Most people appreciate the power to choose. Most people also loathe the idea of making a Will.
These two ideas are in conflict. Creating a Will gives you power by allowing you to choose what happens to the things you own (assets) after your death.
Although not everybody needs a will, generally, many people would benefit from having a Will. Without it, state laws are dictating what happens to your assets without your input. In my experience, most people don’t want only their state deciding what happens to their bank accounts, investment accounts, and homes.
Let’s discuss what a Will does, the benefits of a Will, what happens if you die without a Will, and alternatives to a Will.
As with all of my writing, I am not an attorney, and this is not legal advice.
What is a Will?
A Will is a legal document that specifies what happens with your assets after your death and who will care for your children.
Saying that it is pretty important would be an understatement. It’s very important.
It’s one document that gives you power after you are gone. It’s the document that honors your wishes and can remove the burden and stress on your loved ones. And, there is a significant burden of dying without one, but I’ll get to that later.
Benefits of a Will
I’ve already said a Will is very important, but why? What are the benefits of a Will?
Below are a few benefits of a Will:
- Choose who receives your assets
- Ensure your children are cared for by the individuals you want
- Help minimize family disputes
- Create other legal entities, such as a testamentary trust, to care for children or other family members
- Plan for federal or state estate taxes
- Makes changes to your wishes with a codicil (which is a way to amend a Will) or revoke it if your wishes change
You’ve worked hard for your assets. Do you want the state to decide where your assets go? I don’t. I want full control over who receives what.
An often overlooked benefit of a Will is the benefit it provides to children. Although parents are busy, prioritizing a Will is critical. Without it, a child may end up in the care of a family member you never intended. I know a Will is not on the top of most people’s list, and the probability of a parent dying while having a young child is low, but planning for those moments is vital because they do happen.
When they happen, life is already tough enough. You do not want to complicate things by leaving a mess of a situation and family members trying to decipher your wishes through private conversations and court who never knew you.
If you have a child, you should have a Will.
Although control of where your assets go is important, equally as important is minimizing family disputes. Perhaps both children wanted the family home. How do you split it in a way that makes sense with your other assets? Does co-owning it make sense or will that cause more challenges? Does giving it to one person and giving other assets to the other person make sense? Is giving more to a family member or loved one okay because there are special circumstances?
Death is not pretty. Splitting assets right after death is also not pretty.
Having the conversations prior to death and making your wishes known may bring some difficult conversations to the present, but those conversations will likely be better than the ones after you are gone.
By having a Will, you can specify who receives a family heirloom, provide reasoning about why you split assets the way you did, and hopefully make your intentions clear to minimize animosity and fights after you pass.
There are many benefits to a Will, and I wish more people understood the advantages not only for the person creating the Will, but for family members, friends, and charities named in the Will.
What Happens if You Die Without a Will?
I’ve met many people who will tell me, “I have a simple life. I have no children and a small family. My assets are not complicated. Why do I need a Will? What happens if I die without a Will?”
The answer is that you die intestate. When you die intestate, a probate court appoints an administrator to oversee your estate. The state law provides a list of people who can serve, and also indicates the order of priority of these individuals. The administrator then locates your assets, pays your debts, and distributes the remaining assets according to state law.
States have different rules about who receives what. Generally, your surviving spouse receives assets, followed by your children if your spouse dies before you; however, if you have children from a prior marriage, your spouse may not receive all the assets. For example, if you have a child from a prior marriage and are currently married to a new person, your spouse may only inherit a portion of your property while your child from a prior marriage receives the other part.
When you die without a Will, it gets sticky. The stickiness depends on your family structure. If you only ever had one spouse and children with that one spouse, assets may make it to the right people. You will have to check your state law, but if you are going to go through that headache, you might as well make a Will!
If you have been married before, have children from prior marriages, are unmarried, but in a long-term relationship, or want to direct assets to any other individuals or charities, dying intestate could pose significant problems after your death for your loved ones.
When given the choice, most people would not leave major processes to chance or in the hands of the government, but that is precisely what people are doing when they die without a Will.
Alternatives to a Will
A Will is not the only legal document that controls what happens to your assets when you pass.
An important element of a Will is that it may require probate when you die. Probate is a legal process where your estate is transferred to who you have named in your Will. States have different thresholds where probate is required. For example, some states say if your estate is worth $100,000 or less, you do not need to go through the probate process.
Your executor, who you name in your Will, handles the probate process, sometimes with the help of an attorney. The executor will file the Will with the probate court and decide that it is valid before the executor is given the legal authority to act on your behalf. Since the Will is filed with a probate court, this means probate is a public process.
A Will does not provide privacy. For some people, that is reason enough to seek alternatives to a Will.
One common alternative is a living trust. There are many nuances to trusts and different types, so when someone mentions they have a trust, please do not automatically think it’s the same type of trust I am talking about. In this case, a living trust can be created and assets put into the trust.
Going forward, you do not own the assets – your living trust owns the assets. You can name yourself, or another person, as a trustee of the trust. Many people name themselves as a trustee of the trust with successor trustees (the people who will take over if you are unable to serve). For example, Suzie could create the “Suzie Rich Living Trust” and name herself as the primary trustee and name her sister, Dawn, as a successor trustee.
The benefit of a living trust is that if you actually put all of your assets into the trust, and your estate is below the threshold identified by your state, you can avoid probate. I say “actually” because I see many people create living trusts, but fail to fund the trust.
What I mean by that is people will create the living trust, but they will never transfer their assets into it or only partially transfer some assets into it. This is a big problem because if the trust is not funded and the estate large enough, probate will still need to occur.
A living trust is similar to a Will in that you can specify how assets are used, who receives them when you pass, and also can set up new trusts upon your passing to provide for the care of others. It’s very similar to a Will, but has a few more advantages.
Living trusts help provide privacy because they do not go through the probate process. Your living trust does not become a part of public record. Plus, it’s helpful to have a living trust if someone has property or assets in multiple states. For example, if someone had property in California, Oregon, Washington, and Texas, they might need to go through the probate process in each state.
By using a living trust, they may not need to go through the probate process in any state.
Also, some states are notorious for a time-consuming and expensive probate process. Where I grew up, in Washington state, probate is a fairly easy and inexpensive process when compared to a state like California. This is why even people who live in California and only own property in California usually create a trust.
Living trusts are a popular strategy to avoid the probate process, protect the privacy of one’s wishes, and still specify what happens to one’s estate upon passing.
The main disadvantages to a living trust are that it is usually more costly to set up and can be a big time commitment to transfer the assets into it. For example, if you have 10 bank accounts, you may be advised to transfer all 10 bank accounts into the trust, which can require a fair amount of paperwork and time with the bank. The same can be said for your home, investment accounts, and anything else that would pass through probate, which brings me to the next alternative – assets that generally do not go through probate.
There are a few assets that generally do not go through probate, which include jointly owned assets, retirement accounts with a named beneficiary, life insurance proceeds, accounts with a payable upon death registration, and others.
Many people get tripped up by this idea, so let me repeat: some assets do not follow what you specify in your Will. For example, if you specify in your Will that your friend Jane receives 100% of your estate, but you name Nick as your 100% primary beneficiary on your retirement account, Jane will not receive your retirement account because a retirement account with a named beneficiary is not controlled by your Will.
Pay special attention to jointly owned assets, retirement accounts, life insurance, and accounts with a payable upon death registration. Regardless of what your Will says, they are going to follow the beneficiary information or be passed to the other person on the account.
A few more examples may help. In each of these cases, the titling of the asset or the beneficiary overrides whatever the Will says.
- Jointly owned asset: If you own an asset with another person and it is titled in both of your names, commonly referred to joint tenants with rights of survivorship, and you pass away, 100% of that account goes to the other person.
- IRA account: If you name your sister Denise as 100% primary beneficiary, your IRA is going to go to Denise.
- Life insurance policy: If you name your brother Steve as 100% primary beneficiary, your life insurance policy proceeds will go to Steve.
- Payable upon death account: If you have a bank or investment brokerage account and make it a payable upon death account by naming a beneficiary, which usually requires paperwork, it will go to that beneficiary.
Say it with me again – certain assets do not care what your Will says. The titling of the account or the beneficiary designation will dictate who receives the assets. They act as an override of any statements in your Will.
Since they act as an override of your Will, you need to be careful about coordinating beneficiary designations with your Will. I’ve seen people create wonderful Wills only to destroy the wonderful work they did by titling an account wrong or making an account payable upon death when they should not have.
As with anything in the legal field, there are always a few exceptions to the rules and nuances to how each state works, but this should give you a general idea of how it works. It’s always a good idea to consult with an attorney about your individual situation.
Summary – Final Thoughts
If it’s not clear by now, a Will helps maintain control and ensure your wishes are honored.
I have met many people who think that writing something on a piece of paper like, “Suzie receives grandma’s clock when I die. George should get the house. Serena will get my bank account unless she does not finish college,” and think that is sufficient.
Although there are free resources online to create a Will, there are plenty of horror stories of how they did not hold up in court. It’s worth paying an attorney to create a Will that reflects your wishes and who can help answer your questions to ensure what actually goes on the legal document makes sense for you.
If you live in an expensive probate state, want more privacy, or have assets in multiple states, a living trust likely is worth exploring.
Nobody likes to think about their demise, but having a Will in place can allow your loved ones to grieve at an already difficult time. Not only is it a gift to yourself to help ensure your wishes are honored, but it’s also a gift to your loved ones.