There are two things you can count on – death and taxes! Both of these issues can be addressed in a Will.
If you die without a Will, the assets of your estate will be distributed according to the laws of intestacy in the state of your domicile. In Maryland, distribution of assets owned by a decedent without a Will is as follows:
- If you are survived by your spouse and have no children or surviving parents, your spouse will receive your entire estate.
- If you have a spouse and surviving minor children, the spouse and your children will split your estate.
- If you have a spouse and adult children, your surviving spouse will receive the first $15,000 plus one-half of the estate and your children will share the remaining half.
- If you have a surviving spouse and no children, but do have surviving parent(s) and/or siblings, then your surviving spouse will receive the first $15,000 plus one-half of the estate. Your parents (or the survivor) will share the remaining half and if your parents are not alive then to their children (your siblings).
- If you have no spouse but do have children, the children will share the entire estate equally.
- If you are not survived by a spouse, children, parents or siblings, then your estate is split between your maternal and paternal grandparents. If one of the maternal grandparents is not living, then to the surviving grandparent and if neither maternal grandparent is living then to their issue (e.g. your aunts, uncles, cousins). The half that is distributed to your paternal grandparents is distributed in the same manner as the maternal half.
For purposes of this article, your “estate,” for distribution purposes, does not include (i) assets that are held jointly and will pass by operation of law to the surviving joint tenant, (ii) assets held in trust, or (iii) assets with a beneficiary designation or that are “payable on death.” These assets will not be subject to probate. However, those assets may be included in your gross taxable estate for purposes of calculating inheritance and estate taxes.
Even if you want your estate distributed in accordance with the law of intestacy, you give up the ability to appoint the person who will oversee the administration of your estate and handle its distribution. If your estate is worth over one million dollars and you do not have a Will, then you forego any tax planning opportunities, which could ultimately create a cost for your beneficiaries. A Will is one way to implement tax planning that can make a significant difference to your beneficiaries.
Although we recommend that everyone have a Will, there are circumstances where it is not entirely necessary. For example, if you are single and have a relatively small estate (under one million dollars), and all of your assets are either held jointly with your adult children, or your children are designated beneficiaries, you may not need a Will. There are, however, dangers in jointly holding accounts with your adult children. They could have financial or legal problems of their own which could place your joint assets at risk. Moreover, they could exercise dominion and control over those assets and use them as their own rather than leaving them for your sole use and benefit during your life.
Preparing a Will is the first step in estate and tax planning. The basic estate planning documents also typically include a Durable Power of Attorney for Healthcare, a Durable Power of Attorney for financial matters and a Living Will (not to be confused with a Living Trust). Some people mistakenly think that if you have a Revocable Living Trust you do not need a Will. However, having a Will prepared is still beneficial to ensure that any assets not properly transferred into the trust and which remain in your name are transferred to the Living Trust at the time of your death.
Special concerns if you have a minor or disabled child?
Assuming the other parent is deceased your minor child will receive your entire estate. However, the question remains who will raise, nurture and care for your child? If you have a Will then you can appoint a legal guardian to care for your minor child. Within the Will, you can create a trust to hold the funds for your child as well as name the trustee who will administer the assets of the trust. If you do not have a Will, these decisions will be made according to the law of the state of your domicile and will require a formal proceeding for the appointment. That can waste time and money as well as result in the appointment of people you would not have chosen.
What happens if I am unmarried but have a significant other?
If you have an unmarried significant other, then it is imperative that you have a Will (or some type of estate planning). Absent estate planning, your significant other will not be entitled to any part of your estate. At the time your partner is trying to grieve, he or she may also have to pack up and leave your home because your parents or siblings, or even a child from a former marriage, is forcing your partner out. Your partner will have no legal rights to the house that you share if it is only titled in your name. This could be true even if your partner paid a portion of the mortgage or helped improve the house. There could be additional controversy when your family and partner try to determine who owns certain personal property within the home.
Should you have any questions or wish to speak about these matters further, please feel free to contact Ronald Lyons.