The Planner's Perspective: Why Have A Will?
By Paul Morrone, CFP ®, CPA, MSA
It’s very common to see a couple that had a will made up when their children were born that is over 20 years old, and unfortunately it is even more common to see a couple that has not done any estate planning at all.
Many assume that if they aren’t rich that they don’t need an estate plan. This is absolutely not true, as estate planning applies to even the simplest households because many of the key documents and appointments have nothing to do with how much money you have.
A simple will has multiple functions, the most widely known of which is the ability to spell out who gets what at your demise. While that is a primary purpose of a will, it also has several other functions that are equally, if not more important. The will also serves to appoint fiduciaries (executor/executrix) to administer your estate at your death. This is the individual responsible for working with the probate court, your attorney and other advisors to help distribute your assets to your heirs in the manner documented in your will.
A will may also include provisions to provide guardianship for an individual’s minor children, hence why many people draft wills once their first child is born. While this is important to the development of a young child, other considerations should be taken to describe what happens to an individual’s money and assets if they are to be left to a minor child. This often includes the inclusion of a testamentary trust within the will which would place the decedent’s assets under the control of a trustee for the benefit of the child until they are financially responsible enough to manage the funds themselves.
Defining who the responsible parties are often times more challenging than deciding who gets what, especially if there are tensions within a family, geographic barriers or differences in beliefs. Just because it is challenging, however, is not an excuse for avoiding these issues all together. Passing away without a will subjects your estate to administration through your state’s intestacy laws, which is a predetermined process of distributing your assets and does not take into account your wishes. If you have minor children, the court will also be forced to appoint a guardian for the kids and that individual may not be the one you would have chosen yourself.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.