No one likes to think about death or taxes. Unfortunately, as the saying goes, they are both inevitable.If you die without a will, however, you risk leaving your family to make some difficult decisions at a time when they are grieving the loss of a loved one. Every adult should have a will in place for many reasons. The following are the five most important reasons to stop delaying a visit to your estate planning attorney:
CHOOSE THE HEIRS OF YOUR PROBATE PROPERTY
If you do not take the time to write a will yourself, then your state writes one for you. You may not realize it, but every state has an intestacy statute in place that determines who inherits your probate property if you die without a will. Probate property includes anything in your individual name that does not have a beneficiary, such as an investment account without another owner or property held as tenants–in-common. You may be surprised by the results of your state statute. Below is an example of Massachusetts’ intestacy provisions.
If you are unmarried or in a second marriage, it is even more essential to have a will since the intestacy statute is less likely to mirror your desires.
Furthermore, if you move to another state or your state legislature amends its statute, your “plan” may change as well. By executing a will, you ensure that you get to choose your heirs.
NAME GUARDIANS FOR MINOR CHILDREN
If you have children under the age of 18, you need a will to designate a guardian for them. Any parent knows how difficult it is to decide who should raise your children after you are gone. Now imagine how hard it would be for a probate court judge who does not even know your children. Unfortunately, if you do not have a will, then the probate court must choose your guardian. The court will act in what it deems to be the best interests of the child, but that is no guarantee that it will be the same choice that you would have made. In addition, if there are multiple parties involved, it can end up in an extended and expensive legal dispute.
TO NAME YOUR EXECUTOR/PERSONAL REPRESENTITIVE
Your will names an Executor or Personal Representative to carry out your wishes and probate your estate. This position carries a great deal of responsibility and you should choose a person who can handle this role. If you do not have a will, the probate court must appoint a representative. Most states have a statute that designates an order in which the court should consider individuals based on relationship to the decedent and not the skills of the individual. In addition, most wills waive the posting of a bond by your Personal Representative, but someone appointed by the court is required to post a bond. The bond typically costs about $100 per year for every $100,000 in the probate estate and is an expense that must be paid by the estate.
TO PROTECT YOUR HEIRS
If you die intestate, your heirs receive the assets outright. There are many reasons why this might not be a good idea. Your surviving spouse may have diminished capacity, your children may be minors or just too young to handle the funds or going through a messy divorce, or you may have beneficiaries with special needs who may be disqualified for government benefits if they receive an inheritance. A will can establish a trust in situations where it may be needed to protect the assets. Protecting the assets does not mean that they are unavailable to your heirs, but means that someone else is given oversight to determine when distributions are advisable.
TO MINIMIZE TAXES
Finally, a well-drafted will can help minimize, or even avoid, estate taxes. Estate taxes are a concern for many people because the threshold may be lower than you think. Although the Federal estate tax exemption is set at $5.45 million for 2016, the state estate tax exemption is only $1 million in Massachusetts. If everything passes to a surviving spouse, that individual may end up with all of the property in their estate and trigger a tax. A will can ensure that you do not waste your exemptions and that
a married couple can take advantage of both exemptions. In addition, if you wish to make charitable bequests and receive a corresponding estate tax deduction, you need to specify it in your plan.
Even if you do not have a large estate, you need a will for the reasons explained above. Depending upon your specific situation, there may be even more compelling reasons to execute a will. A will can save time and money when your estate is settled and avoid confusion and disputes among family members. By planning ahead, you will have peace of mind that your wishes will be carried out.
Please Note: Boston Financial Management is a wealth management firm serving individuals, families and endowments. The combination of our independence, transparency, responsiveness, and quality-driven investment orientation results in the outcome we are solely and wholly focused on – your financial well-being.
Important: This alert does not contain any legal or tax advice. You should always consult with your attorney, accountant or other professional advisors before changing or implementing any tax, investment or estate planning strategy.
IRS Circular 230 Disclosure: Pursuant to IRS Regulations, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax related penalties or (ii) promoting, marketing or recommending to another