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By our sheer numbers and interests, Baby Boomers are destined to change retirement forever. Many of us will continue to work; others will "downshift" or move to the Sun Belt. Find help with your dream here.
Do I Need a Will?

As aging Boomers, sooner or later, it finally dawns on us that we are not going to live forever. One of the questions this realization spurs is the inevitable: Do I need a will?

The answer to this question depends upon your circumstances. Unfortunately, too many people are steered to the wrong answer by some common misconceptions:

1. My spouse will get everything anyway.

This misconception can be disastrous for your surviving spouse. If you die with assets in your name only, the division and distribution of these assets is governed by the “intestate” law of the state in which you reside. In Pennsylvania, this law provides that if you are survived by your spouse and children, your spouse receives half of your assets and your children the remaining half. If you have minor children, the court must appoint a guardian or custodian to oversee their share of your estate. Because of the potential for abuse, the court will not choose your spouse. If your residence was in your name alone, your spouse will need the consent of the guardian and court permission to sell the property. If you are survived by your spouse and your parents (no children), your spouse receives half of your assets and your parents the remaining half. A will allows you to leave your surviving spouse all your assets if you wish.

2. Having a will means that a lawyer gets to take a big fee out of the estate.

Whether there is a will has little impact on the need for an attorney, as there are many legal tasks that must be accomplished in order to legally pass your assets to your heirs at your death, with or without a will. By making decisions and specifying them in your will, disagreements among heirs and the need for court approval can be minimized or avoided, resulting in decreased legal fees.

3. Without a will, the state will get all of my assets.

You have to be pretty alone in this world for the state to receive your assets. You must be without a spouse, children, grandchildren, parents, siblings, grandparents, aunts, uncles or cousins before your assets will pass to the state. But you may prefer your assets to pass to a close friend or charity before benefiting your cousin in Wyoming whom you have not seen since you were two. A will allows you to direct whom you want to receive your assets and in what amounts

4. Having a will automatically reduces taxes.

Having a will does not in itself save taxes. Whether your assets pass to your children according to the intestate statute or you write a will leaving everything to your children, the state inheritance tax and federal estate tax will be exactly the same. However, it is possible for a married couple with a substantial estate to transfer $1,500,000 each (in 2005; under current federal tax law this figure increases to $3 million by the year 2009, then returns to $1 million in 2011) to their heirs without paying federal estate taxes through the use of trusts in their wills. By properly establishing trusts in their wills and properly allocating their assets, thousands of dollars in federal estate taxes can be avoided upon the death of the surviving spouse.

5. Once I prepare a will, everything will pass to the persons indicated in my will.

This can also be a disastrous misconception. A will only controls assets in your name. There are many types of assets that do not pass under a will and therefore are not part of your estate. Life insurance, annuities, retirement benefits and IRAs are payable to the person specified on the beneficiary designation forms. Unless you specify on each beneficiary designation form that your estate or a trust under your will is to be the beneficiary, these assets will not pass according to the terms of your will. Other assets that do not pass under your will include assets owned by husband and wife as tenants by the entireties and assets owned by two or more persons as joint tenants with rights of survivorship, such as bank accounts that are in the name of you and your child or the house that is titled to you and your mother. These assets automatically pass to the surviving owner regardless of what is said in your will. (Note: Though they do not pass through your will, these assets are still subject to state inheritance tax and federal estate tax.)

Other factors to consider:

~~ If you die without a will, the court will appoint the Administrator of your estate. Called an Executor if appointed by will, this person has the job of finding assets, paying debts, paying taxes and distributing whatever is left. Sometimes there are disputes about who should be Administrator. If your heirs do not agree, a bond is required for the Administrator to serve. A will allows you to name the person you want to act in this role, thereby eliminating disputes, the need for a bond, and reducing administration costs.

~~ If you die without a will leaving minor children with no surviving parent (for example, both mother and father die in the same tragic accident), the court will appoint the guardian of your children. Anyone who is interested can ask the court for the position. The judge must decide without benefit of your opinion who will do the best job of raising your children. A will allows you to name the person you want as guardian of your children.

If you die without a will and minors inherit all or part of your assets, the court appoints the “guardian of the estate” who is responsible for managing these assets until each child turns 18, at which point each child receives their share of the property outright. A guardianship requires court supervision. The types of investments that are allowed are limited and the guardian is required to ask court permission for distributions of principal. A will allows you to establish trusts for the benefit of minor children in which you name a trustee, specify what the income and principal can be used for, and at what age the child is to receive the balance of the inheritance outright, free of trust. The trustee is not required to obtain court approval before distributing principal.

So ask yourself: Do I need a will? If all of your assets are jointly titled or pass by beneficiary designation and you have no minor children (or grandchildren) and your assets are less than $1.5 million, a will may not be necessary. If you have any assets that are in your name individually and you have minor children, it is imperative that you prepare a will. If your assets, including life insurance, exceed $1.5 million, it may be costly for you not to have a will.

By Colleen Kilbert, Esq.

Colleen is an attorney experienced in estate planning and administration. 

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