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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 and
have children, your assets generally pass to your children and/or your
parents, if alive. If you don't have children, typically
your assets pass to your parents and/or siblings. Having a will allows you to name the individuals you wish to inherit your assets, and the
manner they will do so, regardless of state law. 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. You also may wish to specify funeral arrangements,. If you are married with children, and you and your spouse die together in an
accident,, 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. In 2010,
all federal estate and generation-skipping transfer (GST) taxes were
repealed and the “stepped-up basis” of assets at death is replaced with
a “modified carryover basis.” However, the new 0% estate tax is
for 2010 only. Unless Congress acts, in 2011 the estate tax will
automatically spring back with an exclusion of only $1 million and a
maximum tax rate of 50% (it was 45% in 2009). The new modified
carry-over basis of assets means that people with a large estate
will need to keep track of basis because at death the starting
point of determining the new basis is the lesser of the old basis of
the property or the fair market value of the property on the date of
death. To ease the pain, however, the estate of a U.S. citizen or
resident is then given an additional $1.3 million of basis to allo-cate
to the property; if the property is passing to a surviving spouse, the
estate receives an additional $3 million of basis to allocate.
Property is treated as passing to the surviving spouse if it passes
outright or in a form that provides a qualifying income interest for
the life of the spouse. There also are a number of complex
allocation rules.
Perhaps you're interested in going online, 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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