Why Do You Need a Will?
If you have attended any programs on financial planning or read up on planning for your estate, you probably have heard the expression more than once that you must have a Will. The thought is that a Will can resolve all issues concerning distribution of your assets on your death. Unless all of your assets are titled in your name alone and you have no life insurance or retirement funds that name beneficiaries, a Will is a reasonable first step but only a first step. Why you need a Will in a given situation and what happens if you have none is part of an overall estate plan. The estate plan which includes but does not stop at a Will can be much more important.
What does a Will do? A Will distributes assets that are in your name alone and have no beneficiary. It also does not cover assets that are TOD (Transfer on Death) or POD (Payable on Death). Why do you need a Will? You need it to distribute just those assets that do not pass in other ways.
Think about this for a moment. If you are married, the chances are that you titled your house in joint name with your spouse. You also have jointly titled all or most of your bank and investment accounts. Some parents have titled assets jointly with one or more children. All of these dispositions go outside the Will and override any provisions you might have stated in your Will. The joint owner inherits everything.
Similarly, if you have life insurance or an IRA, 401(k), or 403(b), the proceeds go to your beneficiaries, unless you failed to name beneficiaries and then they might go to your estate and be distributed according to your Will.
Do you get the idea?
Where Wills become most important is where assets are titled in an individual’s name and have no beneficiary. Then it is especially important to have a Will and this is why.
State intestacy laws decide where individually titled assets go without a Will. If you die without a Will and while owning assets that are not jointly titled with right of survivorship and have no beneficiary designation, then it is most likely that the state laws of the state where you are a resident, known as the intestacy laws, will decide where those assets go. Remember, the intestacy laws apply only to assets that do not go to a joint owner or to a beneficiary.
The results may not be what you expect.
Here are some examples of disposition of individually titled assets with no beneficiary where there is no Will and the decedent dies as a Pennsylvania resident.
- If Decedent dies with a living spouse and no living children or living parents, then everything goes to surviving spouse.
- If Decedent dies with a living spouse and living parent or parents but no children, the spouse takes the first $30,000 of the estate plus ½ of the remaining estate. Parents take the rest. (That one and the next are probably surprises.)
- If Decedent dies with a living spouse and children and the children are also children of the spouse, then the spouse is entitled to $30,000 and ½ of the estate. The children divide the remainder equally. If the spouse is not the parent of the children, then the spouse receives only ½ of the estate.
- If the Decedent dies with parents and no children or spouse, then surviving parents share equally.
- If the Decedent dies with children and no spouse, the children take all equally in the same generation.
- If the Decedent dies with no spouse, children, or parents, then decedent’s brothers, sisters, or their children take all.
Parents of minor or disabled children should also be concerned about Wills since the Will can designate Trustees to handle assets for minors and disabled beneficiaries and guardians for minor children.
Without a Will it is quite possible for someone to leave everything to a relative or distant relative she never knew or from whom she has been estranged for years. This is a final reason for a person to take care of business before the State writes your Will.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.