You may be surprised to learn that even if you don’t have a written will, your state of residence has a plan in place for the disposition of your assets; this is called dying intestate. If you die without a will, your spouse won’t necessarily inherit your entire estate. State laws typically entail dividing the estate between the surviving spouse and living children. A will allows you to decide who receives your assets and how much, rather than the courts deciding. A will is essential for complex financial situations, large estates, business owners, charitable or legacy desires, or ownership of property in multiple states.
Assets that pass according to your will include individually registered accounts, personal property (jewelry, antiques, etc.), tenants-in-common accounts, community property accounts, real estate owned in other states, and any accounts in which the named beneficiary is your estate.
Certain assets pass to heirs outside of the will via beneficiary designations. Such accounts include IRAs (individual retirement accounts), Roth IRAs, annuities, 401(k) plans and other employer sponsored retirement plans, certain pension benefits, transfer-on-death accounts, life insurance, joint accounts with right of survivorship, and certain trust accounts.
There are many questions to consider prior to drafting your will. After your death, to whom and how would you like for your assets to be distributed? Would you like your assets to pass to non-family members or to leave specific bequests? What if that person predeceases you; who would you prefer to receive those assets? Is minimizing estate taxes for your heirs important to you?
A will is particularly important if you have minor children because it enables you to name guardians; without a will, the court will decide. It is also important to name a trustworthy executor to administer your estate. All executors, Trustees and guardians (if applicable) should have successors, in the event your initial choice is unable or unwilling to fulfill the duties.
Once you’ve determined your estate goals, an estate attorney and CFP® practitioner can coordinate your will, account titling, and beneficiary designations to ensure everything passes to your heirs just as you wish. Be sure to update your plan if you experience a major life event such as the birth of a child, death, divorce, or simply a change in your wishes.