We all have worries about the future that cross our minds occasionally. Have you ever thought about what may happen in the future with your finances if you haven’t gotten your affairs in order? While it can feel far off or daunting to think about creating a will, it’s a valuable document for you and your family.
Here we’ll explore what will happen if you die without a will and why having one is essential.
A will is a legally binding document that specifies how your property and assets will be distributed after your death.
A will lets you be clear about who you want to receive your assets- including, but not limited to, bank accounts, property, possessions, family business, investments, etc.
A Will Affects More Than Just You
Another essential feature of this legal document is that you can identify who will care for your children -if you have any- should anything happen to you. This will apply when you become incapacitated and unable to care for them or if you and your spouse pass away.
This is a process you should put careful thought and consideration into; it’s one of the more significant decisions you can make in your life. Discuss who you trust with your spouse and the individuals you’re considering appointing guardianship to.
This part of a will can help to avoid some confusion and chaos in the case of a tragic event. Also note that when it comes to pets, they will be viewed legally as one of your possessions or assets. So, you can still appoint someone to care for your pet should you pass away, but it will be framed as the person you choose becoming the beneficiary of this “item.”
You can also give gifts and charitable donations in your will, which could help you save money on your estate taxes. There are several ways to incorporate giving into your will: gift property or cash, go through a donor-advised fund, or even create your private foundation.
No matter which way you choose, leaving money to help others is always a good choice.
What Happens If You Pass Away Without A Will
Passing away without a will is known as “dying intestate.” You may also hear the term “intestate succession,” which describes the distribution when a person dies without leaving a valid will, and the spouse and heirs will take (receive the possessions) by the laws of descent and distribution and marital rights in the estate which may apply to a surviving spouse.
This means that the state oversees the distribution of your assets, typically according to a set formula. The exact process will depend on which state you live in. Various aspects within your assets will be considered separately in the case of intestate success, namely:
When it comes to where your money goes if you don’t have a will, where you live will make a difference due to varying state laws. Generally speaking, it will involve going to probate court, where the court will assign someone to be your estate’s representative to oversee your assets’ distribution.
Going through probate is also the only way your family can access any of your financial accounts (of all types) that you have not set up to transfer automatically to a beneficiary. In general, probate can be a lengthy and nuanced process.
The courts will also determine guardianship of your children. They do their best to make the right choice, but ultimately, they obviously don’t know your family as you do.
If no one volunteers to raise the children, there’s no guarantee they’ll be placed in your desired household without a will.
Assets and taxes
If your estate is valued over $12.92 million, Federal Law requires that it be taxed at 40%. But state taxes are different! States use their formulas to determine how to divide your estate taxes among your spouse and children.
If you’re married, your surviving spouse will likely receive a portion of your assets whether or not you have a will (in most states). Of course, this also depends on if you have previous spouses, children, etc. If you’re not legally married but are in a domestic partnership, your case will vary from state to state.
If you’re single, your children will inherit your entire estate unless otherwise specified with a will. If you don’t have children, it will move to your parents or siblings.
For many, if not most, of the scenarios we’ve listed, there is a degree of variance from state to state on how these matters are handled, so be sure to work with your financial advisor to understand what will apply to you.
The Importance Of An Estate Plan
As you can see, leaving things up to chance, or in this case, strangers, is different from how you want to go out. One of the most significant benefits of having an estate plan is that it can relieve your family’s stress.
A will gives exact instructions for how you would like your assets to be distributed, which can ease hard feelings between family members, help avoid messy court decisions, and generally make things more transparent and easy for your loved ones to deal with.
Even small details that can be included in a will, such as your online banking passwords or knowledge of where your estate plan documents are kept, can make a difference.
Leaving a Legacy
Lastly, your estate plan is also part of your legacy! It’s comforting to know that your assets can still make an impact after you’re gone. It can do impactful things for your family, charity, or both.
What things are you passionate about? Who could use your funds to push forward the change you want to see in the world? Who would most benefit from what you’re able to donate? These types of questions can help point the needle to direct you to where to leave your money after you’re gone.
Don’t wait until it’s too late- create a will for you and your loved ones’ peace of mind. Our financial planners have plenty of experience in this specialty and would love to help you. Contact us today!