Where there’s a will…

… there’s a way (or so they say). And, in fact, it’s true – almost everyone should have a will. Even if you have a trust. And even if you are young, of modest means, and perfectly happy with the state’s “default” plan for distribution of your property. Here’s why:

What if you have a fully-funded trust, but are killed by a drunk driver, or by medical malpractice? Your estate (NOT your trust!) could become the plaintiff in a multi-million dollar lawsuit, or the recipient of a large settlement or insurance payout. Even if you have a trust, those proceeds would be coming to YOU – and hence, to your estate – not your trust. This is just one example of why the ‘pour-over’ will is an important part of a trust plan.

Or what if you learn that you were named as a beneficiary of someone else’s estate, such as a distant relative or long-lost friend? And then, by a twist of fate, you die before actually receiving your inheritance? (This actually happened in an estate I was recently called upon to help administer.) While money you had actually received prior to your death could have been placed into an account in the name of your trust, unless you also had the forethought to assign your right to future distributions to the trust, those funds would be a “probate asset” that would pass according to your will (or, if you had none, to your heirs – rather than to your trust or the individuals you would have designated in your will).

So those are some good reasons to have a “pour-over” will even if you have a trust.

But what if you are young, or poor, and you’re perfectly fine with your assets passing to your legal heirs (those who will get your stuff if you don’t have a will)? Why should you spend the time and money to make a will?

Well, consider the above examples, which are just a few of the many ways that large sums or other assets could come into your estate as a result of your death, or shortly before or after you die. Are you still comfortable with even a very large sum passing by intestacy? (Do you even KNOW where it will go? If you live in Hawaii, and are married, it can be difficult to even determine how much will pass to your spouse – some may go directly to your children or even to your parents, if they are alive!) If you have a small estate, it may all go to your spouse, but if it increases substantially, it is possible that large amounts will go to your children (even if they are minors) or parents. Conversely, the size of your estate may go down, if you are found liable for an accident or incur large medical bills, and that too can change how your assets are distributed.

You need to be sure that your plan will work as you wish even if the size of your estate changes substantially, in either direction, and one way to do that is to work with an experienced estate planner, who can help you to think of different “what ifs” and design a plan that will work with all of them.

Finally, what if you move to a different state? While state laws can affect the precise way in which an estate will be distributed even if you have a will, most states provide that a will is valid for someone dying in the state, if it was valid “when and where” it was made. This means that at least most of the provisions in your will (if you have one) will control things after you are gone, even if you move to a new state. Moreover, in most states, the individual named in a will has priority to serve as executor (there may be some ‘glitches’ – for example, some states have residency requirements for executors, so a non-resident might not qualify), so at least you will have some assurance that you will have your chosen person “in charge” and making the necessary decisions. If you have NO will, however, and you move to another state, the entire scheme of distribution (and even the persons who have priority to serve as executor) can be changed drastically.

These are just some reasons why almost everyone should have a will – regardless of their wishes, family or financial circumstances.

Published in: on July 20, 2014 at 11:06 pm  Leave a Comment  

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