Why Do I Need a Will?

The idea of one’s own mortality is never easy to accept. For this reason, some people never want to face the need for their estate planning, including the most basic actions such as making a will.  Another reason we often hear is that the family doesn’t have enough assets to justify making a will.  The fact is that they are almost always wrong.  And, not having a will can have disastrous results.  For example:

•        People frequently have more assets than they believe at the beginning of the estate planning process.  If you have a home, bank accounts, brokerage accounts, or collectibles, you have enough property to justify the effort it takes to have a will.

•        If you have a family, especially young children, who would need a guardian and a trust, then you need a will.

What happens to your estate if you do not have a will?  In New York, as in every other state, the laws of intestacy take over and your property is distributed the way the state legislature dictates.  For example, if you die leaving a spouse and children, your spouse would receive $50,000 and half your residue estate and your children would divide the balance.  (Your “residue” is the total of the property you own in your own name less your debts, funeral expenses and administrative expenses. ) If you are single and without children, your estate passes “upstream” to your parents, if they or either of them are alive.  From an estate tax planning viewpoint, this result could be a disaster for your parents’ estate plans.  Further statutory dispositions are provided for virtually all possible alternatives.  Some of them are pretty arcane and not likely what you would want.                                  

What property would pass outside your will and your intestate estate?  To start with, jointly held property is not controlled by your will.  That includes a deed for your house, condominium or cooperative apartment held in joint name, joint bank accounts and brokerage accounts. The ownership passes to the joint tenant.  And, of course, the proceeds of any life insurance policy passes to the named beneficiary.  Likewise, the death benefits of your retirement account, whether a IRA account, Keogh Plan, corporate retirement account or government employee retirement plan or Tax Deferred Annuity.  (We will discuss the treatment of these assets in further detail in coming articles.)

If you have minor children, having a will is most important, because your children need to have a guardian appointed to take care of them if both you and your spouse are no longer available to do so.  They need two types of guardians: A guardian of the person and a guardian of the minor’s property.  

Guardian of the person: Who will be in charge of the raising of your minor children if both you and your spouse are no longer here?  Do you want to make this decision in your will, or do you want your relatives to fight over this responsibility?

Guardian of the property of the minor: A minor cannot own property.  Until the minor becomes an adult at age 18, that property is supervised by the courts and administered by a guardian appointed by the court.  During the minority of the child, the use of the property is extremely restricted.  

So, while a guardian of the property is necessary for the management of property left to a minor, this problem can be avoided by placing the property in a trust for the benefit of the minor.  That can be done in your will or in a trust you create outside of your will during your lifetime.  

Non-citizen spouse: If you are married to a non-citizen, estate planning gets a little complicated, because the estate tax laws make it more difficult to pass your estate to your spouse without a potential immediate estate tax.  Fortunately, there are provisions in the law that permit your spouse to enjoy the benefits of your estate without the immediate tax, but to do so the property must be placed in a special trust.  Again, this can be done in your will.

Charitable Gifts: If you want to leave a part of your estate to a charity or non-relative, you can provide for these beneficiaries in your will, as well.  In fact, short of some of the most sophisticated estate planning strategies, leaving property to a charity must be done through your will.  

In future articles, we will be examining each of the issues raised here in much more detail.  

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Last modified: December 27, 2007

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