Why Is Having a Will So Important?

As many as 50 to 70 percents of the population die without having made a will. The state has made a will for you if you do not have one, and the heirs it decides upon might not be the ones you would have chosen. Are you reluctant about making your will, perhaps because you’re put off by all the decisions and details that it entails, or maybe because you just don’t like to even think about the inevitable? When you don’t have a will things can get pretty sticky, with a string of complications that could someday, if you’ll excuse the expression, have you spinning in your grave.

Dying Intestate Is About as Bad as It Sounds

If you don’t have a will when you die (that’s what dying ‘intestate” means), you may have given your family another reason to mourn your loss. Without a will, they must turn to state statutes to determine who your heirs are and how much of a share in your estate they are entitled to inherit. Is the state poking its nose into your family affairs? Yes indeed, that’s exactly what they will do, down to your last penny.

When you don’t get around to making a will, you give up the right to …

  • Select the beneficiaries of your estate.
  • Make gifts to close friends.
  • Name the executor of your estate.
  • Designate a guardian for your minor children.

Here are a few other complications you may leave behind if you die intestate.

  • Federal estate taxes could be higher without the full marital deduction your spouse might be entitled to.
  • State death taxes might take a larger share of your estate.
  • Income savings may be lost.
  • Probate expenses will be higher.

Probate

There’s that word you often hear in the same breath with “wills” and “estates.” It’s usually said with a shudder. What does it mean, and can it really be that terrible? Probate is commonly defined as a state court procedure administering the estate of a deceased resident, whether that individual died with a will or without one.

It is designed to apportion your estate according to your own wishes if you have a will, or according to how the state sees fit if you don’t. Naturally, it is also created to see that your creditors are satisfied and that any legitimate taxes due on your estate are paid before assets are disbursed to your family and friends.

If an individual dies with a will, the presumed beneficiaries bring it to the probate court. If he or she dies intestate, again the heirs come in, this time with a list of the deceased’s (or decedent’s, in legal parlance) assets that comprise an estate, in order to begin probate administration. They file a “petition for probate,” a simple form that contains essential information needed by the court, such as name and address of the deceased, and names and addresses of relatives and likely heirs.

Most times the family member or other individual petitioning an intestate estate to be settled through probate must post a bond, to cover any loss to the estate caused by their negligence or malfeasance. That might be, oh, let’s say a bond of $17,000, for which the executor might pay a fee, or a premium, of say $125 a year until the estate is settled (and most estates are settled in less than a year). That cost varies, however. The executor would go to a local insurance company that has bonding power to purchase the bond, and then would return with it to the court. The premium cost comes out of the estate, not the executor’s pocket.

A probate estate is defined as property a probate count has to administer. But there is property that doesn’t go through probate. Any property owned jointly with right of survivorship, distributions from any life insurance policies to their beneficiaries, pension funds, trusts, and other investments with a named beneficiary skip probate and go directly to the person named.

As a matter of fact, with the above-named exclusions, sometimes there is little that is subject to probate. The deceased might have done this on purpose, to avoid having his or her heirs spend time and money in probate court. Sometimes, though, it’s just a coincidence.

Also note that many states have a simplified procedure for small estates, such as those worth $50,000 or less, which permit transfer of the decedent’s assets by an affidavit signed by an heir.

Speaking of heirs, I’ll digress here for a brief explanation. Technically, the word heirs is used for those who inherit in an intestate estate, beneficiaries for those who inherit from a legitimate will. Sometimes the terms are used interchangeably.

How the State Determines Your Heirs

Once your assets—minus a will—land in probate court, the process of settling the estate begins. Here is an example of how that court’s thinking might proceed, noting that there are slight differences among states.

Let’s use a typical family as an example. Albert is married to Susan. They have three adult children: Ken, Betty, and Clark. Ken has one child, Alice; Betty has no children; Clark has two, Chloe and Charity. Albert’s father is deceased, but his mother is alive.

Albert dies without a will. Who inherits his probate estate?

In many states, that estate would be divided as follows: one half to Albert’s wife, and one half divided equally among each of his children.

Some states give everything to the spouse, while others would give the spouse a specified amount of money from the estate, plus one half of the rest of it.

Abert’s mother and his grandchildren would receive nothing.

Let’s vary Albert’s situation a little. Here are some other relationship possibilities for him:

Let’s say Susan is his second wife, and the children are all from his first marriage. Susan may receive only one-third of the probate estate and Albert’s children share the balance. Some states give the subsequent spouse, who had no children with the deceased, less than half the estate. Once again, Albert’s mother and his grandchildren receive nothing.

If there is no surviving spouse, but there are children, then the children receive the entire probate estate.

Grandchildren inherit their deceased parent’s share. So if Clark were deceased at the time of Albert’s death, his two girls, chloe and Charity, would inherit Clark’s share of his father’s estate.

If Albert were single—there is no surviving spouse and no surviving children—then most state intestate laws divide the probate estate among the parents and siblings. If the parents are deceased, then it is just among the siblings.

If Albert had no brothers or sisters, the estate could be divided among his grandparents, if they are living, and aunts, uncles, and cousins.

If Albert were single but had been in a 10-year, live-in relationship with Lee, then since Albert died without a will Lee would come in for no portion at all of Albert’s estate.

The following table helps you see at a glance how states typically divide the estate of a resident who dies without a valid will.

If You Are Your Property Will Go
Unmarried with no children, parents alive To your parents and possibly brothers and sisters as well.
Unmarried with no children, parents dead To your brothers and sisters; if an only child, to other next of kin: grandparents, aunts, etc.
Unmarried with children To your children, but not stepchildren (a few states do recognize limited inheritance for stepchildren); the court also appoints a guardian for minors.
Unmarried with no relatives To the state.
Married with children Often divided between spouse and children.
Married with no children Usually to the surviving spouse, or part to the spouse and part to your parents, perhaps even siblings.

The Guardian

If you have minor children (under the age of 18), and your spouse survives you, then you won’t need to appoint a guardian. However, if the other parent is not alive, or is not capable of caring for the minor children, or you have a child of any age with special needs, then a guardian is necessary for them if you die.

Naturally, parents of young children should appoint a guardian for them in the event they both die at the same time. Naming a guardian is especially important in a one-parent situation.

Let’s consider Jane’s situation. It is a potential guardianship nightmare because there is no will. Her husband passed away several years ago. Jane has two minor children, Jason and Joan, both in their early teens. Because Jane doesn’t have a will designating who will be guardian, then state law takes over.

Whom would the state choose? Well, grandparents and siblings are usually in line for that appointment. If they agree on who will care for the child, fine. But if they cannot, then a court battle may ensue.

It’s bad enough to have relatives fighting over child custody. Worse yet is when no family member wants the child or children. Perhaps both sets of grandparents in Jane’s situation define their golden years as not including child rearing. And Jane’s siblings might have children of their own and say quite frankly that they don’t want to be responsible right now for a couple of teenagers.

What happens then?

Jane might have a close friend who would be competent, and quite capable and willing to serve as guardian. But the friend might not be able to take on that role without being nominated in Jane’s will. Can Jane’s kids recommend that friend? Sure, and because they are older children, the judge is likely to listen to their recommendation and seriously consider that nominee.

But if there is absolutely no one to take Jane’s kids, the kids become a ward of the state and are then placed in a foster home. They are, after all, orphans.

If you have a will, name a primary and alternate guardian to be sure that one will serve. Always get that family member or friend’s permission before naming him or her as guardian. A guardian is not required to serve just because you name that individual.

The Administrator

The executor of an estate is a person nominated to handle the disposition of that property according to the wishes of the deceased.

The administrator of an estate is an individual, typically a spouse or child, appointed by the probate court to handle that function for the deceased who dies intestate. The administrator handles the paperwork of an estate, such as composing a list of the deceased’s assets, hearing from likely heirs, processing claims from creditors, and the like.

Here’s yet another reason why you should have a will: although you are apt to ask a relative or friend to be your executor, if you die without a will, the state might appoint a stranger to handle your estate and deal with your family on estate-related, and certainly personal, matters. The judge has quite a bit of leeway in appointing an administrator, and could even name a friend of his to that position.

The administrator is usually paid for his or her services. Fees run quite a wide range. I hesitate to offer even a ballpark figure because so much depends on the size of the estate and the amount of work facing the administrator. But I’d say that perhaps that fee could be as much as 5 percent of the estate’s worth. It is paid from the estate before any part of it is disbursed to heirs.

Divorce, Remarriage—and No Will

There are complications here, too, as you might imagine.

Consider Hank and Wanda. The couple both work outside the home. Wanda had been previously married and has one child from that union, Willie, who is under 18. Hank likewise had an earlier marriage, and he has two minor children: Hank Jr. and Karen. Hank and Wanda have one minor child, Holly.

Wanda has custody of Willie; Hank does not have custody of his children from the prior marriage.

Wanda dies suddenly. She does not have a will. Let’s look at possible consequences:

Inheritance. Wanda owned the house where she and Hank lived, and she had a substantial investment in stocks and bonds in her own name, all of which is in her probate estate. what happens to that property?

In most states the surviving spouse, Hank, will have to divide ownership of the house and investments with Wanda’s child of her previous marriage, Willie, and his and Wanda’s daughter, Holly, as follows: half to the spouse, and one quarter to each child.

Whether Hank can continue living in the house is a question; he may have to pay rent to the children for their share, or the estate may have to sell the house. Is this what Wanda would have wanted?

Probate administration. The surviving spouse is usually, but not always, appointed administrator. If Hank is named to that position, very likely his administration will be closely scrutinized by the child from the prior marriage (Willie) and/or his supporters (his biological father, for example, or a maternal aunt). Because of a potential conflict there, a simplified probate provided for by many states might not be available (because all the heirs would have to consent to use such a procedure), so estate expenses could be considerably higher, due to added attorney time, that they could have been if Wanda had that will.

Guardianship. Hank and Wanda’s child will have Hank around to serve as her guardian. Wanda’s son from her prior marriage may have his father appointed as guardian. If the father has been out of Willie’s life for years, that may not be a viable option. Hank could be the seemingly likely choice, but he might not be chosen by the court, which could favor the biological father. This could be quite a lengthy, even messy, issue. An additional worry: The guardian manages the minor’s money until he or she is 18 years old. What if Wanda’s previous spouse had made a career of maxing out credit cards?

Death taxes. The tax situation will be worse for Wanda’s estate because she has no will.

Simultaneous death of spouses. Finally, with this couple, we must consider what could happen if both Hank and Wanda died at the same time, in a boating accident, say, or a car or plane crash. Neither has a will. All of the problems we just discussed remain, or are magnified. Now we also have an orphan—their child, Holly.

The state would likely split the house and investments that Wanda owned solely as follows: one half to Willie and one half to Holly.

Any property that Hank owned solely at his death (which in this example is simultaneous with Wanda’s, remember) would likely be shared by Hank Jr., Karen, and Holly. However, those children may or may not have a claim for child support from the estate during the rest of their minority, so they may be in financial distress. Children in some states can make a claim for child support from an estate, sometimes until they are 17 or 18, sometimes up to age 21, which can include college expenses. Naturally, Wanda’s son Willie could make the same claim against Wanda’s estate.

Any property the two owned jointly as spousal property would be equally divided and put into each estate. For example, Hank’s estate would be distributed this way: One third each to Hank Jr. and Karen (children of a previous marriage) and one third to Holly (child of a current marriage). Wanda’s share would be divided equally between Willie and Holly.

Adoption

Adopted children inherit from their adopting parents. In most states the adopted child will not automatically inherit through the biological parent, unless that parent is married to the adopting parent.

So let’s look at Al, who adopted Ally, the daughter of his wife, Tracy, from a prior marriage. He and Tracy have a child of their own from their marriage, a son, Cory. Al has no will. If he dies, his probate estate will be divided like this: one half to his wife and one half divided equally between the adopted child (Ally) and the biological child (Cory). If he had not adopted Ally, she would have received nothing from his estate.

Children Born Out of Wedlock

Social security, child support, survivor’s rights, and inheritance are but a few heavy legal issues swirling around children born out of wedlock.

Clearly, a child born out of wedlock can inherit automatically from his or her mother. What is less certain is the child’s inheritance (not to mention support) rights from the father.

Most state laws provide that the child may inherit from the father if paternity is established in court or the father marries the mother and acknowledges the child born out of wedlock as his child.

A paternity suit is a court action to have it acknowledged that a man is the father of a specified child and, usually, to secure financial support for that child by that father.

Paternity actions require the assistance of the mother, who may often be reluctant to bring the lawsuit. If a paternity action is initiated, blood tests will disclose whether that man is the biological father.

If no paternity action is taken and the biological parents don’t marry, then the child will not be able to inherit automatically from the father or the father’s parents without a will.

Have I motivated—or perhaps scared—you into writing a will yet?

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