Do I Need A Will?
When clients call and ask us if they need a will, we almost always reply in the affirmative. Why? Because without a will, your assets will not necessarily go to whom who wish. Further, the Court will appoint an “administrator” and this may not be the person you wanted to carry out your wishes. Finally, tax planning for your assets will be up to the state and the federal government for those without a will.
Some clients report that their assets are minimal. Nevertheless, they often fail to remember life insurance (which can pass outside the will, but should be factored into the plan) and personal injury and wrongful death actions. Some folks report that they have only two children and the Court would split their assets equally anyway. They fail to realize that there could be a fight about who should be the executor and how much that executor should get paid.
Therefore, a properly executed will assists the Court in following your wishes. There are a few basic elements in the simple will. First, who do you want the assets to go to? If you are married and have children, this is usually clear. If you have children from multiple relationships, it can take on another level of complexity. Second, who do you want to be the executor, and the alternative executor? Be careful, your son the accountant in Boston may be insulted if you name your sister in California. They are entitled to a fee, which must be submitted to the Court. Third, who should be the trustee of any testamentary trusts (typically money left to your minor children). Again, be careful, this may not be the person who would take care of the children. Fourth, who should be responsible for your minor children? The Probate Court must act in the best interests of the children; however, the judges will look at your recommendation as critical.
How do you avoid Probate Court? Fortunately, many assets pass outside the will and avoid Probate Court, such as retirement plans like 401(k) and IRAs. Therefore, it is important to name your beneficiaries carefully, and to update those beneficiaries when you have a change in circumstances. Life insurance generally passes outside the will the same way. The person you name as your beneficiary will receive the proceeds outside of any Court order. Finally, joint accounts and jointly held real estate, if properly drafted, will pass outside the Probate Court. Undertaking planning for the above can save your heirs money and aggravation during a trying time.
For the affluent, avoiding Probate takes on additional layers of complexity. However, the simple explanation is that you have a lawyer draft a Trust, or a series of tax and probate avoidance trusts; you execute the Trust; and, you “fund” the trust with assets or the promise of assets (such as life insurance proceeds). This methodology can avoid your assets being reviewed by the Probate Court, however, it necessitates strict attention to the rules of the Trust, annual tax returns by the Trustee, and other legal requirements that most people want to avoid.
The bottom line is that for anyone with any assets whatsoever, meet with your lawyer, make a plan, and EXECUTE THE PLAN!