In a survey conducted by Caring.com in 2020, it was discovered that only 32% of Americans have created some kind of estate planning document.
Of these, only 23.9% have written a will. This may not seem like a big deal when you are younger, but as you age and build up a collection of property and assets, it becomes much more important.
The legal term for this is dying intestate. The rules on this vary from state to state, and this decides how your assets and properties are divided once you have passed. If you have property and other assets in different states, this will be distributed according to that state’s intestacy laws.
These laws vary depending on your marital status, and whether you have any surviving offspring and relatives. If no familial connections can be found, your property is often turned over to the state.
This is decided through a probate process where the state names a personal representative. This is the individual who is tasked with distributing your assets.
Often, this job falls to the surviving spouse but this is not always so simple. If there is no individual that wishes to take on this job, the court names a public trustee. They are a complete stranger and will distribute any assets according to state legislation.
Until the time at which the distribution is agreed your assets will be frozen. This means that no-one can access them, regardless of what the deceased may have said to you.
If You are Single at the Time of Death
If you are single and childless, but your parents survive you, your estate will be turned over to them. If they do not, your siblings (and half-siblings) will have the estate divided equally between them. If one parent survives, they will get an equal share too.
If you have no parents, siblings, nieces, or nephews when you die, your mother and father’s sides of the family will get half of the estate each.
If you have kids, your assets will be split evenly between them. Guardianship of your children will also pass to someone chosen by the courts. This is often a family member but may not be who you wanted them to go to.
This individual will be responsible not only for their care but for their inheritance until they reach the age of 18.
If your child has died, but their offspring is still alive, they will inherit their parent’s share.
If You are Married at the Time of Death
This depends on the ownership of your property and other assets. If it is jointly-owned, your spouse will inherit them all. If it is separately owned, the assets will be split equally between your spouse, parents, and siblings.
If you have children with your spouse, the property and your assets will pass to them. If you had kids with a previous spouse, half your estate will pass to them while the other goes to your current spouse.
If You are in a Domestic Partnership at the Time of Death
Again, this is highly dependent on the state you live in. Not all states recognize domestic partnerships and you should check the legal rules on what will happen in the event of your death.
Generally speaking, your domestic partner will inherit the same as a spouse. This again depends on how the property and other assets were owned.
If You are Unmarried but in a Relationship
The law does not recognize this, even if you are living together. This means that you will not inherit your partner’s assets. If you are expressly mentioned in their will this is different.
If an unmarried individual dies without a will, their assets are divided among their relatives, depending on their relationship to the deceased.
If You Own Property in More than One State
This will be divided up according to each state’s legislation.
Ultimately, this could mean that your assets are divided between two completely different groups of people if you do not write a will.
What if you have life insurance or retirement accounts?
Provided there are named beneficiaries in either of these instances, they are likely to get what is allocated to them without state interference.
If you do not explicitly name beneficiaries, all assets are divvied up according to the state’s laws.
What about taxes?
The first $5.45 million of an estate is exempt from the federal estate tax. Following this, any excess value is taxed at rates of up to 40%. This is a general rate but varies from state to state.
If you mention your spouse in your will, they can have what is known as a marital deduction. This is a tax benefit that allows your spouse to inherit your entire estate and assets free from taxation.
So how do you create a will?
There are a few different routes that you can go down. The simplest is to hire an attorney to help you through the process, but there are also DIY will kits.
We would always recommend using an attorney where possible, as this ensures the will is written correctly. This makes it easier for your heirs to divide up your property.
You will need to choose and name your beneficiaries, as well as the executor of your will. If you opt to have your attorney as the executor, they will typically take 2-4% of your estate’s assets.
It is also important to name a guardian for any offspring. You should be incredibly specific about what each individual gets, to ensure there is no confusion after your passing.
You can also write a personal note to be read to your beneficiaries, although this is not required.
You will need some witnesses to sign your will. Usually, you only need 2, but in some states, you will need 3.
Find a safe and secure location to store your will. Review and update your will as necessary.
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