By: Gary Hirsh, CPA, CFP®
In my 40+ years as a CPA, I’ve had many clients place having a will or updating an older will take a back seat to all other financial matters.
For a couple without children, the impetus for having a will is to avoid the intestate succession laws that will dictate who receives property in the absence of a will. For example, in New Jersey, the surviving spouse receives all assets. In contrast, in New York, the surviving spouse receives cash or cash equivalents up to $25,000, a car with a value of up to $25,000, and household items, including furniture and other items up to $20,000. The next $50,000 and 50% of the remainder of the estate is divided between the surviving spouse and the children. If there are no children, the spouse inherits everything, regardless of how long they have been married. I have seen an example where a spouse did not have access to half of an estate as there was no will. As a result, the minor children received nearly half of the assets in a trust.
If a decedent is not married, then parents inherit the entire estate. If parents are no longer alive, their siblings each receive an equal share.
One of the most important reasons to have a will for couples with children is naming who will raise the children if something happens to both parents. This is where it doesn’t matter whether you have financial assets or not, naming guardians for your child or children is a critical part of your estate planning.
A more recent issue to arise is who has access to all of your digital assets, such as email, social media profiles, online banking, and the plethora of usernames and passwords after you are gone. The digital footprint you leave behind can sometimes be a burden for the surviving heirs.
A few items that generally indicate your will may need to be updated are if, since the prior will, you have one or more of the following changes:
Birth or adoption of children/grandchildren has occurred
Desire to add/delete or change amounts received by one or more beneficiaries
Change in amounts or properties bequeathed to beneficiaries
Addition or deletion of beneficiaries
Change in marital status of a member of the family
Changes in the health of family members
Assets have significantly appreciated since the last will
Beneficiaries who may now work in a family business vs those who do not
Change in wealth of some beneficiaries relative to the other
Change in guardian, executor, or trustee
Change in state of domicile
Property acquired in another state
Tax Law Changes
Reminder to update beneficiary forms:
A recent article in the Wall Street Journal was about an ex-girlfriend receiving a $1 million retirement account nearly 40 years after they broke up. The decedent listed her as the sole beneficiary of his retirement account and never changed the beneficiary designation. Under federal law, employers are generally required to pay out retirement accounts to the last recorded beneficiary or a surviving spouse if the spouse has not filed a waiver—the case is now in court with his brothers.
The most apparent forms to review are life insurance, retirement accounts, and financial accounts with a payable on death/transfer on death (POD/TOD) designation.
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