Five Reasons Why You Need a Will
1. To Appoint an Executor
Appointing an executor will allow you to designate someone you trust to act as the personal representative for your estate after your passing. The personal representative carries out the administrative tasks related to your estate. These tasks include locating your will, finding and collecting your assets, paying legitimate creditor claims, paying any taxes owed by your estate, making claims on behalf of your estate, and distributing any remaining property to your beneficiaries. Without a will, the probate court will appoint a personal representative to administer your estate in accordance with the laws of the state in which you reside upon your passing. This person may not be someone you would have selected, or could even be someone you do not know.
2. To Determine Distribution of Your Property
A will allows you to leave your property to anyone you choose. You can leave your property to a surviving spouse, your child and/or grandchildren, other relatives, friends, or a charity or educational institution. Gifts through your will take the form of specific bequests (e.g., jewelry, furniture, cash or securities), general bequests (e.g., a percentage of your property), or a residuary bequest, which is what is left in your estate after your other bequests are distributed. If you do not have a will, your property goes to your heirs based on the laws of the state in which you reside at your death. Further, family issues may arise in determining asset distribution if there is not a will in place.
3. To Appoint a Guardian for Minor Children
In many states, a will is the only means of providing for your wishes as to who should raise your children in the event both parents die. A will allows you to name both a guardian of the person, who takes physical custody of your children and who will be responsible for your children’s day-to-day care, and a guardian of the property, who manages your children’s assets. This can be the same person or different people. The court ultimately has final approval, but it bases that decision upon the provisions made in your will. Without a will, the court will choose a guardian who might be very different from the one you would have selected.
4. To Create a Trust for Your Heirs
A testamentary trust is created under your will and becomes effective during or after the administration of your estate. Your will sets out the terms of the trust, such as who the trustee is, who the beneficiaries are, how the trust is funded, how the distributions should be made, and when the trust terminates. This can be especially important if you have a spouse or minor children who are unable to manage assets or property themselves. A trust can also be created during your lifetime. If you have a living trust, your will can transfer any property that was not transferred to the trust while you were alive. It essentially “pours over” your estate into your living trust.
5. To Plan Gifts to Grandchildren or Charities
A will can allow you to make long-term gifts to grandchildren under terms and conditions you establish, even if these grandchildren were born after your death. Generally, the property which you designate is held in a trust, which is expected to exist for a specified period of time and which is designed to be exempt from, minimize, or defer certain estate and inheritance taxes. However, there are many rules that must be followed to ensure tax minimization on the trust property, and an estate planning attorney should be consulted. A will also can make outright or long-term bequests to charities. The value of these bequests may be tax deductible, but there are also many rules that have to be followed for favorable tax treatment.
For questions, comments or additional information, please contact Kathleen DeLacy, Partner in our Estates & Trusts Group, at firstname.lastname@example.org or via phone at 302.477.7103.