Originally published in Forbes on May 25, 2022
BY: DAVID REDDING, CTFA, AEP, CWS
Austin, TX Market President, Argent Trust Company | (512) 478-3188
Most people are generally familiar with what is called a will, or more formally a “Last Will and Testament.” Most people also know the purpose of a will—but “What does a will really do?” and “Do I need one?” are questions that I am often asked. We’ve all watched scenes in the movies where the family lawyer shows up at the house after the funeral to read the will to the grieving family. It’s a very solemn occasion and everyone is on the edge of their seats, wondering what Grandpa might have left them. The attorney informs the family who inherits the house, the Hummel figurines, the family ranch and, most importantly, the family wealth. But that is usually just in the movies and it rarely, if ever, plays out this way in real life.
According to a recent Gallup poll, a little over half (54%) of adults in America don’t have a will. For adults under 30, even more live without wills—80%. To put it simply, if you are married and/or have children, you should have a will. However, I also recommend everyone over 18 have a will, even if it’s just a very basic one.
What does a will do?
A will is a legal document that directs who or what entity will inherit your property when you pass away. It can be a very simple document that leaves everything to a single beneficiary such as a spouse, your children, a sibling or a friend, or charity; or it can be very complex—using very complicated estate planning techniques to limit the amount of estate tax that will be owed and creating trusts to benefit one or more beneficiaries. The type of will you need depends on the complexity and total value of your estate. For instance, in 2022, an individual can transfer $12.06 million to their heirs without paying any estate or gift tax. That amount doubles for a married couple, which equates to $24.12 million.
Therefore, most people will not owe any estate tax, but does that mean you don’t need a will? Absolutely not! If you own any property that requires a legal change of ownership, then you must have a will to carry out your wishes. Examples are real estate, bank accounts without a POD designation, brokerage accounts, automobiles, etc. If you die without a will, or what is known as intestate, then the state in which you die has provisions in the estate and probate code that specifies how your property will be divided by the courts. If you die intestate, your heirs will be bound by the dispositive scheme your state has provided for you. It is unlikely that your state’s intestate provisions will match up with your wishes!
A will can also reduce or eliminate the conflict that might occur between potential beneficiaries. If you die intestate, your heirs might be inclined to dispute who gets what. A will can clearly spell out who gets your property, which won’t always prevent a fight, but it will provide legal relief to allow your executor to make sure your wishes are carried out and assets are allocated per your instructions. An executor is a fancy word for the person or corporate trustee that you appoint in your will and who the court puts in charge of your estate.
How do I go about obtaining a will?
Getting a basic will done is typically not a difficult or arduous process. I’ve had many clients, mostly younger, ask if they can draft a will themselves using the various online tools available today. While that is an option, it is typically not the best solution. I almost always recommend using an estate planning attorney. It is my experience that most people underestimate the complexity of their estate and how best to transfer assets to future generations or charity. A simple clerical mistake or error in the execution process can be disastrous. Also, there are other basic planning documents that an estate planning attorney can draft that should also be a part of a basic estate plan.
A will is something all of us should have. The time, energy and cost can all be justified when you think about the peace of mind you give to those you leave behind. I suggest not putting it off and finding an estate planning attorney in your area who can help you complete all the necessary planning documents. These are living documents, and they should be updated and changed as your life circumstance, wealth and the complexity of your wealth change.
David E. Redding, Market President and Senior Wealth Advisor at Argent Trust Company, helps clients navigate the complex world of estate planning, trust administration, wealth transfer and closely held business strategies. David has over 28 years of experience in in the wealth management industry.