What Happens If I Die Without a Will?
Dying without a will means you are what the courts consider “intestate,” which means laws of your state determine how your property is distributed. In most cases, your assets would go to your spouse,...
You have a Will! Congratulations. You are in the minority in the United States. Some surveys show that only 39% of people in the United States have a Will. When we look at the age bracket of 18-35 the percentage drops to 9%.
A Will is a documents that expresses your wishes as to who will receive your property when you die. Parents can also use this document to name a guardian for their children if both parents are dead. At Penglase & Benson we put a standard clause in that will create a Trust to hold all money and property being passed down to a minor if the minor is to receive the gift and be too young (in the parents eyes) to make good financial decisions. We usually have our clients break the gift down to thirds so that the child will receive a portion of their gift at three different ages as they grow up. A popular split is to have the child receive a portion of their inheritance at ages 21, 25 and 30. This ensures that if the child makes a bad financial decision, it is limited.
The 39% of have Wills probably think they have done all that they can to protect their children's inheritance. They would be wrong. Most families have the vast majority of their wealth tied up in life insurance and retirement accounts. These financial vehicles contain beneficiary clauses in them that require the company to pay the benefits to the named beneficiary at their time of death. These monies pass outside of probate and are not controlled by the Will. The majority of the 39% of Americans who have Wills have not accounted for this. As such, for most, if they die and a spouse is not still living, the money will be paid to the child. The question becomes, how do we protect this money?
Most Courts will prevent the money from being paid directly to the child. The Court will impose a Trust on the money and protect it until the child is 18. The problem is that the Court, and not you, will choose the Trustee (probably a corporation) who will charge a fee for this service (less money for the child). Furthermore the child can then have all of the money at the age of 18 (were you financially responsible when you were 18?). As an added bonus the court imposed Trustee will not know of or share in your financial philosophy and cannot pass that on to your child.
Enter the solution. For our clients who have children we recommend a stand alone Trust. With the establishment of a stand alone Trust you can pick who will be the trustee and when the money will be distributed to your children. You can then name the Trust as a secondary beneficiary. In this case the life insurance or retirement account will pay directly to the Trust bypassing the child and eliminating court involvement or oversight.
Speak to an attorney at Penglase & Benson to review your estate plan to ensure that your children are protected.