Assume for the moment that you live in Pennsylvania and have reached that stage in your life where you are married, have two young children, a dog and two cars. You both work, have life insurance and some IRA retirement money. You believe your biggest asset is your house, which has a hefty mortgage balance. Why bother preparing a Will at all?
A lot of people I talk to in this or a reasonably similar situation ask, “Why should I make a Will? Won’t my spouse get everything when I die and then, won’t my kids get whatever is left?” The answer is that Pennsylvania, like all states, has a set of laws that determines what will happen if you don’t have a Will. Do you really want Pennsylvania making these important decisions for you?
Do you really want…
Although the laws in each state are different, in Pennsylvania, if you die without a Will, your spouse gets the first $30,000 from your estate and one-half of the rest of your estate. Your children will get the rest of your estate at age 18! Assume your estate is composed of some cash and investments, jewelry and other personal property, and a car and is worth $200,000 at the time of your death. That means that when your children turn 18, they will get a check for around $85,000 less the inheritance taxes of about $4,000. If you and your spouse both die and all of your chips get cashed in, it is even worse – you do the math – do you really want a check written to your 18 year old children for the total value of all the assets you and your husband own – with no one overseeing how it is spent? I don’t know how much you know about 18-year olds and their financial acuity – but they are usually not graced with the greatest financial wisdom. To the contrary, as my husband says, they lean toward spending their money on sex, drugs or rock and roll – and hopefully, not all three!
Making a Will Avoids These Calamities.
Instead of leaving the disposition of your estate to the politicians in the Pennsylvania legislature, grab control! First, the jewelry!
The wives in my practice usually leave their jewelry to their daughters (instead of to the bimbettes that their husbands or sons may marry after their death). Sometimes, but not often, the husband will leave particular items to his sons. Then the rest of the personal property (the pictures, furniture, books, etc.) is usually left to the surviving spouse and then to the children, to be divided between them. If they can’t agree on how to divide the things within 60 days, the articles that the children are arguing about get sold and the proceeds are added to the residuary estate. If the children are minors, the executor usually decides what is appropriate to keep and the rest is sold.
The money and other property without a listed beneficiary is usually left to the survivor. I often suggest that at the death of the survivor, the residuary estate should go to a “common trust” to be used for either child’s health, education, medical needs, etc. During the time the common trust is in place (until the youngest becomes 25 or even 30), the money is doled out in the same way that a parent of more than one child handles the family finances – fairly, not equally. For example, if one child needs a winter coat, you don’t buy two coats – you just buy one. The trustee will dole out the money separately to your two children, based on their individual needs. Then at the time the trust ends, whatever is left will be divided equally between the two children.
Your trustee should be someone who won’t let your children bully him or her into giving them money for no good reason and can say the ultimate parental curse word (“No!”). You will also need to appoint a guardian in case the natural parent dies. You should also appoint a contingent trustee and guardian in case the primary person is unable to serve.
If before the trust ends, the child dies but has children (that is, your grandchildren), usually those children inherit the deceased child’s share (held in a different trust, discussed below) and if when the trust ends, both of your children are alive, then your children will inherit equally whatever is left in the trust. By using this method, you have accounted for their individual needs.
We routinely add a “Minority and Disability Trust” that says if beneficiaries inheriting are under a legal disability or under age 25 or 30, their shares are held in trust and doled out based on their needs, for their health, education, medical needs, etc. until the trust terminates.
There is no substitute for good legal advice – so do not rely simply on Internet research and online forms – to do your estate planning. You wouldn’t perform surgery on yourself, right? Find a good lawyer to help with your estate planning. We will continue to post articles on different issues you might want to consider as you plan your estate.
|Bonnie Smith Moses|
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|Hope Bosniak||Sam Rossittto|
|E-Mail Hope Bosniak||E-Mail Sam Rossitto|