Most people understand the necessity of having a Will. Even if you're young and just starting out, you have some assets, so it's important to have a Will. As you acquire more assets or start a family, the importance of having a Will grows.
Lawyers and financial planners recommend basic estate planning for everyone, but there are many misconceptions about how Wills and other estate planning documents work. Don't let unfamiliarity stop you from properly planning your estate. Here are some frequently asked questions—and their answers—to better acquaint you with the estate planning process.
Q: WHAT HAPPENS IF A PERSON DIES WITHOUT A WILL?
When a person dies without a Will, the person's assets are probated and distributed according to the laws of intestacy. In other words, the deceased person's assets will be distributed according to the laws of the state—not necessarily according to the deceased's wishes.
The laws of each state vary, but the money and other assets typically pass to the spouse first. For example, in Washington and Idaho (both community property states), all the property acquired during the marriage passes completely to the spouse. Any property acquired before the marriage or inherited is split between the spouse and any children.
If a person dies without a living spouse, the estate passes to the children, if any, equally. If there are no children and no spouse, then to grandchildren and other descendants. If there are no living descendants but living parents, the estate passes to the parents, and then to siblings and siblings' descendants. Generally, the state will attempt to find any living relatives and pass the estate to them.
In the event that there are absolutely no blood relatives (descendants, parents, siblings, nieces and nephews, grandparents, aunts, uncles, cousins, or any of those people's descendants), the estate "escheats" (it goes to the state).
Q: WHAT HAPPENS AFTER SOMEONE WHO HAS A WILL DIES?
The probate court supervises the distribution of the assets in accordance with the Will and the law.
Q: DOES A PERSON HAVE TO HAVE MINIMUM AMOUNT OF ASSETS TO WRITE A WILL?
No—a person can create a Will to dispose of assets worth $10 or $10 million. Of course, the distribution of those assets can have tax implications. For that reason, it is important that you understand how inheritance will be taxed as you make your estate planning decisions. You should consult a lawyer, especially for large or complicated estates.
Q: WHAT'S THE DIFFERENCE BETWEEN A WILL AND A "LIVING WILL"?
The basic difference is that a Wil is used to dispose of assets after death. A "Living Will" (technically called a Directive to Physicians or a Health Care Directive) can be used to provide health care instructions in advance, such as whether or not life support is desired.
Q: WHAT ARE THE MAIN BENEFITS OF A WILL VERSUS A REVOCABLE LIVING TRUST?
A Will's main benefit is its simplicity. Anyone over 18 and with mental capacity can write a Will. The drawback is that your family members may have to wait months or even years until your property goes through the courts and is distributed.
A Revocable Living Trust, on the other hand, can be used to transfer property and assets to beneficiaries without going through the probate process. This can save years of time and thousands in fees. Also, it keeps your estate private, whereas a Will, once probated, becomes public record.
People often use a Will and a Revocable Living Trust together. A Will can be used in conjunction with a Revocable Living Trust to name guardians for minors and express final wishes not otherwise captured in a Revocable Living Trust.
Q: HOW DO I DECIDE WHAT'S BEST FOR ME?
Your estate planning needs depend on your individual circumstances. If you're unsure what you need to protect your family, consult a lawyer. The most important thing is that you don't neglect planning your estate. It's the best way to protect your loved ones and make sure your assets are distributed according to your wishes.
If we can be of service to you, your family, friends, neighbors, or co-workers, give us a call at 253.858.5434 to set up an appointment today. We proudly represent clients throughout Washington and Idaho and are available to meet in person, by phone, or via Skype or FaceTime.