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Not Everything or Everyone has to, or will, Blend in a Blended Family

November 3, 2015 by Leave a Comment

To those couples who’ve decided to blend their families and to those who already have, know this: Just because the two of you fell in love, doesn’t mean your children are going to fall in love with each other or with your new spouse. While you wait for that to happen–if it ever happens–shoot for like, for tolerate. Pray that they’ll be kind to one another. But don’t insist that your children–the children who’ve already suffered through the divorce or death that turned you into a single person–don’t insist that they love one1805-Gillray-Harmony-before-Matrimony.2 another, not right now. Love, even like, takes time.

So hope, pray, and work to the end that they will at least tolerate and be kind to one another.

And then do your best, your very best, to model for them the way they should treat each other. You do this by treating your new spouse–the new love of your life–the way you hope they–the newly blended children–will treat each other. Then be patient because becoming friends, especially when each child is struggling to fence off his or her space in a new family, is not easy.

Yes, be patient. You are the adults after all.

Filed Under: Blended Families, Estate Planning, Stepfamilies, Wills

Hard Questions Make Strong Foundations: Estate Planning and Second Marriages

October 27, 2015 by Leave a Comment

The day my wife and I finally met with our estate planning attorney, Don Owen, was anticlimactic. We sat across from him, my wife Janet to my left, Don sitting on the other side of his desk. We were there to resolve what we then realized were thornier issues than what we had imagined when we began the process, issues that most families don’t face–because most families aren’t blended families.

Very wealthy couples deal with estate planning issues most of us can only imagine. Business owners whose companies make up the bulk of their net worth likewise confront estate planning problems foreign to those who work for someone else. Add to that list, couples who head up blended families. In fact, maybe put them at the top of the list. Courageous, often twitterpated, souls, these couples enter into second marriages and all the responsibilities that entails and deal with some thorny problems. Often, many of those problems first make their appearance years down the road. For my wife and me, they made their appearance when we decided to do some estate planning six years after we married and joined my three and her four children together.

The idea to do some estate planning was mine. I stood to inherit some money from my grandfather’s estate. He’d worked hard and invested well, and he’d set up his estate to benefit his children first, then his grandchildren when his children died. His children were now in their late 80s and 90s. I wanted to make sure that when they died, and after both my wife and I died, my share of my grandfather’s estate would pass on to my children–his great-great grandchildren. I wanted to keep the Taggart family money in the Taggart family. My wife was fine with that. And so I set up an appointment with DonHermanWeissFamily600 to get that done. This should be easy, I thought. Silly me.

Facing the Facts. For couples in second marriages, estate planning can be difficult, more complex. Think about it: Each party comes into the marriage with their own assets; their own debts; and often, their own children–sons and daughters who have their own special needs, often known only to their biological parent. Add an “ours” to the mix of yours and mine, and the family photo quickly goes out of focus.

Frequently, at least one but probably both of the step-parents have made promises to their own children, promises that often involve dollars and cents. Maybe one parent made a promise to pay for college or for a car when his child graduates high school. Maybe the other guaranteed a trip to Europe if her  young son or daughter graduated college.

All too often such promises were made in the heat of the battle in the previous marriage. No matter, already feeling guilty about a failed marriage, the parent making the promise will not drop this ball. Not this time. His or her promises, wise or unwise, will be kept. No more disappointed children. Nope.

And so it is when the newly married couple finally decides they should do some estate planning. So it was when my wife and I  sat down with Don Owen to make sure that promises we had made were kept–to each other and to our children.

Like I said, the experience was more intimate than sex.

Why? you ask. Well, try this list of issues on for  size. One or both of us had:

  1. Made promises to our children.
  2. Made promises to each other leading up to marriage.
  3. Insecurities created or exacerbated by the previous marriage and not yet fully healed by the second.
  4. Secrets that had yet to be discussed with the the other.
  5. Allegiances that were at the time stronger to blood than to water.
  6. More insecurities, as in, will this marriage last?
  7. Age, maturity, and wisdom not present the first time around, thus a willingness and ability–and need–to look beyond the unicorns of true love and ask the hard questions.
  8. Etc.

Now this list isn’t particular to my wife and me. I suspect most anyone in a second marriage can see at least some of themselves in it. The point is, parents in blended families face lots of issues that in-tact families typically don’t. But that’s only part of the story, the hard part. But can I tell you, what I had anticipated would be a cake walk–at least I did after my wife said she was fine with what I wanted to do with my inheritance from my grandfather–turned out to be a slog. Not because my wife was hard to deal with. She wasn’t. In fact, she was a gem. No, it was a slog because the issues grew more complicated the deeper we probed, one question leading to another and then another. When we got to the end of the slog, I was amazed, both at what an experience it had been and at how refreshing it was to have done it.

Reaping the Benefits. It gets better. If the planning is hard and the issues complex, the aftermath is long lasting and satisfying. With each hard question asked and answered, a stronger bond forms between husband and wife. As each secret is revealed, trust and respect grows. In the end, the new marriage stands on a more firm foundation. I know ours did.

I don’t have any statistics to support the following claim, but I have to believe that good, thorough estate planning will strengthen the marriage of the man and woman who blend their families. It did ours. It can do the same to yours.

 

 

 

 

 

Filed Under: Blended Families, Estate Planning, Stepfamilies, Trusts, Wills

Decanting is Not Just for Wine: “Revoking” an Irrevocable Trust

October 19, 2015 by 2 Comments

My how things have changed, or at least, how my understanding of things have changed. I graduated from law school in 1980 thinking that irrevocable meant just that. Once a trust became irrevocable–generally upon the death of the settlor–its terms turned to stone, fixed and barely movable. The only way to turn that stone back into something more malleable was a cumbersome process in which the trustee needed to secure the agreement of all the beneficiaries and then the court, before implementing any change to the trust. Again, that was my understanding at the time. I’m guessing it might be yours as well.

If trust law was ever that way in the past, it is certainly not that way today. The Uniform Trust Code (UTC) and various state “decanting” statutes have insured that. The UTC, implemented by a number of states, including both Wyoming and Utah, allows for judicial modification of trusts in a variety of circumstances, including “modification to achieve settlor’s tax objectives” and “modification or termination because of unanticipated circumstances.” But for our purposes here, I’m more interested in decanting, a process for modifying a trust somewhat analogous to decanting wine.

decanting

With wine, decanting involves pouring wine from one container to another in order to separate the wine from any sediment in the bottle, sediment that can ruin the taste. The process also infuses the wine with oxygen as the liquid passes from one container to another. Apparently–I don’t drink–pouring old wine into new bottles can improve the drinking experience.

With trusts, decanting involves “pouring” the old, irrevocable trust into a newer, more flexible trust, a trust better fitted to the needs of the parties to the trust at the time of the decanting. Maybe the decanting will result in the trustee having more flexible powers to better administer the trust. Maybe it will lead to better state and federal tax benefits. Maybe asset protection is the goal. For these reasons and more, trustees (often encouraged by beneficiaries) are looking to decanting as a way to deal with circumstances and issues unforeseen by the settlor of the original trust.

Decanting is not a new idea. Some argue that it has been allowed under the common law for a long time–at least since 1940–on the theory that if a trustee has discretionary authority to make distributions to a beneficiary from a trust, that trustee also has authority to make distributions in “further trust,” that is, into a new trust. But common law can be finicky and is subject to the whims of the local judiciary, so it’s with some relief that at least 22 states have enacted decanting statutes, codifying what was once only in the casebooks.

Wyoming’s decanting statute (Utah doesn’t have one), enacted in 2013, is short but illustrative:

§ 4-10-816. Specific powers of trustee 

(a) Without limiting the authority conferred by W.S. 4-10-815, [a statute that essentially frees the trustee from court supervision] a trustee may:

. . .

(xxviii) On distribution of trust income or principal pursuant to authority in the trust instrument to make discretionary distributions to a trust beneficiary, whether or not the discretionary distributions are pursuant to an ascertainable standard, make distributions of all or any portion of trust income or principal in further trust. (emphasis supplied)

Notice that there’s no mention of court supervision. No, this is a specific power granted trustees by statute, so the trustee can act on his or her own. That’s not to say that the court should never be involved. In fact, if the new trust contains provisions that might raise the hackles of one or more beneficiaries, the trustee would be wise to seek the court’s  blessing.

Now there are limitations to decanting, and it’s not something to do willy nilly. That said, if you’re a trustee or beneficiary of an irrevocable trust and if the old trust creaks and sways under the weight of today’s needs and demands, maybe it’s worth looking at decanting as a way to resolve those issues.

Filed Under: Decanting, Estate Planning, Trusts Tagged With: ,

Are CLEOs Shirking Their Duty?

September 29, 2015 by Leave a Comment

So I’ve been reading the ATF Federal Firearms Regulations Reference Guide 2014, the most current version as of March 7, 2015, so you don’t have to. It’s actually an interesting read if you’re into statutes, rules, regulations, and such. Try it.  You may have a knack for deciphering dense, jargon-laden language. But if not . . . at least skip to the Questions and Answers section that begins on page 191 for a more accessible rendition of much of the law and in a format that won’t drive you to wherever you go when you don’t drink.

If you’re like me, you’ll find interesting the answers to two questions on page 210, both of which fall under Section N of the Q&A: National Firearms Act (NFA). Now as everybody who’s anybody who’s at all interested in so-called NFA firearms knows, purchasing such arms comes with its own entry among Dante’s circles of hell [insert image of such circles here to catch the already weary reader’s eye]:

circles-of-hell-in-dantes-inferno_50291c3324df2_w1500

This particular circle floats somewhere between Limbo and Anger, though more than one AFA firearms aficionado swears he has seen the circle hovering around Violence.

There’s a reason for this. You see, NFA firearms are a special category of six firearms or weapons that comes with its own extra set of federal rules buyers must abide before they can get their hands on their new NFA firearm–that is, if their states’ law doesn’t ban them altogether. In brief, NFA firearms include 1.) machine guns, 2.) short-barreled shotguns, 3.) short-barreled rifles, 4.) silencers or suppressors, 5.) destructive devices, and 6.) “any other weapon[s],” an odd little category that really doesn’t include just “any other weapon,” but that’s a post for another time (see USC §5845 (a)).

Now, suppose you walk into your local gun shop to buy a short-barrreled rifle as an individual. The National Firearms Act or NFA is pretty explicit. There are taxes to be paid (the seller pays, but your pocketbook takes the actual hit), stamps to be affixed, fingerprints and photos to be taken (guess whose?), firearms to be identified, CLEO signatures to be secured, and finally, approval of the Secretary of the Treasury to be had. Yup, the NFA falls under the authority of the IRS. But that’s not the worst of your problems. No, your problem begins much closer to home.  With the Chief Law Enforcement Officer or CLEO in the jurisdiction where you live.

You see, because you chose to buy as an individual, the local CLEO has to decide whether to sign off on your application, certifying that s/he is

satisfied that the fingerprints and photograph accompanying the application are those of the applicant and that the certifying official has no information indicating that the receipt or possession of the firearm would place the transferee in violation of State or local law or that the transferee will use the firearm for other than lawful purposes. (CFR §479.85)

Read that again. Now, think about what you just read. Would you certify to all that? For someone you didn’t really know, who’s application just showed up in the mail? I probably wouldn’t. And I’m not alone. Apparently, many CLEOs are passing up the opportunity to put their butt on that dotted line as well.

Kind of takes the huff and the puff out of “Who does s/he think s/he is, anyway?” doesn’t it? Yes, I get the frustration of the prospective NFA firearms owner. But having read that little snippet from the Code of Federal Regulations (CFR), I get the reluctance of the CLEOs who don’t want to bet their career on the application of every John Doe and Jane Smith that lands on their desktops. Circle of Hell doesn’t begin to describe the firestorm that would ensue should that brand new certificated NFA firearm owner use that new NFA firearm to commemorate Columbine.

But surely the CLEO must sign eventually, right? You’re a taxpayer, by cracky! And you pay their salary!! There ought to be a law!!!

Check your outrage. There apparently isn’t a law. Let’s go back to those two questions and answers on page 210 of the AFT Federal Firearms Regulations Reference Guide:

(N16) Is the chief law enforcement officer required to sign the law enforcement certification on an ATF Form 1 or ATF Form 4?

No. Federal law does not compel any official to sign the law enforcement certification. However, ATF will not approve an application to make or transfer a firearm on ATF Forms 1 or 4 unless the law enforcement certification is completed by an acceptable law enforcement official who has signed the certification in the space indicated on the form.

(N17) If the chief law enforcement official whose jurisdiction includes the proposed transferee’s residence refuses to sign the law enforcement certification, will the signature of an official in another jurisdiction be acceptable?

No.

“No.” Can’t get much more blunt than that. Though I guess it depends on what the meaning of “no” is. (As an aside, if I were doing Q&As for the federal government, I would have written, “Sorry Charlie, better luck next time. May the Force be with you. Or some such.)

For the “individual,” there’s no joy if Mudville’s CLEO decides s/he doesn’t want to sign the certification. Unless . . . Unless the “individual” takes advantage of another provision in the CFR, a provision that has implications for who can be a transferee under the NFA, a provision that defines “person” as:

A partnership, company, association, trust, estate, or corporation, as well as a natural person. (CFR §479.11)

Thus, when the NFA says that the transferee must be identified in the application for an NFA firearm, it is only where

. . . such person [i.e., transferee] is an individual, [that] the identification must include his fingerprints and his photograph . . . . (USC §5812) (emphasis supplied)

and therefore, only in such circumstances that the local CLEO must sign off before the application can proceed.

However, if the transferee is a partnership or a corporation or a trust? (Is that too obvious a hint that a trust might be the solution to the problems of both the prospective NFA firearm buyer and the reluctant CLEO?)

Rather than going the individual route, maybe a a trust is the better option. No muss, no fuss. No fingerprints, no photos. No CLEO, no certification. All legal, all by the book. Annie gets her gun. All right. [Readers may be nodding off. Another image to get them to the end.]:

sun-rising

And thus was born the gun trust and your local CLEO relieved of a responsibility s/he didn’t want in the first place. The end.

Filed Under: 2nd Amendment, Estate Planning, Firearms, Gun Trusts, NFA Trusts Tagged With: , , ,

A Gun Trust in Your Future?

September 10, 2015 by Leave a Comment

A recent study by the University of Chicago Crime Lab published in the Journal of Preventive Medicine, coupled with a move by Senator Tim Kaine (D-Va.) to amend Section 922(d) of the Gun Control Act of 1963 (18 U.S.C. 44), provide yet another reason for gun owners to set up a gun trust.

The Chicago study involves a survey of 99 inmates of Cook County Jail. Number one among its five principal findings:

Our respondents (adult offenders living in Chicago or nearby) obtain most of their guns from their social network of personal connections. Rarely is the proximate source either direct purchase froma gun store, or theft.

In fact, purchases at gun stores and shows accounted for just 1.5% of the guns these individuals “accessed . . . during the 6 months before the current arrest.” Or, put another way,

a majority of the primary guns (40 of the 48 for which we have detailed information on the source) were obtained from family, fellow gang members, or other social connections; the fraction is still higher for secondary guns. (emphasis supplied)

According to the study, the chain of transactions typically looks something like this:

2015-09-09_1629_Chicago Study

So now comes Kaine and his amendment to Section 922(d), an amendment which effectively puts the same burden on private persons–often family members and friends–that already rests on the shoulders of Federal Firearms Licensees or FFLs. That is,

Unless the transferor has taken reasonable steps to determine that the recipient is not legally barred from possessing firearms or ammunition under paragraphs (1) through (9), it shall be unlawful for any person to sell or otherwise dispose of any firearm or ammunition to a person who
(1) is under indictment for, or has been convicted in any court of, a crime punishable by imprisonment for a term exceeding one year;
(2) is a fugitive from justice;
(3) is an unlawful user of or addicted to a controlled substance . . .;
(4) has been adjudicated as a mental defective . . .;
(5) [is an illegal alien];
(6) has been discharged from the Armed Forces under dishonorable conditions;
(7) [has renounced his citizenship];
(8) [is subject to a restraining order because of harassment, stalking, threatening, and the like]; or
(9) has been convicted in any court of a misdemeanor crime of domestic violence. (emphasis supplied; underlined language is Kaine’s proposed amendment; aspects of items (1)-(9) have been paraphrased for length)

Among many of the knocks against this proposal is that it imposes a burden–the same potential penalty gun dealers face–without offering relief–the ability to do background checks using the FBI’s NICS database. If Kaine’s bill (or any bill like it) passes, a well-drafted gun trust could be the shelter from the ensuing storm, from the increased potential of the unintentional or accidental felony that could result from being unable to perform an adequate background check. Why? Because that trust will contain provisions that spell out, for the trustees and beneficiaries, who can and who cannot qualify as a potential transferee of any of the guns that make up the corpus of the trust. In short, they will know–without having to Google the answer–that persons who fit in categories (1) through (9) do not qualify.

Look, the NRA and other gun advocates may beat back Kaine’s attempt to impose liability on private persons who unknowingly transfer guns to legally barred dudes and dudettes. But given the Chicago study which points the finger directly at family members and social connections as the source of most illegal guns on the streets of Chicago, don’t be surprised if Kaine’s bill has legs. And if it does, it seems at least arguable that a well-drafted gun trust would be one large reasonable step towards satisfying the legal standard established in Kaine’s proposed legislation.

That’s the beauty of gun trusts. Rather than a way to circumvent the law, they’re actually a method of safely and legally transferring the guns you treasure to the people you care about–so long as those people haven’t been walking on the wrong side of the law. Should you have one?

Filed Under: Estate Planning, Firearms, Gun Trusts, NFA Trusts Tagged With: , , ,

5 Reasons You Might Need a Trust

August 15, 2015 by 1 Comment

Virtually everyone should have a will. To see why, go here. But most people would do well to have a trust. Get that? You don’t have to be Bill Gates to need a trust. Here are five reasons why:

1. Avoid probate. Probate is the word we use to describe the legal process, the court proceedings, that virtually all wills must go through, so that your property goes where you want it to go, so that the court can decide whether the guardian you chose for your children is the best person for the job, so that . . . the list goes on and on. A revocable trust saves you from all that. Rather than passing your property via your will, set up a revocable trust, then title your bank accounts, your home, and your other property in the name of the trustee–you–and you can avoid probate, at least for all the property in the trust. A by product of that process is that you can . . .

2. Preserve your privacy. Hand in hand with probate is the loss of your privacy. What do you think “the public record” means if it doesn’t mean the record of what goes on inside a court room? Go down to your local clerk of court’s office and ask for the court file for a recent probate, and you’ll see what I mean. Revocable trusts? They don’t go through probate; hence, your maintain your privacy.

3. Keep control. If you’ve ever seen Brewster’s Millions or Easy Money, you know all about control. In Brewster, Richard Pryor must spend $30 million in 30 days in order to inherit a larger estate. In Easy Money, Rodger Dangerfield has to turn his vices into virtues before he can inherit. Control. In some cases, it might come in handy. A trust can give it to you–even when you’re long gone.

4. Protect your property. Protect it, that is, until your intended beneficiaries are old enough or mature enough to take care of it on their own. Trusts can do that. Wills can’t.

5. Take care of you should you become incapacitated. Coupled with what is called a durable power of attorney, the trustee of your living trust can step in an manage your estate should you become incapacitated. With the power of attorney and the trust powers, he or she will essentially walk in your shoes and speak in your voice–be you . . . essentially.

Bonus: Reduce or eliminate your estate tax. Of course, if you have a lot of money, that is, if you have $5,430,000 or you and your spouse together have twice that amount–$10,860,000–you can use a trust to avoid or delay the estate tax on amounts over those sums. It gets complicated, so we’ll stop here.

Filed Under: Estate Planning, Estate Planning 101, Trusts

Trusts 101

July 1, 2015 by Leave a Comment

Slide1A trust is a fiduciary relationship between a trustee and beneficiaries of the trust. Trusts can be implied and express. Implied trusts are court created in order to prevent unjust enrichment (a constructive trust) or to carry out what the parties intended, but failed to do properly.

In estate planning, we concerned almost entirely with express trusts, trusts set up intentionally to achieve some goal or purpose, to avoid taxes or direct money to a charity, for example. To set up such a trust, a person–the settlor–must have the intent to do so and then must comply with three formalities:

1. There must be a res or property, a bank account, a piece of real estate, a life insurance policy, or some such.

2. The trust must have ascertainable beneficiaries. Why have a trust if there are no beneficiaries, right?

3. Finally, the trusts must have a trustee, though a court can appoint the trustee if the trust document doesn’t name one.

Express trusts are almost always laid out in a trust document that names the res, the beneficiaries, and the trust. Those documents also explain the trust’s purpose, list the trustee’s powers, and the like.

Express trusts can be testamentary, that is they come into existence upon death. Such trusts are generally established in a will and must always comply with the formal requirements of a will, In Wyoming that means the testator or maker of the will must sign the written/typewritten document and that at least two disinterested people must witness the testator’s signature. Though testamentary trusts are irrevocable upon death, the testator can change the terms of the trust while he is still alive.

Express trusts can also be established during the settlor’s lifetime. They are called inter-vivo trusts. People often set up revocable inter-vivos trusts, so they can test drive them before they die. Revocable trusts are not separate taxable entities. Thus, if you have a revocable trust with an investment account as part of the trust property, you will have to report the trust’s taxable income on your 1040 form. Upon the settlor’s death, that revocable trust become irrevocable.

Intervivos trusts can also be irrevocable from the beginning, but by doing so, you may also create a taxable event because, remember, the trust has to have a res, and if that res is large enough, you will have to transfer that property from your pocket to the trust’s pocket, if you will. We call that a gift, and a large enough gift will be subject to the federal gift tax system. Why? Because a revocable trust is a separate taxable entity, a separate person. But that’s enough on that subject for now.

Though the wealthy often use trusts to save estate taxes, they can also be a valuable estate planning tool for the middle class. But more on that later, in another place on this site.

Filed Under: Estate Planning, Estate Planning 101, Trusts, Wealth Transfer

Elective Share

June 26, 2015 by Leave a Comment

As we discussed in 5 Reasons You Need a Will, a valid will controls where your money goes when you die–except when it doesn’t. In some states for instance, the maker of a will–the testator–can’t disinherit a spouse.  In Wyoming for example, a disinherited spouse can “elect” to take 1/4 to 1/2 of the property disposed of by the will (reduced by certain items), depending on whether there are children and whether the disinherited spouse is a “parent of any surviving issue of the decedent.” In other words, the will won’t control where all the money goes in this circumstance.

Once again, whether the disinherited spouse has an elective share and how much that share is, depends on where the decedent is domiciled. If the decedent is domiciled in Utah, the surviving spouse’s elective share is 1/3 of the augmented estate–essentially the property disposed of by the will, reduced by funeral and administrative expenses, certain exemptions, and the like.

 

Filed Under: Elective Share, Estate Planning, Estate Planning 101, Wills

Wills 101

June 25, 2015 by Leave a Comment

Slide1When a person leaves a will, we say that he died testate as opposed to intestate. Blackstone defined a will as “The legal declaration of a man’s intention which he wills to be performed after his death,” a definition that maybe gives us some idea of where the legal term “will” comes from. Thomas Atkinson’s Handbook on the Law of Wills is a little more expansive and a lot more helpful (all emphasis in these quotes is mine):

A will is a person’s declaration of what is to be done after his death, which declaration is (1) revocable during his lifetime, (2) operative for no purpose until his death, and (3) applicable to the situation which exists at his death. Usually a will relates to the disposition of the maker’s property.

In other words, a will only functions after the maker, or testator, dies. Until then, the testator can change her will when she wants, willy nilly, if you will. (I’m sorry.) That is, while she’s alive, her will is revocable.

A person who receives money or property as directed by a will is called a beneficiary. Often a will names more than one beneficiary or classes of beneficiaries. For example, a testator might name her son James and daughter Julie beneficiaries, or she might simply refer to them as a class, as in “all my children, share and share alike.”

To make sure her wishes are carried out, the testator generally names an executor, the person who acts on behalf of the testator after she dies. (A quick note on terminology: If someone dies intestate {without a will}, the court appoints an “administrator.” If someone dies testate {with a will}, the will names an “executor.” Both the terms administrator and executor are included within the meaning of the term “personal representative.” Sometimes people use the terms executor and personal representative interchangeably.)

Filed Under: Estate Planning, Estate Planning 101, Wills

5 Reasons You Need a Will

June 25, 2015 by Leave a Comment

No matter your economic circumstances, you should probably have a will, especially if you have a spouse, even more so if the two of you have children. Here are five reasons why:

1. You can use that new will to revoke the one you already have. That’s right: you already have a “will,” the one your state legislature drafted for you. Say, for example, that you live in Wyoming and you and your spouse have two children. And say that you die without having an attorney draft a will for you, that is, you die “intestate.” The Wyoming laws of intestacy–that “will” you didn’t think you had–direct that 1/2 of your estate goes to your spouse and the other 1/2 goes to your two children to share equally, regardless of whether that’s what you wanted to happen.

A state’s laws of intestacy cover all sorts of contingencies: Spouses with no children. Surviving children and no spouse. Deceased children who leave grandchildren. Etc. etc. etc. The problem is, of course, that the law probably doesn’t cover the situation the way you would want it covered. A properly drafted, valid will does.

2. A valid will is portable. Now suppose you’re fine with Wyoming’s law of intestacy. You love your spouse and both of your children. You’re okay with the “will” the Wyoming legislature drafted for you. In fact, you’re glad that your two children will share in your estate when you die. But suppose that you and your family decide to move to Utah, so you can take a new job. And suppose that you suffer a massive heart attack the first day on your new job. Guess what? Your children get nothing from your estate. Your spouse gets it all. Why? Because the Utah legislature says so, that’s why. Utah’s laws of intestacy are different than Wyoming’s, and because you moved to Utah, its laws govern. That doesn’t happen with actual wills because they’re portable; they go where you go, live where you live. (By the way, this discussion ignores a surviving spouse’s so-called “elective share,” which is a matter for another post.)

3. You can use your will to name a guardian for your minor children. If you don’t, the state will step in and do the job for you. Truth be told, the state will probably step in anyway if you nominate dud as guardian–the state takes the welfare of children seriously. However, if you are of sound mind when you name a guardian and if that person is a stand-up person, the court will generally approve your decision. Best practice, then, is to nominate a guardian in your will.

4. Your will is the place to name your personal representative (or executor). A personal representative or executor is charge with carrying out the instructions in your will about how to handle your property. Again, if you don’t name your personal representative, the state will.

5. Your will makes sure all your property makes it into your trust–if you have a trust. Such a will is called a pour-over will; that is, it “pours” the residue of your estate–the odds and ends, small accounts and expensive vases, you may have overlooked as you planned your estate–into a trust. If you have a trust. A subject for another 5 Reasons post, perhaps?

BONUS reason. Setting an appointment with an attorney to prepare a will that carries out your wishes will cause you to give serious thought to your family and your estate and to focus on the things that matter in a way that few other exercises will. Trust me. That’s an exercise well worth doing.

You need a will, one you had drafted, not one the state drafted for you.

Filed Under: Estate Planning, Estate Planning 101, Trusts, Wills
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