Clients often ask if they need to have a will. The answer is no, you don't "need" a will, as state law will make a will for you if you die without one. The drawback is that all decisions about your estate will be made without regard for your wishes. If you die without a will, Minnesota law (or the law of the state where you reside) will decide which family members will receive your assets and who your personal representative will be. The law will also decide when your minor children will receive their inheritance--usually at age 18.
Dying without a will can cause unnecessary expense and complications in settling your estate. Taking the time to make a will forces you to get your affairs in order, to think about some tough issues and decide how you want those issues handled in the event of your death. What if both you and your spouse are in an accident? What arrangements have you made for your children in the event of your death? Have you designated the person(s) you want to be named as guardian for your minor children if both parents are deceased? Have you named a trustee (as the name implies, someone you trust) to manage your assets, invest those assets wisely and spend them prudently for the benefit of your family after your death? Do you wish to leave something to a worthy charitable cause upon your death? A will can address all of these issues.
Another issue is that of taxes. Estate taxes don't affect only the wealthy. If your assets total over $600,000, your estate may be required to pay taxes upon your death. Estate taxes start at 37% and can go to 60% for large estates. Add up your assets--a house, perhaps a lake home, retirement accounts, life insurance payable on your death, a few investments--and you can quickly exceed the $600,000 limit. There are some tax credits available, but they won't necessarily apply automatically when you die. There are ways to ensure that your estate will pay as few taxes as possible upon your death, leaving as much as possible to your family. But you need to plan ahead. Don't leave something this important to chance.
If you already have a will, you may need to update periodically. The information contained in the shaded box gives you some suggestions about when to update your will.
Other Estate Planning Tools
An estate plan usually involves more than just a will. A will enables you to plan for death, but an estate plan can make provisions for a temporary or permanent disability. By planning ahead, you can give your spouse or a trusted friend or relative power of attorney which will enable them to step in and handle your financial affairs for you. Without a power of attorney, your family members may be forced to go to court to have someone appointed as your legal guardian. The guardianship process is expensive, time consuming and emotionally draining for your family. With a little planning, state-appointed guardianship is unnecessary.
Another form of disability planning is to establish a revocable living trust. You can be your own trustee but upon becoming disabled, your successor trustee will automatically step in to manage your assets without a break in continuity and without the time, expense, and emotional drain inherent in having a guardian appointed.
Estate planning also includes health care planning. What if you can't communicate to your doctor the type of medical treatment you want due to severe physical or mental injury or illness? It makes sense to put your wishes in writing, not only to ensure that you receive the care you want, but also to ease the burden on your family. Do you want to be kept alive at any cost? Or do you want life support removed if you have no change of recovery? Would you want to be fed by tube? Or would you want tube feeding withheld if you are unable to eat by mouth? By clearly expressing your wishes in writing ahead of time, you will make a very emotional, trying time for your family less painful because they will know what you want.
If one of your goals is to provide for your family in the event of your disability or death a will is a vital tool to ensure that your estate will be handled according to your wishes.
With all this in mind, ask yourself again if you really need a will.
Updating Your Will
If any of the following apply, you should consider reviewing your will and making any necessary changes.
- Is your will more than five years old?
- Has your family changed? Have you divorced? Remarried?
- Has the value of your assets grown, whether due to an inheritance, good luck in the stock market, etc.? Be sure to include life insurance death proceeds payable upon your death when calculating your net worth for estate planning purposes, as these will most likely be included in your taxable estate.
- Do you wish to leave something to charity?
- Do you have a dependent or needy parent that you would like to provide for in the event of your death?
- Are the persons named in your will as your personal representative, trustee, and guardian still the best persons for the job?
- Are you still comfortable with your children receiving your estate at the age stated in your current will?
- Are your affairs in order so that in the event of your sudden death your family will be able to quickly collect and manage your assets?
- Is the total of all your assets (including life insurance payable at your death) over $600,000? If so, have you taken advantage of all tax credits available so as to minimize taxes and thus maximize what is left for your family?