Why you need a Will (at least).
I often tell my clients that the necessity of estate planning is not truly apparent until a person dies without a plan. This leaves children and other loved ones in the position of figuring out how to get things sorted. Executing a will can clarify who you want to be in charge of things and how assets are to be distributed. The process of setting up the will can also help to organize assets. Let’s look at some of the key reasons to set up a will.
In Massachusetts, there is a statute that sets forth who has the right to inherit assets when a person dies without a will (intestate). This means that, without a will, you have no control over how your assets are distributed. This could be a problem for many reasons. For example, if there is a child with special needs or who is bad at handling money, distribution of their statutory share to them could cause problems. A will could contain a provision stating that the child’s share should be held in trust for their needs.
In the event that there are no children, distribution of assets under the statute could result in what we call “laughing heirs”. Your nephew in Alaska who you haven’t seen in thirty years would be happy to inherit part of your estate! Again, a will could specify exactly who receives assets, eliminating a distribution of assets to those with whom you have no relationship.
The process of setting up a will often helps to organize assets. A recent meeting with a client and his three daughters included a review of life insurance policies that had not been looked at in quite some time. We were able to inventory the policies and determine whether the beneficiary designations on the policies needed updating. We were also able to inventory the rest of his assets, which will help his daughters down the road if something should happen to their father.
Another incredibly important reason to have a will is to name guardians and/or conservators for minor children. Without such a designation in a will, anyone could petition the probate court to be named guardian and/or conservator. Of course, the court would not allow just anyone to fill that role, but if there are multiple individuals petitioning the court and there is no will for the court to rely on, it will be in the discretion of the court to choose the right individual. And who knows if the parents of that minor child would have agreed with the court.
Finally, there is a misconception that you need a huge amount of assets to do “estate planning”. Estate planning includes the preparation of documents other than wills. Powers of attorney are documents that name agents to make decisions on behalf of someone if they are alive but incapacitated. In other words, the power of attorney would name someone to pay bills or make health care decisions if something happens to the principal. Choosing the right person to fill this role is very important. Without a designated agent, the prospect of guardianship and/or conservatorship again pops into play.
For these reasons and many more, we think it is very important to have proper estate planning documents in place. The cost of planning is minor compared to the cost and difficulty encountered without a plan in place.