WHY HAVE A WILL?
– To make sure that when you die, your assets are distributed as you want.
– To name an executor who will distribute your estate at your death.
– To appoint a trustee for adult children who may need help with finances.
– To save on estate taxes and inheritance taxes.
– To leave some or all of your assets to charity.
There are many reasons to have a will but among the most important may be the need to keep your heirs from fighting over who’s in charge when you’re gone.
Don’t worry about playing favorites, say the experts. It’s best if one person (family member or outside trusted adviser) takes on the job of executor in settling your estate.
With second and third marriages more common among baby boomers in their 50s and 60s, assigning an executor to administer the settlement of an estate could be essential to preserving harmony among children, step-children and grandchildren. Even in a first marriage there may be tension among family members. If you’re single the same issues apply.
“The fact is everyone should have a will,” said Karey Schoenfeld, former president of the Oregon Society of Certified Public Accountants and a Vancouver, Wash. attorney specializes in estate planning. “A will puts someone in charge.”
The sad news is that just 55 percent of adult Americans have gone to the trouble of writing a will, leaving their heirs to pick up the pieces at a time of stress when they die.
There’s two ways to get a will in place:
– Write a will yourself using a standard form printed off the Internet. Ideally, the forms are state-specific, since laws regulating estate settlement vary from state to state. Forbes.com offers pros and cons on the do-it-yourself strategy.
– Or use an attorney to tailor a will to your specific wishes and needs.
Much depends on your family dynamics, what you can afford and the size of your estate:
For those with estates of $1 million and more, a will may be essential for tax-planning purposes or trust designation. Even those with modest estates may want to give money or property to a favorite charity or to a favorite grandchild who might otherwise be ignored.
If you have these needs or have a family that might be in disagreement, you likely need a will that deals with more than what an online form can cover, Schoenfeld said.
Basic legal documents:
A will is one of three basic legal documents (usually written as a package) that 60 & Single women and all seniors should have in place as they approach their later years. Others are:
-A durable power of attorney that designates someone who can step in to run your affairs when you can no longer take care of things such as day-to-day bill-paying, investing or managing other aspects of your estate.
– A power of attorney for health care decisions that designates some one to step in if you fall ill or are a victim of dementia and can not make health care decisions for yourself.
These legal directives, along with a will, can go a long way toward making life in your last years more enjoyable for you and for your family. But they aren’t fixed in stone and should be reviewed periodically (at least every five years) to make sure they remain valid, say financial planning and legal experts.
Avoiding heart ache:
“I’ve seen real heart ache for clients who have a family member or spouse who has lost capacity and they don’t have a durable power of attorney,” said Elizabeth Perry, a long-time Vancouver, Wash. attorney. “Without that directive, family members must petition the court to gain guardianship…that’s expensive and time consuming,” she said.
In addition to directing how and by whom your estate will be settled, a will can also cover these issues:
– How adult children will receive their inheritance.
– Taxes planning. A good will can reduce estate taxes to the surviving spouse or heirs.
– Designating all or some of your assets to charity.
Without a will, your estate goes to probate court with a judge deciding how your assets are distributed. In Washington that process is relatively straightforward, in Oregon probate can be complicated, say the experts.
“Clients can have a lot of misconceptions about what they need to do. Sometimes their reasoning is completely inaccurate for their situation,” said Kathryn Holland, a Vancouver, Wash. attorney for 19 years. “People may have heard something from someone selling a product or something their neighbor told them. But none of what they’ve heard may apply,” she said. “It’s best to get expert advice.”
For example, Oregon and Washington courts handle wills and probate procedures differently.
“Second marriages can be challenging,” Holland said. “We see a lot of those. The law is not really set up to protect assets in those situations. I talk with my clients about things they should do” in terms of children and step-children and separate assets.
Personal property list:
A will should cover who handles your affairs and also who should receive your personal property – paintings, jewelry and furniture — when you die. It may cover how grandchildren might receive certain assets and in what form.
“Occasionally, a client will say they don’t care what happens to their estate after they die,” said Heidi Johnson Bixby, a certified financial planner in Vancouver, Wash. for the past 21 years. “Maybe it’s because they don’t want to confront their death. I tell them that even if they don’t care what happens, a will can simplify things for their heirs in a time of grieving. A will is really all about leaving a legacy. Part of that legacy could be about the mess and the hassle you leave behind if you don’t write a will,” she said.
A will should also consider the financial situation of family members. For example, without a will, elderly parents on Medicaid for long-term care needs could see their benefits ruined by unexpected inheritance. Or a child on disability insurance could lose that coverage. Family members could be devastated by unexpected inheritance taxes.
“People have access to more information (through the Internet) on estate planning but it’s difficult to pour through the details to make sure that they apply to them,” Bixby said. “Lots of people think their situation is pretty straightforward. Hardly anyone is that lucky these days.”
Cost is a factor. Using an attorney to write your will typically costs several hundred dollars or more. Filling out a state-specific form off a Web site and getting it notarized is much less expensive.
Separate location for funeral instructions:
Funeral instructions and burial instructions should be written up separately and given to family members. Heirs typically don’t get around to looking at a will until after the funeral. Your funeral and burial instructions may be overlooked, if they are kept with your will.
If you want to leave any part of your assets to charity, you need a will. If you want to benefit both family members and a charity, a will is essential. There may be ways to reduce taxes for your family through special charitable trust arrangements. An attorney with expertise in these areas will be helpful.
Using your will for tax planning is complicated this year because the Bush tax cuts and federal inheritance tax regulations are set to expire Dec. 30. Currently an estate worth $5 million or less is not subject to inheritance tax. Washington’s estate tax affects anything over $2 million.
Prior to the Bush tax cuts, estates worth $3.5 million or less were exempt from federal estate taxes. Most experts expect the rate to revert to that amount.
“With clients who are trying to do estate planning, we are taking into account what we think might happen,” said Schoenfeld, “so that we don’t have to come back in and redo things. Having said that, I think clients will have to check in more often on these issues,” she said.
The attorneys agree that a will goes a long way in smoothing difficult family dynamics and all say using a do-it-yourself form printed off the Internet is better than having no will at all.
“No one over the age of 18 should be walking around without a will and durable power of attorney,” Perry said.
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