One of the most frequent questions asked in estate planning is whether a will is really necessary, particularly when someone has taken steps to avoid the probate process.
A last will and testament is one of the three documents which make up the foundation of an estate plan. The other two foundational documents, a general durable power of attorney and a health care power of attorney, are equally important but serve different purposes. Regardless of what additional estate planning documents are executed, every individual should have these three documents.
There are five common situations in which a will never may be needed but still should be executed.
First, many spouses with jointly held property neglect to create a will because they know upon the first death, the surviving spouse will continue to own the property.
However, without a will, the spouse usually is not the first person in line to receive any property not jointly owned, such as a vehicle. Further, even when all property is jointly held, upon the death of the second spouse, a case must be brought to court through the probate process in order to transfer property.
Second, individuals with beneficiary designations on all accounts often believe all property will transfer to beneficiaries without court involvement. To some degree, this is correct. Property with beneficiary designations will transfer directly to beneficiaries. However, payable on death provisions only transfer that specific account or asset.
Other types of property, such as real estate and vehicles, still pass through the court’s probate process. Similarly, if the beneficiary was deceased, that beneficiary’s share may pass back into your estate, forcing distribution only through probate.
Third, people who believe they have nothing often fail to create a will because they believe there will be nothing of value to transfer through probate. It is important to understand in this scenario upon death, nothing in your name alone can be transferred without court approval. Further, if your estate is able to file a lawsuit for any reason involving your death, your estate may have money to distribute that you never anticipated.
Fourth, too often individuals believe because they have a power of attorney in place, the power of attorney simply can continue to pay expenses of property and ultimately to distribute property. This belief is incorrect. To be clear, a power of attorney expires upon the death of the individual for whom the power is given. An agent under your power of attorney cannot take any action after you die.
Fifth, when someone creates a trust to hold property, a will is necessary to funnel unfunded property into the trust upon the death of the grantor. Because trusts are individually created for a number of different purposes, they do not all hold the same types of property. Property which is never funded into the trust, whether intentionally or inadvertently, should have a way to get into the trust upon the grantor’s death. This may be through a payable-on-death designation, if available, or a will.
Without a will, property unintentionally may pass to someone potentially undesirable. Having a will lets the court know who should receive your property, as laws regarding property distribution without a will do not often follow what we expect to be the natural choices.
Regardless of how much or how little property you have, without a will, you surrender the ability to determine who will receive any of your property.
Write down your wishes and expectations and be sure your document is legally enforceable upon your death. Create a will to ensure your desires for your family and your property are followed.