Wills Necessary for All Estates, Not Just Rich and Famous
Tips from Bills.com can help anyone get ready to prepare a will
March 19, 2008 — Leona Helmsley's will specified that her dog, Trouble, would receive $12 million for its care after her death. Former Supreme Court Chief Justice Warren Burger jotted a short will that overlooked the matter of estate taxes, costing his heirs thousands of dollars. Richard Nixon left behind specific instructions on how to handle his personal papers. But Bills.com co-founder and co-CEO Brad Stroh notes that while famous people sometimes are equally famous for their unusual wills, everybody needs a will to provide for the handling of their estate.
"A will makes important provisions for how to handle an estate after its owner's death -- and an estate can be as simple as a bank account, a car or a home," Stroh said. "If you do not establish a will, the state decides how to handle your possessions and responsibilities, and legal provisions might not be your first choice."
A will names the executor who will take care of an estate; a guardian for minor children; and a trustee who will manage any money or property left to minor children, or in some cases, others. A will also can specify that particular items be left to certain people.
For those who die intestate, or without a will, the state makes all these decisions. The courts choose a guardian for children and divide possessions according to state law. Laws vary by state, but generally, a married person's possessions would go to a spouse (or, in some cases, a domestic partner) and children; an unmarried person's belongings would go to parents and siblings. Friends, unmarried partners and charities would receive nothing. For those with no living relatives, all possessions would go to the state.
To plan for their family's future, Stroh advises individuals to consider these steps:
- Make a will. A simple will typically costs a few hundred dollars as drafted by an attorney. Those in dire financial straights might consider pro bono legal services, Stroh said. Several companies offer "write your own will" forms, but it generally is best to hire a lawyer to write the will. Matters relating to estate taxes, provisions for children, care of disabled relatives and disposition of business matters can be complicated and not fit into a standard format. Usually, an estate with a will costs less to administer than an estate without a will that must go through probate, or the court-supervised administration of an estate.
- Understand property ownership. Property owned by "joint tenancy with right of survivorship" automatically goes to the co-owner in the event of either owner's death. This process skips the probate process and provides for a smooth, non-public transfer. Two people who want their share to go to someone else (like a child) separately should have ownership as tenants in common, not joint tenancy.
- Update contracts. Many financial instruments, like insurance policies and retirement plans, ask owners to designate a beneficiary or beneficiaries at the time the document is established. If anything changes after a will is created, such as a marriage, divorce, death, or other relationship-changing event, be sure to update these contracts. Otherwise, a former spouse could receive life insurance proceeds, or a younger child might receive nothing from a policy purchased before his or her birth.
- Consider estate tax. Current tax law provides for tax exemption for estates below $2 million. However, many households can reach this total before they realize it, Stroh noted. Trusts and other mechanisms can soften the pinch of taxes; check with a tax advisor.
- Plan for powers of attorney. Besides a will, an estate plan should include establishing a power of attorney for trust (managing resources) and for health care (having the say on medical care when a person is unable to speak for her/himself). These important documents ensure your wishes are respected.
"In the end, whether you are a hotel magnate or an average Joe, having a will is an important step in your personal financial plan," Stroh said. "Your family, your loved ones and -- just maybe -- your pets will thank you for the peace of mind it provides."
Based in San Mateo, Calif., Bills.com is a free one-stop online portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans.
The company blogs about consumer finance issues. Since 2002, Bills.com has served more than 30,000 customers nationwide while managing more than $1 billion in consumer debt. Bills.com is a division of Freedom Financial Network, LLC, whose co-founders and CEOs, Andrew Housser and Brad Stroh, have been named Northern California finalists in Ernst & Young's Entrepreneur of the Year Awards.