Americans often take a hands-off approach to estate planning. Many people resist the idea of death and planning for when it happens. The results of this reluctance are clear: 51 percent of Americans aged 55 to 64 do not have a will. Look at younger brackets, like 45 to 54, and this percentage increases to 62 percent.
A will is simply good planning. It makes the distribution of your assets after death easier on your loved ones and it assures that your wishes are respected. Wills also contain provisions that assure the future of any dependents. No matter your marital, income, or parental status, you need a will and this is why.
The Reasons For Wills
Wills describe what happens to your income and assets after death. This collection of property is your “estate.” Since dead people cannot own property, it is distributed through a probate process.
Your will also makes other stipulations that affect other people. If you have minor children, the will names a guardian to assure their needs are met. Children who inherit property also require a conservator since minors are not allowed to own property under law. Anything they inherit is kept under the control of the conservator until the children reach the age of majority.
In general, wills address several issues including:
- Specific gifts of property or money to individuals, charities, or trusts;
- Naming a guardian or conservator for minor children;
- Naming a personal representative to carry out the wishes in your will; and
- Creating or adding trusts to aid in the distribution of assets.
If you do not have a will, the probate court determines these issues—not you. That is why if you have specific expectations after death, you need to have a will.
The Effects of Intestacy (Dying Without a Will)
People who die without a will have their property distributed by the court according to Michigan intestate statutes. The scheme presented in the laws depends on who survives you. For example, if your children are still around but your spouse predeceased you, your children would inherit everything. Likewise, if you are married with no children and no surviving parents, your spouse receives all your property.
Other pay-outs under the intestate statutes include:
- Spouse and children from current and previous relationships survive you: Spouse receives first $150,000 as adjusted from your estate plus half the balance remaining after that amount. Children receive the rest.
- Spouse, and only children from previous relationships survive you: Spouse receives first $100,000 as adjusted from your estate plus half the balance. Children receive the rest.
- Spouse and parents survive you (no children): Spouse receives first $150,000 as adjusted from your estate plus three-quarters of the balance. Parents receive the rest.
- Parents survive you but no spouse or children: Parents inherit it all.
- Siblings survive you but no parents, spouse, or children: Siblings inherit it all.
In order to effect these rules, your estate is taken to probate court, just as with a will. However, instead of a quick process, intestate estates generally take more time and effort and are more costly. The court will need to take the time to appoint a personal representative, locate your survivors, take an inventory of your property, and then distribute as per the intestate statutes. Even if the intestate scheme lines up well with your overall wishes, this will be a time consuming process. While an estate probated with a will could take as little as five months to conclude, an estate without a will often requires more time to conclude. The more complex estates with disputes or non-liquid assets or that are also large enough for the federal estate tax would take even more time.
Also, if you have minor children, the court would decide on their guardian. If your spouse survives you, he or she is the obvious choice—omitting certain circumstances. The court could also appoint a conservator to manage your child’s inheritance until he or she reaches the age of majority. Many people prefer to have a choice in these individuals and would rather not leave that up to an intestate proceeding.
Spouses and Reciprocal Wills
Spouses normally draft wills at the same time. Called ‘reciprocal wills’, each document transfers property to the other spouse when one predeceases the other. Unlike the intestate statutes, the spouse receives all the property in order to have the means to care for minor children and other interests. There is normally no share granted to the children in that scenario.
Reciprocal wills also cover the contingency if spouses die simultaneously. While this is uncommon, there is always a chance of this in a car accident or other tragic event. It should be planned for just in case. In these instances, the reciprocal wills designate guardians and a personal representative so there is a consistent estate plan for all the property and the future of any minor children.
For that reason, even if assets are concentrated with one spouse, having reciprocal wills is the best strategy. It assures all bases are covered in the worst of circumstances.
To start your estate planning and secure a will, contact Gold & Associates P.C. at (734) 335-7100. Your consultation will be free and your peace of mind will be priceless.