Reasons Why You Need a Will
Most people fail to
appreciate the full importance of a will, especially if they feel their estate
is too small to justify the time and expense of preparing one. And even people
who recognize the need for a will often don't have one, perhaps due to
procrastination or a disinclination to broach the subject of mortality with
Here are five basic
reasons why you should have a will:
Reason 1: To Choose Beneficiaries
The intestate succession laws of the state in which you live determine how
your property will be distributed if you die without a valid will. For example,
in most states the property of a married person with children who dies intestate
(i.e., without a will) generally will be distributed one-third to the spouse and
two-thirds to the children, while the property of an unmarried, childless person
who dies intestate generally will be distributed to his or her parents (or
siblings, if the parents are deceased). These distributions may be contrary to
what you want. In effect, by not having a will, you are allowing the state to
choose your beneficiaries. Further, a will allows you to specify not only who
will receive the property, but how much each beneficiary will receive.
Note: If you wish to leave property to a charity, a will may
be needed to accomplish this goal.
Reason 2: To Minimize Taxes
Many people feel they do not need a will because their taxable estate does
not exceed the amount allowed to pass free of federal estate tax (for those
dying in 2006-2008, this amount is $2,000,000 plus whatever goes to a surviving spouse
or charity). However, your taxable estate may be larger than you think.
For example, life
insurance, qualified retirement plan benefits and IRAs typically pass outside of
a will or of estate administration). But these assets are still part of your
federal estate and can cause your estate to go over the threshold amount. Also,
in some states an estate becomes subject to state estate or inheritance taxes at
a point well below the $2,000,000 mark. A properly prepared will is necessary to
implement estate tax reduction strategies.
TIP: Changes in the size of your estate may warrant a
re-examination of your estate plan.
Reason 3: To Appoint a Guardian
If for no other reason, you should prepare a will to name a guardian
for minor children in the event of your death without a surviving spouse. While
naming a guardian does not bind either the named guardian or the court, it does
indicate your wishes, which courts generally try to accommodate.
Reason 4: To Name an Executor
Without a will, you cannot appoint someone you trust to carry out the
administration of your estate. If you do not specifically name an executor in a
will, a court will appoint someone to handle your estate, perhaps someone you
might not have chosen. Obviously, there is an advantage, and peace of mind, in
selecting an executor you trust.
Reason 5: To Establish Domicile
You may wish to firmly establish domicile (permanent legal residence)
in a particular state, for tax or other reasons. If you move frequently or own
homes in more than one state, each state in which you reside could try to impose
death or inheritance taxes at the time of death, possibly subjecting your estate
to multiple probate proceedings. To lessen the risk of this, you should execute
a will that clearly indicates your intended state of domicile