Back in April of last year, the musician, Prince, passed away. His untimely death resulted in great speculation as to what would happen to his estimated $250 million estate. This was especially true once his only full sibling, Tyka Nelson, filed documents in court stating that Prince did not have a will. The topic of the will created such interest that Gallup conducted a poll in May to survey just how many Americans do have a will. The answer, they found, was 44%.
Why don’t more people have wills? Some common reasons given are that they do not have enough property to matter, are uncomfortable discussing death, or simply do not know how to start the process.
What Is a Will?
What is a will? It is a legal document that outlines your wishes for the distribution of your property and for the care of minor children in the event of your death. It paves the way for a smooth transition of your assets.
What happens if you do not have a will? You die “intestate” and the state will oversee who gets what. In the majority of states, at the current time, that means about half of your estate goes to your spouse and the remainder to your children. However, each state has its own rules. Don’t assume that someone will be provided for by receiving your assets when that may not be the case, causing severe financial difficulties.
A will allows you to designate how all of your belongings are allocated. For example, if you have family heirlooms, you can note who will receive which ones. Also, smooth transitions of certain investments or business assets can be provided for. If you have minor children, you can appoint a guardian and provision an amount for their care. In absence of your instructions, the court could appoint the guardian. With a will, considerable tensions and problems among your surviving relatives can be bypassed, as they do not need to try to guess your wishes during a very emotional time.
How Do I Construct a Will?
Constructing a simple will is actually very easy. You write a list of all of your assets and belongings and write out instructions as to where you would like them to go. Date and sign the document. However, for complex families, the use of an attorney is recommended. This legal expert should be familiar with the laws of the states where your assets are located and in which you live. They need to be experienced with complicated “family trees” and how to best structure your estate so that your wishes are acted upon at your death.
When Do I Need to Establish a Trust?
For these complicated estates, a simple will may not be enough and a trust could need to be established. A trust sets up a legal entity that you can then transfer assets to. The assets are invested and drawn down based on the trust’s instructions. Such documents help match certain assets to support a specific goal of yours. For example, if you would like to provide for the education of your grandchildren, you can set up a trust, fund it, and stipulate that money in the trust must go towards education expenses.
Trusts also help with tax concerns. Large estates may be subject to estate taxes. Various trust structures can be utilized to minimize these taxes. Also, the legal aspect of the trust continues in existence as long as the documents dictate. Therefore, you can use a trust to allow for financial provision for many generations of your family.
Have Peace of Mind With a Will
A will is a simple way of putting instructions in writing that greatly eases the burden on your survivors. Your wishes will be carried out without a lot of contention, stress, and emotional pressure. At Punta Gorda Financial Planning, we can help you walk through the many financial issues that may arise when you begin the process of writing your will. We can recommend legal experts and monitor the process from a financial planning focus. Bottom line, peace of mind should be the final result.
Written by Thomas M. Geier, CPA, CFP®, PFS.
My aim is to offer clarity to your finances. I specialize in helping individuals and families determine what is most important in their financial lives, identify short and long-term goals, and make great choices for achieving comfort, security, and peace of mind.
I graduated from Loyola University in Baltimore, Maryland, and have been a Vice President of our investment management affiliate, Geier Asset Management, Inc, since its founding in 1999. I have over 25 years' experience in financial planning and investment management and am licensed as a Certified Financial Planner® professional, a CPA, and Personal Financial Specialist. I am member of the Personal Financial Planning section of the American Institute of CPS's and Florida Chapter of the Financial Planning Association.