If you die tomorrow, would it matter who received what you left behind? If the answer is “yes,” but you have not yet written a will, then there has never been a better time than now.
No matter how big or small your assets, whether you have children, are married or single, it’s important to write a will that specifies exactly what will happen to your property after you pass away. While most people realize the importance of having a will, many continue putting it off until it’s too late.
Do you really want the state to decide who gets (or doesn’t) get what? That’s exactly what will happen in the absence of a will. Depending on which state you live in, your property and assets will be handed down to your spouse or children, or if you have neither, your other closest relatives. But it may not be the same formula you would have chosen had you written a will.
Example: Even if you express during your lifetime to friends and family how you want your money to go to a niece or nephew for education expenses, but don’t specify those wishes in a will, it will instead go to your parents, or your siblings if your parents are deceased. It’s ultimately up to whomever inherits the money to use it for your niece or nephew’s education. After you die, if you have no will, you also have no control.
In legal terms, the laws pertaining to those that die without a will are called intestate. Following are different scenarios for how a person’s estate would be distributed according to intestacy laws:
Married with no children: state laws vary widely. For instance, in some states, such as West Virginia, the surviving spouse receives 100% of your property and assets. In others, only one-third to one-half of the estate is handed to your surviving spouse, while the rest is inherited by your parents. If the parents are also deceased, then the remaining one half to two-thirds of the estate is given to your siblings.
Married with children: Again, state laws vary. Usually, if you have had one or more children with your current spouse only, then your spouse will inherit all of your estate. But some states only designate one-third to one-half of the estate to the surviving spouse, while the rest is distributed among the children.
Married with children and stepchildren: This is yet another complicated scenario that differs from state to state. Typically, your children will inherit a specific percentage of your estate, while your spouse will receive another percentage (usually greater than half).
Married with children in current and previous marriages: The estate distribution is similar to the above situation, except it’s usually split more evenly. For example, in West Virginia, half of your property and assets will be split between all your children, while half is given to your current spouse.
Single with no children: If you’re single, having a will is still important, however the absence of one is much less of a complicated distribution process than being married. In most states, 100% of your estate will either go to your parents, or will be split evenly among your siblings if your parents are deceased.
Single with children: In this case, if you die without a will, your estate will typically be split evenly between your children.
Special scenarios: If you have no living spouse, parents, or children, your estate will typically divided among any of your living next-of-kin (grandchildren, siblings, nephews and nieces, grandparents or their descendants). If necessary, a search will be made to identify any living next-of-kin, including half siblings, uncles and aunts and half-blood aunts and uncles. There are no special provisions to cover other unique situations, however, so if you have no living family, your hard-earned assets could go straight to the government in the absence of a will.
Taxes: I shouldn’t neglect to mention your estate is also required to pay federal estate taxes if its net value when you die is more than the exempt amount ($5.43 million as of 2015) set by Congress at that time. Every dollar over the exempt amount is taxed at 43.4% (39.3% + 3.8% additional tax as a result of the Affordable Health Care Act). Click here to read about how gifts to non-profit organizations and other individuals during your lifetime can help reduce your estate taxes.
Bottom line: For many, intestacy can be the most expensive version of estate “planning.” With that in mind, commit to writing a will today in order to transfer your estate to those who can best benefit from it, as well as protect it from significant taxes.
It’s also important to keep your will up-to-date in order to ensure your wishes are fulfilled. When major life changes take place, such as marriages, divorces, births and deaths, review your will and make the necessary changes. Your family will appreciate your diligence, and you’ll have a piece of mind knowing your money will go where it belongs when you’re no longer here.