Are you 18 years old or older? Then yes, you probably need a will.
I am still surprised by how often I encounter relatives, friends, neighbors, and acquaintances who simply don’t understand how important it is to have a will. I’m referring to smart people! Speech therapists, accountants, and teachers, to name a few. Many people have a huge misconception that they are not a candidate for estate planning and that this topic is not relevant to them.
Several estate planning documents are important for everyone to have, such as a health care proxy, durable power of attorney and last will and testament. Below I will focus on the last will and testament, otherwise referred to as a “will” and I will explain why it is important for you to have one prepared immediately.
If you have a crystal ball, or other super powers that can tell you the future, and specifically, your date of death, then you can hold off on preparing a will if that date is far off. For everyone else, while we pray for a long healthy life, we don’t know what may come tomorrow, and therefore, let’s make sure we are prepared.
What will happen if I do nothing and don’t have a will?
If you are a resident in New York State, and you die without having a will, New York State laws will govern who gets your assets (the money and things that you own). Sometimes, it is automatic, such as in the following situations:
→ If you own an account or property together with someone else, it is possible that you own it together as “joint tenants,” which means that after one owner dies, the surviving owner becomes the owner of the full account or property automatically.
→ If you name a beneficiary on an account, life insurance, or annuity, the named beneficiary will inherit that asset without court involvement.
→ If your asset is held in a trust, the trust will govern who gets the asset after you pass away, without the need for court involvement.
However, if something is owned by you in your name alone, with no joint tenant, no named beneficiary, and not in trust, New York State will decide who gets your assets if you don’t have a will in place.
After administration expenses, taxes, and debts are paid, the state requires that distributions are to be made as follows:
→ If a person is survived by just a spouse, the spouse gets all.
→ If a person is survived by a spouse and children, the spouse gets the first $50,000 plus half of the balance, and the children get the remaining half.
→ If a person is survived by only children, the children all share equally.
→ If a person is unmarried and has no descendants when they die, his or her parents get all.
And so on and so forth.
So, you may say, that’s fine. What’s the big deal if that’s what I would be okay with anyway?
Well here are some issues that you may not have thought about and what we, as estate planning and probate attorneys, deal with on a regular basis.
Probate vs. Estate Administration
When there is a will, the process to obtain access to a deceased person’s assets and distribute it to those that inherit is called “probate”. Without a will, the process is called “administration.”
- A will lets you choose who will be in charge of your estate after you die.
A will can designate the specific person that you choose to be your estate’s “executor,” the person in charge of taking care of everything as per your instructions in the will. This is likely someone that you trust and who will honor and respect your specific requests and wishes. On the other hand, during an administration proceeding, the court will appoint the “administrator” who will be in charge. There is an order of preference for close relatives, but it is possible that it could end up being the Public Administrator, whereupon your loved ones will lose control of the process.
Example: Sally was a close family member of the decedent (the person that died). The decedent did not have a will. There was a conflict between family members as to who should serve as the administrator, so ultimately, Sally was not appointed as the administrator, but neither were her siblings, and the court appointed the public administrator instead of any family member. The public administrator decided to sell the family residence to a stranger, and distribute the proceeds instead of keeping the home within the family for the decedent’s adult disabled child to remain living there. It was an awful time, made worse by the additional emotional toll of the disabled child having to leave the family residence.
- A will can avoid the cost and stress of having to get a bond.
A fiduciary bond (or probate bond) is a court bond that is sometimes required when someone is appointed to act on behalf of others. A bond acts as a guarantee that the administrator (or executor) will comply with state laws and administer his responsibilities faithfully in the administration of the estate. Getting a bond requires a credit application, and there is a cost associated with the bond. A court may require that the administrator obtain a probate bond while administering the estate, whereas most often, the court respects the terms of a will that would not require that the executor obtain a bond. While it may be worthwhile in some cases, often, in close family situations, a bond is an unnecessary expense and nuisance to deal with. Having a will may allow a trusted person that you name as Executor access your assets without the requirement of a bond.
Example: Dave was the surviving child of his father Paul. Dave was appointed administrator of his father Paul’s estate, but the court required that Dave obtain a bond in order to access Paul’s money and make the distributions in the estate. Dave had very bad credit and had difficultly obtaining the bond. Ultimately, after a long delay and added expenses, he was unable to serve as the administrator of his father’s estate.
- A will can provide for control of your minor children’s inheritance (or avoid it altogether).
Many people are confused and believe that if they are survived by their spouse, their spouse would get everything. Well, in truth, that is not the case if there are children as well. If a person is survived by a spouse and children, their estate gets distributed between the spouse and the children. Frequently, this is not what someone would have wanted, particularly, if he or she is survived by minor children. A will allows you to direct everything to a spouse, whereupon the spouse can continue to provide for minor children. In the alternative, if you do want to leave an inheritance for your minor children, with or without a spouse, a will would allow you to name the person who would be in charge of the money until the child reaches an age that you designate.
Example: Mike passes away leaving his wife Amy and their four-year old twins. They own a house together, have joint checking and savings accounts, and Mike has a separate investment account valued at $500,000. The house and checking and savings accounts automatically become Amy’s. Easy! Because the investment account was only in Mike’s name, Amy is entitled to $50,000 plus half the balance, and the minor children are entitled to the rest. Minor children (under 18 years old) don’t get inherited money outright, so an adult would have to be in charge of the money until the children reach adulthood. Who chooses which adult? Without a will, the court decides! Ultimately, a court may decide that Amy is not responsible to manage the children’s inheritance and can appoint another guardian or custodian over the money (at a cost to the estate). Second, the children would get the money outright at age 18, and may not be responsible to manage their inheritance wisely at that young age. (Think about what you would have done with a large sum of money at age 18?)
- A will can protect the government benefits of a special needs beneficiary.
If you have a child with special needs who receives government benefits or may likely access government benefits in the future, without a will, an inheritance can jeopardize his or her benefits, and possibly even be forfeited to the government. By having a will that directs his or her share into a special needs trust, you can provide for your loved one with special needs, while making sure the inheritance is preserved. You can also provide for a grandchild, sibling, or other loved one with special needs this way.
Example: Linda suffers from mental illness and receives social security disability income (SSI) and Medicaid as a result of her disability. Her mom passes away without a will, leaving Linda to inherit her mom’s condo and $230,000 in the bank. Without immediate appropriate planning, Linda may lose her benefits, and the inheritance may even be at risk. There is still planning that Linda can do even though her mom didn’t have a will, but she would have to take swift action, and the options she has at that point may not be as good as her mom having prepared a proper will in advance. Think about Linda grieving her mom’s death. Do you think she would want to deal with legal issues and sit in a lawyer’s office weeks after her mom’s death to address further planning?
The above examples are really just a few situations that illustrate how a will can be beneficial and preferable to not having one. There are so many stories where a will made all the difference and where the lack of a will created tremendous hardship for a family that was already grieving.
Consider preparing your estate plan a win-win action. If you die and had a will in place, you won’t regret it. And if you prepared a will and don’t die, well, you probably will not regret that either. Contact us today to learn how we can help.