For his 30th birthday on Thursday, Prince William received a bittersweet present: roughly $15 million inherited from the estate of his mother, the late Princess Diana. Now, if you are reading this humble blog, I sincerely doubt you are royalty yourself (if you are, take note: I have always liked the sound of Sir Dr. Randall D. Fisher, Esq., but unfortunately my dear wife feels that would be far too many titles).
If there is any misconception that I hope to dispel in my career, it is not that all lawyers are sharks but the idea that estate planning is of use to you only if you have royal riches. You need not be able to pass on a regal sum to your heirs in order to benefit from such a service. In this series of posts, I’ll tell you why.
Smart Money recently summarized the basics of why you need an estate plan by focusing on the establishment of a $5 million federal estate tax exemption. Specifically, the writers point out that because only estates whose value exceeds $5 million will be taxed federally in 2012, most folks are just not exposed to that estate tax right now. (Note that the same is not necessarily true of your state of residence—Maryland, for example, taxes estates as low as $1 million in value.) Despite these thresholds, if you live in a state like Maryland and have some assets (maybe just a car and some nice furniture) or minor children, you still need an estate plan—even if taxes are not an issue. Here’s the scoop.
Why You Need a Will or Living Trust Document
If you die intestate (without a will), Maryland (or whatever state you live in) is happy to determine what happens to your assets and your minor children. So unless you have an inordinate amount of faith in your beloved elected representatives in Annapolis, you need a written will to make your wishes known. (Knowing what I know about what goes on here, the will is definitely a good idea.)
In addition to drafting a will, you may also want to set up a living trust in order to avoid probate. (Yes, you can do probate yourself but mess it up and pay the consequences. If you hire a lawyer, you will end up paying about 4% of the value of the estate going through probate. And yes, some will charge more and some may charge less.)
For simple wills, good do-it-yourself software is readily available. Again, the issue is whether you know all the correct questions and all the correct answers. But the software is available. My personal recommendation is that you should hire an attorney to draft either a will or a living trust document, because I’ve see what happens when you get it wrong. And you really need to think about a trust, because you don’t have to be “rich” to need one.
Regardless of what state you live in, the purpose of a will is straightforward. The main purposes of a will are to name a guardian for your minor children (if any), name an executor for your estate, and specify which beneficiaries (including charities) should get which assets.
The guardian’s job is to take care of your kids until they reach adulthood (age 18 in Maryland, but 21 in other states).
The executor’s job is to pay your estate’s bills, pay any taxes due, and deliver what’s left to your intended heirs and charitable beneficiaries.
Remember: If you die without a valid will, state law generally controls what happens to your kids and your stuff. Not good!
However, the will is really just half of your protection. It acts as a great shield to guard your intentions for your assets, but it doesn’t ward off all of the challenges faced in the estate administration process. For complete peace of mind you should consider a trust, which functions as a suit of armor—the perfect complement to your shield. Even if you are of humble means this type of protection can really help you. Next time, we’ll take a look at what you can get out of a revocable living trust.
Good luck and good hunting.
(Entry originally posted March 25, 2011. Updated today.)
If you have any questions about setting up a will or planning your estate, you can find out how to reach us at our website: TheFisherLawOffice.com. You can also find us at Facebook.com/FisherLawOffice, on Twitter @thefisherlawoffice, or at LinkedIn.com/in/FisherLawOffice.