Future Planning 2 – Wills

There are several purposes to having a will. The one that people think of first is generally how your property is to be distributed after you die. But this is a somewhat limited view in a few ways.

First, anything that you own in common with another person or for which the benefits are declared to another person are excluded from distribution under the terms of a will. For example, if you own a house jointly with your spouse, then your spouse will retain ownership of the house after your death. Or, if you have a life insurance policy that has a named beneficiary, that person will receive the proceeds of the insurance after your death. These exclusions are true whether or not you have a will.

Secondly, a will can do more than provide for distribution of assets. A very important one is that it can provide for support and guardianship of any minor children.

If you die intestate, meaning “not having made a will,” then all the normal functions that a will would provide would then be covered by the laws of the state of which you are a citizen. These would include the designation of an executor of the estate, the distribution of your assets, and the guardianship of any minor children.

For asset distribution, the exact rules may vary by state, but most states are somewhat similar in their regulations. Here is a synopsis of the intestate succession rules for Pennsylvania, where I happen to live:

http://www.nolo.com/legal-encyclopedia/intestate-succession-pennsylvania.html

As you notice in this synopsis, who inherits your property is a function of whether you have a spouse, whether you have children, etc. There are also provisions for step-children, children from a former relationship, etc. There are many details covered in the regulations that are only summarized on this webpage. Notice that if you have a spouse and children (a fairly common scenario), that your spouse does not automatically receive your estate – rather they only get the first $30,000, the remainder is divided equally between your spouse and your children. Also, if your parents are still living, they may also share in your estate. If these types of rules are not what you desire, then you must have a will to override this “default”.

For guardianship of minor children, if you do not have a spouse with whom you have joint custody, then they automatically become a “ward of the court”. The court will then decide whether there are relatives who may be given custody, or whether they will go into the foster care system. Again, all this can be prevented if you make provision for them in your will.

A related topic to wills are trusts. There are a number of different types of trusts. As I do not have training in this area, I won’t attempt to describe them all together with their benefits and limitations. But unless you are in the top income bracket, most of these are likely not going to be part of your portfolio.

My wife and I had our first wills drawn up when we were in our late 20’s – about the time we started having children. We have updated it periodically since then. I strongly recommend to people that they have one. Even if you do not have a large estate, having a will is more for the people you leave behind as it is for you. A will can prevent misunderstandings, prevent arguments, and make sure that your desires are followed instead of just taking the “default” that is provide by your state’s intestate rules.