While there are many reasons for having a will, here are my 6 main reasons why you need to stop procrastinating and get it done:
Reason #1: People who you don't want getting your stuff will get your stuff
If you die without a will (what the law refers to as dying “intestate”), all your stuff will be distributed according to the intestacy statute. In other words, the law will dictate who gets your personal property, real estate and financial assets. It will not matter what you thought about people or whether you wanted to give them something or not. The law will treat everyone entitled to get something the same. No discrimination.
Reason #2: People who you don't want touching your stuff will be the ones giving out your stuff
When you do a will, you appoint someone to be the executor, who is the person in charge of collecting your assets, paying your debts and handing out what's left after you die. The executor is also the one who decides who gets what and deals with any conflicts. So if you have something special like a neat fishing reel or American Doll collection that you want your nephew or niece to have, it is the executor's job to make sure that happens. But if you do not have a will, then someone in the family will have to go into court to be appointed, not as the executor, but as the administrator of your estate. It is likely this person will be motivated by their own personal interests and will not have the same level of patience to manage your estate than someone you specifically chose to do the job. The administrator can choose to work with the beneficiaries to see who wants what, but they can also simply throw up their hands and send everything to a cheap auction house to have your stuff sold for pennies on the dollar. Not a nice way to see your worldly possessions disposed of.
Reason #3: Your estate will need to purchase an expensive surety bond
Consistent with reason #2, the administrator will be required to obtain what's called a “surety bond.” A surety bond is an insurance policy to protect the beneficiaries from the administrator running off with all the money and leaving the beneficiaries out to dry. Not everyone will qualify for a surety bond (since they run a credit check and you need to own some assets) which may preclude someone who you may have wanted from being the administrator. Surety bonds are also expensive and a waste of money in the vast majority of cases. You can waive this bond requirement in your will as most do. But without a will, your estate will need to pay for a surety bond.
Reason #4: Someone who you don't want may end up raising your kids
For people with young children, this is probably THE MOST important reason to have a will since in the will, you can name a guardian for your minor children. The guardian is the one who will have physical and legal custody of your children. You should name someone who shares your most important values, philosophies and ethics. Of course, no one will be able to replace you, but if you do not want your sister-in-law or brother-in-law raising your kids, get a will and name the person you want.
Reason #5: Your kids will get their entire inheritance when they turn 18 (God forbid!)
Consistent with reason #4, without a will, your children will have complete and unbridled access to all the money left to them as soon as they turn 18. Think about how frightening that might be, and how that could alter their entire life – coming into hundreds of thousands of dollars (or maybe more) while still in high school! A will allows you to set up a trust for your minor children that will allow them to have limited access to funds for their health, education and welfare. The trust also defers the final outright distribution until your children reach a certain age that you choose, like 21 or 25. So until they turn the magic age of 21 or 25 this money can be used for their health, education and welfare. But that burning urge to buy that fancy red Ferrari will have to wait until they turn 21 or 25, when (hopefully) they are more mature and have more reasonable priorities.
Reason #6: You lose the opportunity to do tax planning
Not all estates are taxable, but if it is likely your estate will be assessed a tax, unless you have a will, you will lose the benefit of any tax planning. This applies to both estate taxes (assessed based on the size of your estate) as well as the New Jersey inheritance tax (assessed against certain classes of individuals) who stand to inherit your estate. Some of this tax planning is very simple and easy to do. But if it is not set forth in a will, you lose the benefit of any such strategies. For some people this can be a modest amount, but for high net worth individuals, you're are looking at big money to the government that could have been saved.
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