Most Americans do not have a simple will as part of their estate plan. You might believe that a will is only for the rich and famous, and not the average person who has a far smaller net worth. Or, you may think that a will is entirely unnecessary if you have a trust, jointly owned property, or have named beneficiaries on your insurance.
So, to the question of the day – do you really need a will? The short answer is “yes.” In fact, everyone who owns anything – no matter how much or how little – should have a will. This is because a will puts you in charge of directing your wishes and the distribution of assets upon your death. Without a will or other estate plan you forfeit control and state law determine who gets what after your death. Even if you have a trust, jointly owned property, or have named beneficiaries on your insurance, a will is critically important as a “backup” plan.
As a practical matter, the simpler your affairs are (and the fewer assets you own) the less complicated your will and overall estate plan needs to be. But keep in mind, it does not take much to complicate your estate, legally speaking. For example, if you have minor children you must name a guardian for those children in the event of your death – and not only in your will as most traditional estate plans do, that leaves holes which could cause your minor children to be placed into temporary foster care, something which no parent wants.
Many people believe if they have made beneficiary designations on life insurance policies, property deeds or retirement accounts that a will is not necessary at all. While it is true those particular designations ensure the people you intended receive benefits or inherit those assets, the distribution stops there. If there are other assets you own – such as a car, a china set, or jewelry for examples – or if you would like to give part of your estate to a charitable organization, a will becomes essential.
Furthermore, when a person dies without a will (referred to as intestate), the estate goes into probate. Probate is a judicial process by which the court decides the rightful heirs and distribution of the assets of a deceased person. Going through probate without a will can be both more time consuming and expensive than it is with a will. This is because your will can waive certain probate requirements (like having the executor post a bond or obtain judicial approval to have an estate sale). And again, probate without a will follows the state’s intestacy laws which may likely result in a less-than-perfect split of assets that may not be in line with the deceased’s wishes and often leaves many surviving loved ones unhappy.
Family dynamics also play a part in estate planning, something state intestacy laws do not account for. Many people have blended families. There may have been second or third marriages. Older couples may choose to cohabitate after a death or divorce and never legally get married. You may have to treat your children differently on current accounts due to distance, and without a will, those assets will not be distributed equitably.
It is important to note that a will can also include a no contest clause, reducing the likelihood of potential heirs arguing over its contents.
Creating a will as part of your estate plan is primarily about passing your wealth to your loved ones only after you die since a will only “works” after it’s gone through the probate court process. A will gives you both independence and control of what happens to your assets after your death. Instead of leaving the distribution of your property to California’s intestacy laws, a will can put your wishes down on paper and direct a selected person to carry out your desires exactly as expressed.
But before you decide a will is all you need, read my article next week to learn more about another, more comprehensive strategy — the revocable living trust.
Dedicated to empowering your family, building your wealth, and securing your legacy,