Many people draw up complicated estate plans to minimize the taxes they have to pay on their assets when they die. But people who are nowhere near the $5 million+ floor for estate taxes have very valuable reasons for having wills and trusts.
Myth 1: My spouse automatically gets everything when I die.
Actually, in North Carolina, without a will, the spouse gets only ½ of everything if you have one child, and only 1/3 of everything if you have two or more children. If you have no children, your spouse gets ½ and your surviving parent(s) get the other half. It gets even more complicated if the deceased person has been divorced and there is a property settlement to the former spouse or children from the first marriage.
Your spouse may not have enough assets to continue the lifestyle you had before your death. If your children are minors, to sell any real property that goes to the children, your spouse will have to appoint a guardian and petition a court to approve the sale. The proceeds will have to go into a separate account for each child, and the child will get that money when he or she turns 18.
Myth 2: The only reason to have a will is to avoid estate taxes.
Wills are not just for the rich. No matter how much or how little money you have, a will allows you to state which relative, friend or charity will receive your heirloom furniture, jewelry, art work or other treasured personal items. With a will, you can appoint an executor to handle your estate. Otherwise, a court makes these decisions.
Another reason for young families to have a will is to choose the guardian of their children. If you die suddenly without a will, your loved ones will be burdened by government intervention and approvals at what is already a difficult time.
Myth 3: All I need is a will leaving everything to my spouse.
When you have a will, the executor must file an inventory of everything you own with the clerk of court, and be supervised in distributing the assets. Probate ensures that your property is distributed according to your will, or according to the law if there is no will. Probate is lengthy and can be emotionally draining for your family.
If, however, your will leaves everything to a revocable trust, there is very little that has to go through probate. Avoiding probate protects your privacy. Revocable trusts can also be used to hold your assets safely until your minor children reach an age where you think they can handle the money safety (25, 35 or even 45). With a will, they will get the assets at age 18.
Myth No. 4: I can get a will online and be fine; I don’t need a lawyer.
Seeing a lawyer to discuss even simple estate planning can provide additional benefits. Usually we provide an entire package of documents, including a durable power of attorney and health care power of attorney.
Your will only matters if you die. But if you are incapacitated (car accident, stroke, brain injury, cancer, serious illness, coma, injury while traveling overseas, etc.) your will cannot provide for someone to take care of your financial matters while you are alive. It can be difficult for a spouse or family member to step in and take care of your day to day obligations and bills. A durable power of attorney gives someone this power if they should ever need it.
Also, your will does not address medical decisions. Again, in worst case scenario, if you are incapacitated, you would like someone you trust to carry out your medical care wishes. A health care power of attorney is the document that will allow someone to speak for you medically when you can’t.