Here are the top 10 reasons to have a family will:
10. Family Harmony: A will contains your decisions as to disposition of your assets. Without a Will, there is an increased likelihood of family disagreements and fighting, even in the best of circumstances. Where there are unresolved issues between children or siblings of a decedent, or an otherwise dysfunctional family, such disagreements and fighting turn into litigation. This will likely cause increased expenses incurred by an administrator/trix or personal representative in administering an estate, thus reducing inherited amounts going to estate beneficiaries. Family members are more likely to respect the written decisions of a lost loved one that are articulated in a will.
9. Increased estate costs for a decedent dying without a will: A decedent’s intestate estate may cause increased administrative expenses such as court costs and attorney fees, especially where there are multiple estate beneficiaries as determined by a laws of intestacy in a particular jurisdiction. There may be lengthy court proceedings to resolve family disagreements or uncertainty regarding the disposition of assets. Also beneficiaries may not have access to inherited assets and are thus unable to pay expenses or notes in connection with such assets.
8. Establishing a Domicile: One may wish to establish a permanent legal residence or domicile in a particular state for tax reasons. Some jurisdictions do not have any estate or associated death tax. Others have estate tax but no inheritance tax. There are two jurisdictions, including the state of Maryland, that have inheritance tax for distributions made to certain family members and non-family members. Some states such as Ohio have very low gross estate amount that is excluded from calculation of estate tax. Failure to establish a domicile may cause an estate problems where a decedent owns property in or has lived in more than one state. Multiple states may attempt to assess estate or inheritance taxes upon an estate where a decedent failed to establish a domicile.
7. Certain beneficiaries may become ineligible for government benefits: Without a will the state or jurisdiction’s laws of intestate succession determine estate beneficiaries. Such beneficiaries may be current recipients of government benefits such as disability benefits, social security or medicaid. A will may specifically acknowledge a beneficiary receiving government benefits, and may either omit or limit an inheritance so as not to jeopardize a beneficiary’s eligibility for receipt of such benefits.
6. You have established a trust: A trust is a legal document used to determine asset distributions after one’s death, shield one’s assets from creditors, and in many cases used to eliminate or reduce estate and gift taxes. A trust may only govern certain assets such as real estate or life insurance, however. Although one may create a revocable trust designed to manage many assets, often a settlor/trustor will neglect to transfer or re-title assets to or in the name of a trust. In such a case, a court may determine the beneficiaries and the percentage of a beneficiary’s inherited interest. A pour-over will listing the trust as a beneficiary insures that all of a decedent’s assets that are subject to probate are disposed of according to the true intentions of a decedent.
5. Bond requirements, tax and creditor issues: One can use a will to dictate any fiduciary bond requirements on an executor/trix or personal representative, or reduce such requirements to a nominal bond or completely waive bond. Without a Will, a court will impose fiduciary bond requirements on an administrator/trix or personal representative. Wills can also include provisions about payment of any death taxes instead of relying on a court to determine responsibility for death tax payments. Wills can also include spendthrift clauses to protect a beneficiary’s interest from creditors, or to protect an irresponsible beneficiary from getting into financial difficulties associated with poor asset management.
4. Ability to name an executor/trix or personal representative: One can only appoint a personal representative to carry out his or her wishes at death if such person is named in a will. Otherwise, a court will appoint someone to represent and manage the estate. This may be a person who you may not trust or would not have preferred to marshal your assets and settle your affairs. This may also raise the possibility of litigation and increased estate costs to determine an estate personal representative.
3. Ability to appoint a guardian for minor children or disabled beneficiaries: Your death may trigger a guardianship issue for your minor children or other disabled beneficiaries who are unable to manage their affairs. The death of a surviving spouse, as well as an unfit or unwilling surviving spouse creates a required court appointed guardian for such persons. One can use a will to nominate a guardian. Although a court is not bound by a decedent’s wishes concerning guardianship, a court will generally try to accommodate such wishes in subsequent guardianship proceedings. Without a will, a court’s choice of a guardian may be contrary to the unknown wishes of a decedent.
2. Ability to minimize taxes: Many people feel they do not need a will because their taxable estate does not exceed the amount allowed to pass free of federal estate tax. This does not take into account state estate tax that states assess at lower gross estate values, however. Also, one may not realize that one’s gross estate (although not subject to probate) for tax purposes includes jointly held assets, life insurance, qualified retirement plan benefits and IRAs. Therefore, one may have a taxable estate. A will, along with other estate planning strategies such as trusts can reduce estate tax exposure.
AND THE NUMBER ONE REASON TO HAVE AN EXECUTED WILL…
1. Ability to choose beneficiaries: If you die without a will, the intestate succession laws of the state in which you live determine how your property will be distributed. If you are married with children, usually a surviving spouse will inherit one-third and your children the remaining two-thirds of your assets. If you are unmarried and childless, intestate succession dictates that your assets pass to your parents, or if your parents are deceased, then to siblings. This may be contrary to your wishes,especially where you do not get along with a sibling or believe a family member is financially irresponsible. You may also have a partner who you are not married to, thus causing that partner to inherit nothing. You may also have grandchildren or stepchildren who you want to inherit your assets. You may want to leave a bequest to a charity or a faith-based organization.
You may have a specific bequest of personal property such as jewelry or a sports card collection that you may want to leave to a specific family member. Specific bequests can benefit an estate when a decedent has a large family. Co-ownership of assets may produce disagreements regarding asset management, thus potentially causing harsh feelings, litigation and increased expenses. There may also be increased expenses and administrative hassles associated with co-ownership when co-owners live in different states.
A will allows you to accomplish your intentions in distributing property.
** This article is intended to be used for solely educational and informational purposes, and is not to be understood as legal advice or any offer to provide legal advice.