by Bruce L. Dorner
I can’t count the number of clients who ask me to prepare estate planning documents for them. Just about every consultation starts with the client stating, “all I need is a simple will.” I really wish that at least one client would come to my office and ask for a complex will!
The reality is that there is no such thing as a simple will. All wills are simple if they meet your needs and the needs of your family. Some wills are longer than others and some contain more detail as a result of unique family structures or the need for tax planning. The key to good wills and estate planning is to find the right language to accomplish your goals, protect your family and assets, and reduce stress after your death.
The first question is, “do I need a will.” For most people the answer is yes. Here’s a great example of how important a will is to your family security. Harry and Sally have been married for ten years. They have two lovely children age eight and six. Harry works for a company with good benefits and has a growing retirement plan. He forgot to list a beneficiary on his insurance policy. He owned the house in Londonderry before they got marries. All the cars are in his name, along with the boat and a timeshare interest in a vacation cottage. Harry died unexpectedly and left assets that were not held jointly with his wife totaling about $600,000.
Guess what! New Hampshire law provides that if you die without a will and leave a spouse and children of that marriage, the surviving spouse gets the first $250,000.00 and one-half of the balance of the remaining estate. In our example Sally would receive $450,000 and the children would receive the remaining $150,000. The real problem is that the children’s share is now held in trust for their needs and Mom can’t get to that money without permission of the Probate Court. Additionally, that money will be held aside and invested until each child reaches their 18th birthday. Gee, do you really want your 18-year-old child coming into a large sum of money? I can’t think of an 18-year-old who wouldn’t want a fancy sports car!
With a will, Harry and Sally could have avoided the problem by including language that gives all assets to my surviving spouse. Now, Mom is in control of all of the money and doesn’t have to answer to the Probate Court regarding the use of money for her children. On the other hand, and moving into a more detailed provision, maybe Sally can’t manage money and Harry needs to have a portion of his estate held aside for the children. This can be accomplished with designation of a trustee and instructions on how to hold, invest and distribute the funds segregated for the children.
I don’t want to get too involved in tax planning issues as Congress has recently enacted new laws which have significantly impacted traditional planning tools. Suffice it to say that planning for the financial security of the family has become more complex and the need for legal advice and financial planning service has increased. Each family needs to know where they fit in the financial hierarchy so the tax burdens can be reduced. Planning is essential to this goal.
As family structures change, the need for careful estate planning grows. It is quite common to have blended families with “his, hers, and our” children. Often there are issues arising from divorces that require insurance or college funding for children of prior marriages. These factors need to be considered. Also common in the planning scheme is the potential for inheritance from parents and how this might increase your assets to a point where Federal tax becomes a consideration.
Another important component of the planning process, but not part of the will, is a review of financial stability. In our example, if Harry dies, will Sally have sufficient cash flow to make the payments on the house and other tangibles? Will she have enough money to pay all the bills? Harry brought the lion’s share of income to the table, but his passing does not decrease the regular monthly expenses by any significant amount. Is there adequate life insurance to provide for family needs for a reasonable period of time?
It is also important if you already have a will to review it on a periodic basis. I’ve had a number of clients who were too busy to add the name of their last born child to the will. Emotions peek at the passing of a parent and not having that child’s name in the will was a great psychological injury to that child. Of course the wills prepared in our office provide for children who may not be named, but the emotional impact is still there. The lesson to be learned is that wills need to be reviewed on an annual basis to be sure that all the pieces still fit. I urge my clients to read the will from top to bottom and then ask themselves one question, “does this still make good sense today?” If the answer is in the affirmative, then there is likely to be no need for change. If there is any question, then clearly a call to your attorney is in order.
This is only a brief over view of the topic. Estate planning can be rather complex as your assets and family structure change. I have not addressed the use of trusts in estate planning or the technique of segregating assets between husband and wife. In another column I’ll talk about additional documents needed in a basic estate plan including a durable power of attorney, a health care power of attorney, a health care directive or living will, and other items that may be needed to adequately protect your family.
This article provides general information only. It is not legal advice. You should consult with your own attorney before making any legal decision.