Most people understand the necessity of having a last will. Even if you're young and just starting out, you have some assets, so it's important to have a last will. As you acquire more assets or start a family, the importance of having a will grows.
Financial and legal experts recommend basic estate planning for everyone, but there are many misconceptions about how wills and other estate planning documents work. Don't let unfamiliarity stop you from properly planning your estate. Here are some frequently asked questions—and their answers—to better acquaint you with the estate planning process.
Q: What happens if a person dies without a last will?
When a person passes away without a last will, the person's assets are probated or passed through the courts for distribution according to the laws of intestacy. In other words, the deceased person's assets will be distributed according to the laws of the state—not necessarily according to the deceased's wishes.
The laws of each state vary, but the money and other assets typically pass to the spouse first. For example, in California, all the property acquired during the marriage passes completely to the spouse. Any property acquired before the marriage or inherited is split between the spouse and any children.
If a person dies without a living spouse, the estate passes to the children, if any, equally. If there are no children and no spouse, but living parents, the estate passes to the parents. Generally, the state will attempt to find any living relatives and pass the estate to them.
In the event that there are no blood relatives, the estate passes entirely to the state.
Q: What happens after someone who has a last will passes away?
The probate court disposes of the assets in accordance with the last will and the law.
Q: Does a person have to have a minimum amount of assets to create a last will?
No—a person can create a last will to dispose of assets worth $10 or $10 million. Of course, the distribution of those assets can have tax implications. For that reason, it is important that you understand how inheritance will be taxed as you make your estate planning decisions. It is often wise to consult with estate planning professionals, especially for large or complicated estates.
Q: What is the difference between a living will and a last will?
The basic difference is that a last will is used to dispose of assets after death. A living will can be used to provide health care instructions in advance, such as whether or not life support is desired.
Q: What are the main benefits of a living trust vs. a last will?
A last will's main benefit is its simplicity. Anyone can write a last will. The drawback is that your family members may have to wait months or even years until your property goes through the courts and is distributed.
A living trust, on the other hand, can be used to transfer property and assets to beneficiaries without going through the probate process. This can save years of time and thousands in fees. Also, it keeps your estate private, whereas a last will, once probated, will become public record.
People often use a last will and a living trust together. A last will can be used in conjunction with a living trust to name guardians for minors and express final wishes not otherwise captured in a living trust.
How do I decide what's best for me?
As you can see, wills are not necessarily complicated. They are actually among the simplest legal documents. Whether or not a will is wholly adequate for your estate planning needs depends on your individual circumstances. If you're unsure what you need to protect your family, consult a lawyer. The most important thing is that you don't neglect planning your estate. It's the best way to protect your loved ones and make sure your assets are distributed according to your wishes.