The New Year is here! We have said our good-byes to 2020 and now we uan kick our heels, dance a jig, start to act like normal and do business “as usual”, right?
Well, I hate to start the New Years edition of Dickerson Digest on a low note, but I must confess that I have seen the following scenario time after time and I know I would be doing you a disservice if I didn’t share a story of a long time client I had been continually pleading with to do his will who died unexpectedly the day before payroll for his business. I want to impart this message in the hopes that it will hit close to home. Perhaps like you, he was the only signer on the checkbooks. He had no will, trust or any other estate plan in place. As a result, his wife had to pay over $5,000 just to get a court order authorizing her to sign payroll checks and keep their business rolling and employees paid. This did not include all of the other probate matters and fees that ensued. As you can imagine, that was just the tip of the iceberg of his widow’s struggles to get access to the cash flow they had been so accustomed to prior to his unexpected death. The family felt like they were in a nightmare trying to get to their “new normal”. Unfortunately, all of this trauma could have been avoided with proper estate planning that would have accounted for the needs of the family and the business in their time of need.
Here’s what you should know about preparing a proper will and estate plan:
1. You need one.
If you die without a will, your property will be distributed pursuant to state law, which may not achieve the result you would have intended. Having a will ensures that your personal assets and belongings will go to family members, individuals, or charitable organizations you specifically designate to receive your property. If you have minor children, your will should name a person who will become their legal guardian after your death if their other parent is also dead or not able to care for them. You can name someone you trust to serve as executor to make sure your wishes are carried out. In your will, you can establish trusts to manage the inheritance of minors or young adult beneficiaries and to save on estate taxes.
2. You need one even if you have a revocable living trust for probate avoidance.
A revocable living trust is in some ways a will alternative, but it passes only the property that is in the trust. It’s very likely that you will own some property outside of the trust when you die. You might have acquired the property shortly before your death or simply overlooked it. Your estate could even acquire property after you die, such a tax refund or payment of a debt. You can have a pour-over will that provides that the property is transferred to your trust to be distributed in accordance with its terms or a back up will that directly provides who is to get your property. If you have minor children, you’ll need a will to name a guardian for them.
3. Property that passes by your will is subject to probate.
A will does not avoid probate. However, if the size of your estate is modest, it may qualify for streamlined or simplified procedures that are faster and cheaper than full probate.
4. You may own some property that you cannot pass with a will.
You can pass assets titled solely in your name by your will. You can also pass assets titled in your name with another person as “tenants in common” by your will.
You cannot pass the following types of assets by your will and an attempt to do so will be void:
- Property you own with another as joint tenants. This property passes directly to the surviving co-owner and can include real estate, vehicles, and bank accounts.
- Life insurance proceeds; retirement accounts, pension plans or IRA proceeds; some banking and investment accounts. These assets pass in accordance with beneficiary designations.
- Assets subject to transfer on death on pay on death designations, which pass to the pay on death beneficiary.
- Any assets placed in a living trust, which will pass under the terms of the trust.
These assets all pass outside of probate.
5. Your will must be executed properly to be valid.
It must be:
- Signed by you in front of two witnesses who are not beneficiaries of the will and who know you are signing your will.
- Signed by the witnesses.
Friends, do not 2021 go by that you leave the matter of your estate unattended. Do not leave a mess for your family to deal with when you die. They will have enough on their minds with the grief of your loss, don’t add to their burden by not having planned ahead for their benefit.
For my guide to help you get started on organizing your thoughts and intentions for your will, trust or an update to your will, request your free copy of my guide by scanning the QR code here: