Planning Estate planning: Why everyone should consider having a will

Just under half of Americans have a will, according to data from Gallup.¹ J.P. Morgan Wealth Management data suggest that this number may even be lower, especially among Black and Hispanic investors.

You may be asking whether it matters. Almost every state has laws that give your money to your immediate family if you die without a will – spouse and children if you’re married with a family, or parents and siblings if you’re not.

But your will doesn’t only control who gets your money. It also controls when they get it and who’s in charge of the process.

And critically for parents of young children, your will is the only place where you can officially tell a court who should be your children’s guardian if something should happen to you and you have no spouse – or if something happens to both of you at the same time.

To break it down further, here’s more on wills, estate planning and the steps you can take to get the ball rolling.

What is a will?

A will is a legal document that dictates what happens to your assets (and debts) after you die. This includes your money, real estate, other investments, personal belongings and more. If you have children, it allows you to name guardians if they’re under 18 years old. A will can even include funeral arrangements – but keep in mind that it may take time for your survivors to find your will, so you may wish to lay out your wishes for your funeral in a separate document.

Among other things, having a will generally allow you to:

• Decide who inherits your assets.
• Decide when and under what circumstances your heirs can control their inheritance.
• Name guardians for your minor children.
• Decide who will be in charge of overseeing your estate until your heirs receive their inheritance.

What is estate planning?

Estate planning is the overall process of making preparations for after you die (and potentially for any incapacity beforehand). It involves not only drafting legal documents such as your will, trust, and other estate planning documents, but also how you own assets (i.e., asset titling), who can make decisions for you if you’re unable to make your own decisions and what kind of legacy you want to leave. It may be prudent to involve the counsel of various professionals, including a lawyer, accountant, financial advisor, insurance advisor and more. These professionals can help crystallize the issues you should think about and guide you to a strategy once you’re clear on your goals and objectives.

What happens if you die without a will?

If you haven’t left a will that lays out the distribution of your assets, your state’s law will determine it for you. While every state has different rules for who inherits your assets if you die without a will (also called intestacy), the vast majority of states follow rules similar to the following:

• If you’re survived by only your spouse, your spouse inherits everything.
• If you’re survived by your spouse and at least one child, your spouse gets a portion of your assets and your child(ren) get the rest.
  • If your children are minors, their assets are held for them until they turn a particular age, usually 18 or 21 – but then they control their inheritance, no matter how large.
• If you’re survived by children but no spouse, your children inherit everything equally.
• If no spouse or descendants survive you, your assets pass to your parents and siblings and their descendants, and if none to grandparents, aunts and uncles, and cousins.

And so on. In general, your assets may go to the people you probably want to inherit them. But if you want to leave anything to your parents, siblings, nieces or nephews, friends, in-laws – or if you want to eliminate someone from your plan for any reason – you should consider creating a will. And as we’ve said, your will is the only document a court will recognize in which you can name guardians for your minor children. If you die without a will, your families have to decide who’s going to take care of your children – and if they disagree, a court will make the final decision.

If you have a will, you have named an Executor or Personal Representative – the person in charge of carrying out your instructions. If you die without a will, your heirs can go to court to be put in charge of your estate. In either case, unless you’ve structured your assets to avoid the probate process, your heirs will have to go to court, which will oversee the process of transferring ownership to your heirs. You may be able to minimize or avoid probate by, for example, owning everything jointly with rights of survivorship, having beneficiaries designated to receive your assets or putting everything in a revocable trust. You should speak with your legal counsel and trusted advisors about ways to structure your assets to avoid them being part of the probate process after your passing.

In some states, the cost of probate can be very high – up to 7% of the value of the estate or more² – and time-consuming. In other states, however, the cost of probate is relatively small and the process doesn’t take too long. You should ask your legal counsel about your state’s probate process to understand how important it might be for you to avoid probate court involvement – and the only way to do so is to have an estate plan.

Why don’t more people have a will or a plan?

According to AARP, the main reasons people cite for not having done a will are that they “haven’t gotten around to it,” it’s “too expensive” or because “they didn’t know how."³ And thinking about your own mortality is depressing – even though planning for your demise won’t hasten its occurrence.

Unfortunately, any of us can die at any moment, young or old, in good health or bad health.

Just look at the estates of celebrities who died without a will – Prince, Jimi Hendrix (litigation about his estate dragged on for over 30 years!), Sonny Bono, Bob Marley, Stieg Larsson, Pablo Picasso. Their estates made headlines – and cost their families both time and money in legal and court fees – because they didn’t take the time to make even a simple will. You can save your family similar heartache by taking a few simple steps.

How to get started on a will

There are do-it-yourself services that can take you through a will-making process online. However, you should only use those if you have a very simple situation. Even if you don’t have a lot of assets (and especially if you have a blended family or other complex considerations,) you may be better off hiring a lawyer to create your will and estate plan. And if you have more complicated assets – if you own real property outside your home state, for example, or you own property with siblings or others, or you have a business – a lawyer is likely to be able to address your situation better than a digital document creator.

A lawyer doesn’t have to be very expensive – your local bar association can often recommend a few reasonably priced alternatives. And a lawyer should be very familiar with the requirements in your state to make your will legally airtight (e.g., Does it need to be notarized? Do you need witnesses?, etc.)

If you have a simple situation, an online will is certainly better than not having a will at all. But especially if your situation – or your assets – is more complicated, consider hiring an attorney, which will cost more but can give you peace of mind that you’ve had a professional create your document.