What Happens if You Die Without A Will?
If you die intestate (without a will), your state's laws of descent and distribution will determine who receives your property by default. These laws vary from state to state, but typically the distribution would be to your spouse and children, or if none, to other family members. A state's plan often reflects the legislature's guess as to how most people would dispose of their estate and builds in protections for certain beneficiaries, particularly minor children. That plan may or may not reflect your actual wishes, and some of the built-in protections may not be necessary in a harmonious family setting. A Will allows you to alter the state's default plan to suit your personal preferences.
What a Will Does
A Will provides for the distribution of property owned by you at the time of your death in any manner you choose. Your Will cannot, however, govern the disposition of properties that pass outside your probate estate (such as certain joint property, life insurance, retirement plans and employee death benefits) unless they are payable to your estate. Wills can be of various degrees of complexity and can be utilized to achieve a wide range of family and tax objectives.
Aside from providing for the intended disposition of your property to spouse, children etc., there are a number of other important objectives that may be accomplished in your will.
- You may designate a guardian for your minor children if you have survived the other parent-and, by use of a trust and appointment of a trustee, eliminate the need for bonds and supervision by the court regarding the care of each minor child's estate.
- You may designate an executor of your estate in your will and eliminate the need for a bond; in some states the designation of an independent executor will eliminate the need for court supervision of the settlement of your estate.
- You may choose to acknowledge or otherwise provide for a child (e.g., stepchild, godchild, etc.) in whom you have an interest, an elderly parent, or other individuals.
- If you are acting as custodian for the assets of a child or grandchild under the Uniform Gift (or Transfers) to Minors Act, you may designate your successor custodian and avoid the expense of a court appointment.
Good planning can also enhance your support of religious, educational, and other charitable causes.
What a Will Does Not Do
A will does not govern the transfer of certain types of assets (non-probate property), which by operation of law or contract pass to someone else on your death.
How to Execute a Will
Wills are signed in the presence of witnesses and certain formalities must be observed. In some states, the will may refer to a memorandum disposing of tangible personal property, such as furniture, jewelry, automobiles, etc., which may be changed from time to time without the formalities of a will. In many states, a will that is formally executed with the signatures notarized is deemed to be self proved and may be admitted to probate without testimony of witnesses or other additional proof.
Trusts describes the holding of property by a trustee (which may be one or more persons or a corporate trust company or bank) in accordance with the provisions of a written trust instrument for the benefit of one or more persons called beneficiaries. A person may be both a trustee and a beneficiary of the same trust. A trust created by your will is called a testamentary trust and the trust provisions are contained in your will.
If you create a trust during your lifetime, you are described as the trust's grantor or settlor, the trust is called a living or inter vivos trust, and the trust provisions are contained in the trust agreement or declaration. The provisions of that trust document (rather than your will or state law defaults) will usually determine what happens to the property in the trust upon your death.
A living trust may be revocable (subject to change and terminated by the settlor) or irrevocable. Either type of trust may be designed to accomplish the purposes of property management, assistance to the settlor in the event of physical or mental incapacity, and disposition of property after the death of the settlor of the trust.
Trusts are not only for the wealthy. Many young parents with limited assets choose to create trusts either during life or in their wills for the benefit of their children in case both parents die before all their children have reached an age deemed by them to indicate sufficient maturity to handle property. This permits the trust estate to be held as a single undivided fund to be used for the support and education of minor children according to their respective needs, with eventual division of the trust among the children when the youngest has reached a specified age. This type of arrangement has an obvious advantage over an inflexible division of property among children of different ages without regard to their level of maturity or individual needs at the time of such distribution.
An important part of lifetime planning is the Power of Attorney. Valid in all states, these documents give one or more persons the power to act on your behalf. The power may be limited to a particular activity (e.g., closing the sale of your home) or general in its application, empowering one or more persons to act on your behalf in a variety of situations. It may take effective immediately or only upon the occurrence of a future event (e.g., a determination that you are unable to act for yourself). The latter are "springing" Powers of Attorney. It may give temporary or continuous, permanent authority to act on your behalf. A power of attorney may be revoked, but most states require written notice of revocation to the person named to act for you. The person named in a Power of Attorney to act on your behalf is commonly referred to as your "agent" or "attorney-in-fact." With a valid Power of Attorney, your agent can take any action permitted in the document.
Powers-of-Attorney are used for convenience. If you are buying or selling assets and do not wish to appear in person to close the transaction, you may take advantage of a Power of Attorney. Powers of Attorney prepare for situations when you may not be able to act on your own behalf due to absence or incapacity. Such a disability may be temporary (e.g., due to travel, accident, or illness) or it may be permanent.
If you do not have a Power of Attorney and become unable to manage your personal or business affairs, it may become necessary for a court to appoint one or more people to act for you. People appointed in this manner are referred to as guardians, conservators, or committees, depending upon your local state law.
When do I need to change my Estate Plans?
You should consider updating your estate planning documents if any of the following events happen.
- Death of a spouse, partner, child or beneficiary.
- Birth of a child/other beneficiary.
- Marriage or Divorce.
- Moving to a new state.
- Possible divorce of a beneficiary.
- Retirement and/or approaching age 70 (to consider effective ways of taking a required minimum distribution from a qualified retirement plan).
- Substantial increase or decrease in wealth (for example, by inheritance.)
- Permanent disability of a family member.
- Assuming financial responsibility for a family member.
- Execution of substantial financial guarantees for third parties.
- Establishment or dissolution of a business.
- Beneficiaries with special needs.
- Beneficiaries with substance abuse problems.
Whether your thinking has changed, you have new ideas, or if any of the events listed above have occurred since you last updated or reviewed your plan we recommend that you take another look at your plan.