Do You Need A Will?

Approximately two million people die each year in the United States, and it is estimated that 70% of those who die do not have a will or an estate plan. A will allows an individual to decide what will happen to his/her property after death. Certain assets (for example, jointly held property with right of survivorship, retirement plans with named beneficiaries, insurance contracts with named beneficiaries) will be distributed by operation of the law or the contract, rather than by the provisions of a will. The disposition of other assets, as well as the guardianship of minor children, can be directed by a will.

Intestate: If a person dies without a will, he/she dies "intestate." Property will be distributed according to the laws of the state where the decedent resided at the time of death, rather than the wishes of the decedent. Assets may not be immediately available to the surviving spouse, children, or other beneficiaries. Other potential drawbacks of intestacy include:

Example: If a husband has title of all assets in his name and dies without a will, some states will distribute half of the estate's assets to his spouse, with the remaining assets distributed to surviving children.

If the children are minors, the state could also decide who has custody of the children's assets until they reach the age of majority.

If there are children from a previous marriage, some states require that assets be divided among the spouse, children from the current marriage, and children from the previous marriage.

Basic Provisions: Wills should include certain basic provisions -- in most cases, the document should name an executor for the estate, direct the disposition of important assets, name a guardian for minor children and their estates, establish a trust for the benefit of the spouse and/or children, and provide instructions in case of simultaneous death of spouses. The document must be signed and dated by the individual, and witnessed (state requirements vary). Preprinted or computer-generated wills may not satisfy state requirements.

Selection of Executor: In addition to managing estate assets and/or hiring professionals to manage the assets, typical duties of an executor include

The executor frequently must have specific expertise and the ability to devote substantial time to estate matters, because it usually takes between one and three years to close an estate. An institutional executor (for example, a bank or trust company) may be advisable if the estate is complicated, or if an individual with the necessary expertise and/or time is not available. When making investment decisions, institutional executors and trustees tend to be more conservative than individual executors or trustees. Consider selecting coexecutors (for example, an institutional executor that shares responsibilities with at least one family member or beneficiary) so that joint approval is required for important decisions affecting the estate. The will could also include a provision that allows an individual executor or beneficiary to change the institutional executor (or trustee for any trust established by the will).

Guardianship of Minor Children: Parents with minor children can establish who will care for the children in case of simultaneous death of both parents, or the death of one parent and the inability of the surviving parent to care for the children. If assets are to be distributed in accordance with a living trust document, a will is needed for guardianship provisions. If a guardian is not specified in the will, state law will determine who will raise the children. Guardianship of minor children is a significant responsibility -- parents should carefully consider this provision. Discuss the matter with potential guardians, and verify they are willing and able to assume the responsibility.

Title to Property: Failure to structure ownership of property to correspond with the provisions of a will could result in property being distributed to a co-owner or other beneficiary, regardless of the directions included in the will. Estate planning frequently involves redistributing ownership of assets between spouses to take advantage of tax savings opportunities. One important opportunity for estates valued over $625,000 is the estate tax unified credit -- the first spouse to die can transfer up to $625,000 to nonspouse beneficiaries free of federal estate tax. If there are not enough assets in the decedent’s name, a properly drafted will that calls for the full utilization of the unified credit by both spouses will not be effective.

Family Issues and Recordkeeping: After a will has been established, advise the executor, family members, and/or other beneficiaries of the location of the will and other important documents. Maintain a list of all assets, insurance policies, and liabilities. In most situations, family members and other beneficiaries should be made aware of the will’s instructions for the distribution of property.

Once a will is in place, review the document every few years. If intentions change, the document will need to be revised. Additionally, the provisions of a will may need to be updated after the occurrence of a major life event (for example, birth of a child, marriage, divorce, inheritance, death of a beneficiary, major asset purchase, substantial increase in wealth).

These are some thoughts to consider about wills. Your financial and tax advisors, as well as your attorney, can provide more information and should be consulted before any action is taken.

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	Do You Have a Will? Personal Finance Advisor by Deloitte & Touche OnLine February 23, 1998