Survey after survey confirmsthat fewer than half of alladults, and even a smaller percentageof those with children, have awill. Physicians are notoriously deficient in this areaâ€”a recent survey showed thatnearly 80% of doctors had no will.
PLANNING YOUR FUTURE
The need for a will increases asyour family and assets grow or yoursituation becomes more complicated,through such events as divorce andremarriage. Once you start a family, itis imperative that you have a will. Awill lets you name a guardian for yourchildren. If no guardian is named, thecourt will usually choose among yourfamily members. You should also have awill if your assets are worth enough totrigger the federal estate taxâ€”morethan $1 million this year.
If you die intestate (ie, without awill), state law decides what happensto your assets. Because your wishesare likely to differ from state law, itbehooves you to have a will. Mostintestacy laws give a surviving spouseonly one third or one half of an estate.Stepchildren that have not been adoptedreceive nothing. Also, in statesother than Hawaii and Vermontâ€”andbeginning later this year, Californiaâ€”unmarried partners can't inherit fromeach other without wills.
Only assets that you own in yourname fall under a will's jurisdiction,which means that many assets don'tget passed on through a will. If youand your spouse own your home orinvestment accounts jointly with rightof survivorship, they automatically goto the survivor. Life insurance deathbenefits, balances in retirementaccounts, money in pay-on-deathbank accounts, and securities intransfer-on-death accounts also passto the listed beneficiary. Assets in arevocable living trust go to beneficiariesaccording to the trust.
Check with your local bar associationfor referrals to lawyers whospecialize in estate planning. Costsvary widely for a basic estate plan.Where you live and the reputation ofthe law firm you enlist influencecosts. An article in foundthat approximate attorney fees inseveral areas varied from $700 forsimple wills to $3000 for willsinvolving basic estate tax planning.
Young adults with modest assetsmay want to consider doing their ownwills. Software programs allowing youto do your will on a computer are becomingquite popular. Nolo (800-728-3555; www.nolo.com), a publisherof self-help legal materials, sawa 200% increase in sales of its estateplanning software in the 6 weeks afterthe September 11 terrorist attacks.Ralph Warner, a founder of Nolo,stresses that do-it-yourself wills areideal for the individual whose life situationis fairly straightforward. Themore complicated your estate or familysituation is, the more sense itmakes to get somebody who knowsmore than you doto talk you throughit, he says.
WillPower through BlockFinancial ($29.95;www.kiplinger.com)and Quicken Lawyer2003 Personal through Nolo ($49.95;www.nolo.com) are 2 solid softwareprograms available on the market.
ESTABLISHING THE POWER
Wills can make use of trusts togive you even more flexibility. Youmight set up a trust to hold funds foryour children, with a trustee distributingthe money as needed for theireducation, health, and maintenance.You decide the ages at which the childrenget the principal, as well as howthe money is divided among them.
You can also incorporate provisionsinto your will to ease the effectsof the federal estate tax. In addition topermitting each person to leave $1million in tax-free assets, federal lawallows you to leave an unlimitedamount for a surviving spouse.However, it would be a mistake toleave everything to a spouse if itinflates the survivor's estate to thelevel at which it may be hit by the tax.
To avoid this possibility, the articlenotes, couples should make sure thatthey each own enough individually totake advantage of the $1-million tax-freeallowance (this might mean splittingjointly owned assets).Then, bothhusband and wife could include a"bypass" or "credit-shelter" trust intheir wills to hold $1 million, fromwhich the survivor would get all theincome and possibly some principalduring their lifetime. Upon thespouse's death, the balance would goto the children tax-free (rather thanbeing included in the survivingspouse's estate).