probate (the process of settling the estate), and taxes the estate. If you die without a will, more money will be paid to the government in fees to find a person to settle your estate.
With a little bit of planning, you can leave more money to your heirs, and avoid paying high estate taxes altogether.
To maximize your estate's value, you need a will or a living trust.
Do you have heirlooms you want kept in the family?
Some families have passed precious heirlooms from generation to generation. A family Bible, generational photos, jewelry, and furniture are common heirlooms, but what about unusual items that have meaning only to you?
If you leave your heirs to "sort it out," the 150-year old darning spool, or the yellow majolica cookie jar, or the Barnum and Bailey Circus posters may get left behind. In many cases, when the family is left to equitably divide the items in an estate, the easiest way to accomplish a fair division of assets is to sell off the deceased person's belongings in an estate sale.
Usually one person from your family is appointed as the executor of the will, and becomes responsible for filling out necessary paperwork, paying bills left behind by the deceased, arranging and paying for a funeral, and selling belongings of the deceased person. Since the process can be complicated, time-consuming, and stressful, it is natural to assume that the person in charge will want to do the easiest thing. Your heirlooms could easily be sold for quick cash, and the legacy or tradition you want to be remembered for will be lost.
There are many issues that arise from a court-appointed executor, who may or may not be familiar with your wishes. Keep in mind your own family's dynamics, and consider who the strongest personalities are. Strong personalities often emerge as executors.
To keep heirlooms in the family, you need a will.
Is there a charity you want to donate to from your estate?
If you pass on without known living heirs, the government can claim your money for itself. And it will. The end. If you are like most people, you've spent a large portion of your adult life paying money to the government in the form of taxes. Even if your estate isn't worth that much to you, is there someone—ANYONE—that could take your money and put it to better use than the government?
People who don't have heirs may not feel a need to leave a legacy behind. That is understandable. If you fall into this category, are you willing to choose the government as your only heir?
Leaving money to a charity may have tax benefits too. If your estate is larger than $600 thousand dollars, you may want to look into organizations that would benefit from your date with the inevitable.
If you don't have living relatives and you want an heir other than the government, you need a will.
Have you been putting it off because a will costs too much?
Paying an attorney to prepare a will can cost more than $1500 if your will doesn't just cover the basics. Many financial advisers suggest that attorneys are the only way to ensure that your will gets smoothly through the probate process.
If you aren't fortunate enough to have an estate-planning attorney in your family, this amount may seem prohibitive. If you are one of the 50% or more of American adults who doesn't have an estate plan, you should know that there are some inexpensive alternatives. Here are three:
Estate planning software:You can purchase estate planning software from $40-$60. The product I saw endorsed most frequently by financial sites such as Kiplinger's was Nolo Software's Quicken WillMaker software. I personally ordered this software myself. WillMaker includes several options, helping you navigate through issues like legal guardianship, creating a revocable living trust, and passing on heirlooms and other property. You fill out an online questionnaire, answering questions in a similar manner to tax preparation software.
The software is updated yearly. If you use estate planning software, it is advisable that you invest in the upgrades to keep abreast of any changes in estate law, to ensure that the will or trust you create stays legal.
Estate planning books: Several authors have written comprehensively on the topic of estate planning. I recommend Suze Orman's series, which is informative, but written so just about anyone can understand.
Estate planning services
Online estate planning services can provide you with a will or living trust for a fee of $2-300. These services help you create you own legal documents, and are not considered legal representation. By choosing from a cafeteria-style menu plan of estate-planning choices, and answering an online questionnaire, you can have a will that will work adequately in most states.
Some estate planning services include:
Take the next step: Make an appointment with your attorney, or try out one of the above options to get the process started. You'll be glad you did!
Read More About This Topic
- Ways to Avoid Probate
Probate is a court-supervised process. During the process a will is determined to be the will-maker's final statement regarding how the will-maker wants his or her property distributed. It also confirms the...
- Wills and Living Wills
This article describes the difference between wills and living wills.
- Estate Planning for Single Parents
Single parents need a will more than ever...
More by this Author
Is a 15 year mortgage ever a good idea? This article explains how this financial move can help you build equity faster and pay off your home early.
Benefits and incentives offered by an employer can have a significant impact on an employee's overall earnings and financial goals, including 401K, group health coverage, life insurance, stock awards, moving benefits,...
My family has been making homemade pizza for dinner about once a week for about 5 years using our Bosch mixer. This article details my pizza making technique with tips and tricks and recipes for pizza results even your...