There are many ways one could plan for the distribution of assets after their death. With so many estate distribution options available, when is it necessary to have a will?
The main reason people avoid writing a will is because they would like to avoid probate. Probate is the court procedure in which the courts validate and enact the will. The probate court will ensure that debts are paid for and the distribution of the assets to beneficiaries is done according to the will. The probate process can take an extremely long time, and has high costs, including court costs and attorney fees. However, probate can be avoided by other means of asset distribution.
One way to avoid probate is through a living trust. All assets that are transferred into a living trust will go directly to the beneficiaries after death, effectively skipping over probate. Other ways of avoiding probate include creating a pay on death account, which results in the automatic transfer of funds to an heir upon death. Married couples can also consider creating a joint tenancy deed that allows for the transfer of property to the surviving spouse when a spouse passes away. All assets covered by non-probate documents, such as a living trust, will transfer automatically upon death.
When dying without a will, assets that were not accounted for by other non-probate documents will be put into probate and intestacy laws will be applied. When assets are put under intestacy laws, they are distributed under a strict hierarchy which deems who inherits the assets. The assets are normally divided amongst the deceased's spouse and children. Intestate is not preferred as one would not have any control over how assets will be distributed.
One way to avoid leftover assets, or ones not covered by trusts, from entering into probate is to create a pour-over will. When funding one's living trust, there is an option to create a pour-over will. This type of will transfers all of the writer's property at the time of his or her death into the living trust, which allows the assets to be distributed directly to the trustee of the trust and avoid intestate.
The pour-over will ensures that all assets that were previously not transferred will be put into the living trust. The trustee will receive all the assets and distribute or manage them as they see fit. However, it is important to note that a pour-over will is still considered a will, which means that the distribution of the assets will still go through probate.
Benefits of a Will
It is important to note that there are benefits of using a will. One benefit of a will is that it is more organized and allows the writer to plan the distribution of all assets in one document. The writer of the will is able to make corrections and amend it at any time. When using different forms of asset distribution, it is more difficult to make sure all assets are accounted for which may cause complications in the future.
A will is also helpful for when a judge oversees the distribution process. The judge will ensure that the executor of the will acts upon the best interest of the writer of the will. A will also allows the write to cut off relatives that would otherwise inherit assets. An important component of a will is that it is the only way of establishing guardianship for minor children. A will allows the writer to decide who would be responsible of their children after their death. If a guardian was not established in a will, the courts will decide upon the guardianship of the children.
There are pros and cons for each method of estate distribution. One thing's for sure, it is necessary to plan for the distribution of assets after death to minimize the negative impact that death has on a family.