REASONS TO HAVE A WILL

Final Directive

The Will is the final, formal, directive of a deceased person as to how he or she wishes his or her assets to be distributed, to whom the assets should go, in what amounts, and when.

Dying Intestate: Forced Heirship

If an individual dies without leaving this "final directive" – a Will – the individual is said to have died intestate. When an individual dies intestate, the State of New York (or the State of the decedent's domicile) will draw that decedent's Will for him or her. This is called intestate distribution and, in the main, the decedent's assets are distributed in sort of a "forced heirship" pursuant to a family tree.

Loosely, this may be called a "Statutory Will" because the laws of all States in the Union provide for intestate distribution by the State's Statute. In New York, the law that directs this is the Estates, Powers, and Trusts Law (EPTL) Section 4-1.1. (See Table Below)

As can be seen, if you do not draw your Will the State will do it and in a manner that you may not have chosen.

INTESTATE DISTRIBUTION IS INFLEXIBLE: THERE ARE NO
CHOICES, NO VARIATIONS AS TO TIMING ASSET DISTRIBUTION

The distribution of the assets of a person dying without a Will is encased in statutory cement in the manner set forth above.

NO WILL, NO TRUSTS: EVERYTHING GOES OUTRIGHT,
REGARDLESS OF A BENEFICIARY'S AGE OR
FINANCIAL ABILITY WHEN THERE IS NO WILL

Each beneficiary of a decedent is an individual with his or her own predisposition as to how to handle, or mishandle, money. Children of tender years (not necessarily minors under the age of 21) simply do not have the experience to handle large sums of money in a lump sum. Similarly, some surviving spouses are financial sieves – giant financial alimentary canals: the money comes in one end and goes rapidly out the other.

The Will can provide for Trusts for one's spouse and/or children in a manner that will protect them from themselves so that they will not be "shining marks for mining sharks." (David Ivry, Professor, University of Connecticut, Insurance 101 (1952).

Bequeathing Specific Items Of Property Can
Only Be Done By Will

If there is no Will, all a decedent's assets get put into a "hotchpot" and will be allocated, as aforesaid, statutorily. If one wishes to earmark where the fine china, the Picasso's and Utrillo's, the stuffed animals, guns, and jewelry go, one has to have a Will.

Naming Guardians For Minor Children

If a decedent and his or her spouse are both gone (and we know this can happen) and if there is no Will which names the guardians of the person and the property of a minor child, the nearest next of kin in the family tree have priority in being named as the guardian of the children. It may well be that the deceased parents would have simply not chosen their parents (grandma and grandpa) or their sister (wicked aunt) or their brother (evil uncle) to be the guardian of their children until age 18. However, if there is no Will you cannot name the guardian. The Courts will do that (Surrogate's Court; Probate Court; Widows and Orphans' Court depending upon the state in which you are domiciled ).

No Will, No Trusts For Minor Children

With certain rare exceptions, a child under the age of 18 (a minor) cannot receive title to property in his or her own name. The Guardian appointed by the Court (from the family tree) will have joint control of the assets of a minor with the Court.

Whenever a guardian wishes to draw down money from the minor's assets, the guardian will have to petition the Court to permit the expenditure. If the guardian happens to be the one surviving parent who owes a duty of support to the minor, the Courts are nevertheless very stingy with permitting invasions of the minor's assets thereby forcing the surviving parent to use his or her assets first. If there had been a Will, with a Trust for the minor children, there is no need to petition a Court for allowances or the expenditures for a minor child.

NO WILL: NO ESTATE PLAN

The statutorily "forced heirship" I mentioned above does not make any provisions for estate planning. Each beneficiary "gets it all" outright and free of Trust (except for minors who will have Court appointed guardians).

Historically, it has been shown that the average beneficiary who receives a lump sum distribution from a decedent's estate (a lump sum of cash, stocks, real estate, etc. – that was never worked for by the beneficiary) goes through the bundle of boodle in eight years (some longer and some very much sooner).

If there is no Will, you cannot mete out the assets to a beneficiary periodically, enabling the beneficiary, over time, to become accustomed to handling wealth.

ESTATE TAXATION CAN BE REDUCED

So long as we have the estate tax, there will be some amount of taxes to be paid. In 2002 a decedent who dies leaving $1,000,000 will not leave a tax bill. However, as asset values grow, and they can grow meteorically (see the "Bull Market" August 1982 through February 2000), estate taxes grow. Without a Will all of the assets of the second of two (2) spouses to die will be exposed to estate taxes at the highest bracket.

A properly drawn Will would provide a Trust for a part of the assets to shelter those assets from taxation in the estate of the second spouse to die. This is known as "The Credit Shelter/By-pass" Trust. In 2002, the "shelter" amount is $1,000,000; in 2004 and 2005 it will be $1,500,000; in 2006, 2007, and 2008 it will be $2,000,000. Thus assets in excess of the "Exemption Amount" will be subject to estate taxes at the 40%-45% rate, down the road. The well drawn Will, with a Trust providing the income for the surviving spouse with remainder to the children, can save anywhere from $400,000 to $450,000 per $1,000,000 of assets in excess of the exempt amount.

SUPPLEMENTAL NEEDS TRUSTS FOR DISABLED BENEFICIARIES

Due to acts of God, there are many children born with birth defects which range from mental disabilities to crippling physical disorders. There are many entitlements provided for the disabled child from State and County departments including medicaid, social security disability, and supplemental social income.

To qualify for these benefits, there are limits to a disabled child's resources or income and if these limits are reached, then the so-called "entitlements" cease or are cut back.

A parent may wish his or her disabled child to qualify for the "entitlement" however the parent would also wish to provide for the extra niceties of life such as vacation, entertainment, etc. To do so, parents create the so-called "Supplemental Needs Trusts" which afford a disabled child with amenities beyond the basic needs provided by social programs.

When the disabled child ultimately "goes poof to Valhalla," the assets in the Supplemental Needs Trust will be given to the disabled child's siblings.

If there is no Will, the disabled child's inheritance will be given "outright" to him or to her and will be totally consumed for his or her care and there will be nothing left over for the other children of the parents of the disabled child.

"I've had no Will up to now, and I'm still alive,
so why hex it?"

This is not a reasonable approach, or even a sound reason, to not having a Will. Death will occur at some time, we simply do not know when ("Ask not for whom the bell tolls, the bell tolls for thee." – John Donne)

Wills are not the only solution to an orderly disposition of property but a Will is one of the most flexible and easiest documents to create to dispose of one's assets and name one's personal representatives to handle the affairs of a decedent.

In a future article "Rethinking Revocable and Irrevocable Lifetime Trusts as Will Substitutes," I will discuss, in depth, the benefits (and burdens) of the manifold uses of Revocable (and Irrevocable) Trusts.