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Why You Need A Will
by Daniel N. Steven
Contrary to a widely-held belief, dying without a will doesn't mean your property
passes to the State, which then uses the money to buy new park benches. Instead, local
laws determine your estate's beneficiaries; these are the laws of "intestacy."
In most states, one half of non-jointly owned property (titled in your name alone)
passes to your spouse, the other half to your child or children. If you are single, your
assets generally pass to your children and/or your parents, if alive.
But what if you are married with children, and you and your spouse die together in an
accident, like a plane crash? Or what if your spouse dies soon after you, also without a
will? Your child or children would receive your entire estate, but a court would have to
choose the child's legal guardian. Judges usually appoint the nearest relatives of the
child, often causing titanic court battles between sets of grandparents. Even worse are
those situations where the child's closest living relative is Uncle Harold, a tambourine
player with the Hare Krishnas. A properly drafted will names your beneficiaries,
your child's guardian and a trustee for his or her estate while a minor. (The guardian and
trustee you select need not be a relative).
Both husband and wife should have their own wills. Although joint wills are legal, it's
generally undesirable to tie yourself together in this way; you run the risk of being
unable to deal with changed circumstances arising from the death of one spouse. For some
people, a comprehensive estate plan is necessary for tax reasons. Under current law, an
individual can leave up to $2M free of federal estate tax, and an unlimited amount to his
spouse (the marital deduction). Life insurance, pension funds and home equity, however,
can place many "middle-income" people above the $2M limit (and state estate
taxes often set in at only $1M). This may generate an estate tax upon the death of the
second spouse to die, who will not have the marital deduction available. In such cases,
your lawyer can design a plan of wills, life insurance and trusts which will gain maximum
benefit from the tax laws and reduce or eliminate the tax. Even if you are single, it
still is important that you name the individuals you wish to inherit your assets, and the
manner they will do so. In addition, if you do not have a will, the local court will
appoint your "personal representative" - an executor to administer your estate,
based on statutory rules of priority. Again, this might not be the person you would
prefer.
Perhaps you're interested in buying a book or computer program that tells you how to write
your own will. This might cause you to miss an essential requirement or have less than the
best plan. Making the best plan and the best will takes knowledge and expert advice. For
example, do you know that property held jointly with another may not be distributed by
will? Or that life insurance may or may not be distributed by will depending who is named
as beneficiary? Or that the same can be said of individual retirement accounts, pension
plans and other assets? That the benficiary designation on retirement plans can have
major tax consequences? That a spouse has a right to a car and some other items, and to a
large share of the property no matter what your will may say? The best plan recognizes
that the best will is only part of the total plan for the distribution of your property.
When choosing a lawyer, seek references from friends and co-workers. Lawyers generally
charge a flat fee for routine wills and estate planning. Preparation of a detailed estate
plan and tax-saving wills, however, is done on an hourly fee basis.
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