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By Marilyn Lewis
You almost certainly need a will.
Take, for example, a fairly common estate: a couple of grown children, no spouse, a small savings account, a house with a mortgage and an old, paid-off car.
If you left a will, your executor could sell your possessions, pay off the mortgage and give your kids their inheritances in a few weeks.
Without a will, a state probate court could take six months or more to identify all claims on your estate, identify your heirs, ask permission from each of them to sell your assets, select an executor and then sell and distribute the proceeds. All the while, someone would need to cover the house payments. And your heirs could wind up paying a lawyer $1,000 or more for court appearances.
Without a will, you lose the chance to say exactly what should happen when you're not around to speak for yourself. A will lets you pick a guardian for your children. A will lets you leave instructions and money to care for someone special - a disabled child or an elderly parent, for example. It lets you ensure that Cousin Julie gets Aunt Gussie's Blue Willow china or that your three children inherit the proceeds of your estate equally.
Yet half of Americans don't have wills because they're afraid to think about death, reluctant to part with the money it costs to prepare one or simply ignorant of the need.
Here's how to tell whether you need a will and whether you're a good candidate to draw one up on your own. Many of us are.
What a will doesn't cover
You may already have done some estate planning without realizing it.
Whenever you open a bank account, an individual retirement account or a 401(k) plan, or buy life insurance, you're given - or you should be given - a form asking you to identify a beneficiary who'll inherit the money when you die. There's no charge for assigning beneficiaries. When you die, the property goes directly to them, and they pay no federal estate tax or income tax. It is taxable, though, if you identify your estate as the beneficiary.
(Some states also impose their own, smaller inheritance taxes. The rules and rates for these vary widely.)
"It is pretty common today for a typical middle-class person to have more property passing outside probate than inside probate," says Robert H. Sitkoff, an expert on wills and trusts who has - literally - written (co-authored, actually) the book on the subject, "Wills, Trusts, and Estates." "Nothing, not even contradicting yourself later in a will, trumps that beneficiary.
(Keep copies of these "beneficiary assignment" forms and update them occasionally so that your ex doesn't wind up inheriting the 401(k) plan you started in 1987.)
Another substitute for a will is joint ownership. When two people own a bank account or real estate and one person dies, the property automatically goes to the other, without probate.
If you die owing money, your heirs won't be on the hook for it unless they've co-signed a loan or own property jointly with you. But your debts must be paid from your estate before your heirs can get their share. (See "When your parents die broke.")
The bottom line: If everything you own has someone else's name on it, either as a beneficiary or a joint owner, you might not need a will. But make sure you haven't forgotten anything, like cash, items in a safe-deposit box or a car that's in your name.
So why so shy?
Jennifer Hartman, a Los Angeles financial planner, is frequently surprised to find clients without wills. "People you expect would have a will - educated, good incomes, professionals, a lot of them with children - don't have them," she says.
The reasons? For a lot of folks, the big obstacle is talking - no, thinking - about death. It's understandable, Sitkoff says.
"Look," he says, "they call death insurance life insurance. They say, 'If something should happen to you.'" He laughs. "If?"
There's also the expense of preparing a will: a few hundred to thousands of dollars, depending on the will's complexity, for something you'll never get to enjoy. "I understand the impulse to say that I don't want to spend money today to distribute my money when I die," says Sitkoff.
This massive shunning of wills demonstrates, at least in part, that the legal profession has priced its services beyond the reach of millions of Americans, says Theresa Meehan Rudy of consumer group HALT. Her organization is dedicated to helping consumers get equitable access to the law.
If lawyer fees scare you, Leonard Kopelman, a Boston estate attorney, suggests these thrifty approaches:
- Prepaid legal plans. These typically charge a fixed rate - $70 to $400 a year, depending on the services you choose - for legal advice and consultation, wills and other documents. Companies often offer these (also called legal access plans) free or at low cost through employee assistance programs, and many unions provide them for members, but individuals can sign up, too. Check this list to find a plan or ask your local bar association for help locating one.
- Lawyer referral programs. Call your local bar association and ask for the lawyer referral program. You'll get a consultation of a half-hour to an hour with an attorney for free or for a minimal ($15-$60) fee. This gives you the chance to lay out your situation, ask the lawyer's opinion and learn what it would cost to get a will written.
- Price shopping. Ask a bar association to give you the names of three young estate-planning lawyers. Call each, explaining that you have a very simple situation, and ask what they'd charge. You should be able to get it done for about $100. Many lawyers will write a pair of reciprocal wills (in which spouses leave their assets to each other, name guardians for children and make mutual bequests) and a trust for $250, says Kopelman.
The do-it-yourself solution
Do-it-yourself wills are another low-cost alternative. With attorneys' fees beyond the reach of many Americans, the market for do-it-yourself wills should be vast. Yet these alluringly simple programs are practical for only a certain segment of the population.
If you want to use the do-it-yourself approach, yours should be a very simple situation, says Michael P. Downey, who chairs the American Bar Association's ethics and technology committee. He is a partner at the St. Louis firm of Hinshaw & Culbertson.
To assess your own picture, think through all the possible roadblocks and barriers or opportunities for disagreement that your executor or heirs might face. If your instructions and arrangements are fairly straightforward and simple, doing it yourself might be for you. (Read "14 mistakes not to make with your will" for help thinking about how you want your last wishes carried out.)
If it's unlikely anyone will challenge your will, you're on somewhat safer ground. A good do-it-yourself candidate, for example, is an unmarried person whose assets add up to around $500,000 (no threat of triggering the $2 million threshold for federal estate tax) and whose only child (just one heir) would receive everything (no squabbling siblings to challenge the will).
Don't do it yourself if you:
- Own a small business.
- Have property in more than one state.
- Have children with more than one partner.
- Are married and live in a community-property state.
- Have stepchildren or a previous marriage.
- Have a messy family situation likely to provoke a challenge to your will.
- Are leaving money to someone who receives government assistance (unless bequeathed carefully, an inheritance could make them ineligible for the government check).
- Are placing strings on an inheritance (giving college money to your niece Charlotte, but only if she uses it to attend your alma mater).
- Have complex instructions. (Example: You want second husband to get your assets while he's alive, but when he dies they go to your children by your first marriage, not to your stepchildren.)
- Want to disinherit a child.
The best of the breed
Books on wills have been around for decades, and now computers simplify the process. The best products, whether at an online site or with a piece of boxed software, are quick, easy to use and typically well under $100.
They offer lots of supporting information, tailor their instructions to fit your state's inheritance and tax laws, and send up red flags to tell you when you need a lawyer's help. They make the distasteful project easy by holding your hand through a questionnaire, then using your answers to create the will and providing crucial, state-specific instructions on how to sign and validate it.
HALT reviewed nine do-it-yourself will products in 2006. Not all products are equally good, warns Rudy, of the consumer group. "'Some can look very sharp and professional, but there's not much substance inside."
Rudy's advice: Don't buy impulsively. Read product reviews before choosing a will program or book.
These three earned an A grade from HALT:
- Quicken Willmaker.
- Nolo's Simple Will Book.
- WillWriter Deluxe 2005.
For the right person, a good will-making book or program makes sense and saves money, Rudy says. Legal experts criticize do-it-yourself solutions because there's no one with professional expertise to catch mistakes or missed opportunities. If that worries you, run your finished product by an attorney for about $50.
Once you've got a will, there's no need to file it with a court. Just make a copy for yourself and leave the original with your lawyer. If you wrote it yourself, stash it in a bank safe-deposit box and give a key to someone you trust. Register your trusted person's name as a "deputy" on the account so they're allowed access in your absence.
© MSN Money, 2008.
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