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'You're Not Worth It'
That's the message you leave your family
if you don't get a will. So stop stalling!
Drawing up a will is the one task everyone hates. People drag their
heels, cancel appointments and refuse to make basic decisions. Lawyers
say it's not even uncommon for folks to have a will drafted but never
show up to sign it.
If that sounds like you or someone you know, maybe it's time to consider
the consequences of inaction. Older adults may have amassed considerable
assets, but if they abdicate responsibility for estate planning and die
without a will, they can leave grieving loved ones with a financial
nightmare.
Exactly how bad could that nightmare be? Pretty bad, if you consider all
the unintended places your assets could end up. So here's our list of
the 10 Terrible Things That Could Happen If You Don't Have a Will.
10. All your money goes to the wrong person.
If you don't specify who inherits your assets, the state will. In New
York, for example, half goes to the children and half goes to the
surviving spouse. It doesn't matter if you happen to be in the middle of
getting a divorce, says Anne K. Hilker, a partner with Dewey Ballantine,
New York. "The law is still going to give your spouse that
share," she says. Ditto for the son who has a drug problem, the
spouse who gambles or the child who hasn't spoken to you in 15 years.
If you don't have any children, your spouse may end up sharing your
assets with the in-laws. In Massachusetts, for example, your spouse gets
the first $200,000 of your estate, with anything above that amount split
evenly between your parents and spouse. Your brother and sister won't
see a penny unless you have no spouse, no children and no parents still
living.
9. Uncle Sam will become your beneficiary.
The state's one-size-fits-all will doesn't include any tax planning. Why
should it? That means a larger-than-necessary share of the funds you
intended for your heirs will probably end up in federal and state
coffers.
Amounts can be substantial. If there isn't a spouse, for example, the
federal estate tax on a $2 million estate would be $569,500, explains
Doron M. Tisser, a Calabasas, Calif., estate-planning attorney. There
are a dozen or so commonly used techniques that could reduce that
estate-tax bill. With proper planning, the amounts could easily be cut
in half, or perhaps eliminated, he says.
8. Your business could go to people who can't stand each other.
Once the state formula is applied, your assets may be divided in strange
ways, Mr. Tisser says. Your second wife may find herself sharing the
family business with the kids from your first marriage. Or the family
factory may end up being divided equally among children who have unequal
business smarts and lots of opposing opinions.
"Your family members could end up not talking to each other,"
he says.
7. The court gets to help run your family finances.
Wills usually confer specific powers, such as the ability to sell real
estate or to operate a business. "If all of that isn't in a will, a
lot of those things can't be done without going to court," says
Deborah Pechet Quinan, director of estate and financial-planning
services at State Street Global Advisors, Boston. In addition to being a
pain in the neck, such court proceedings are also expensive.
6. Your kids' finances will get awfully complicated.
If you die without a will, your spouse will probably be appointed by the
court as guardian of any minor children. But in some states, the spouse
can't be the guardian of the kids' money or other property, says Stephan
R. Leimberg, a Bryn Mawr, Pa., attorney.
"That means my wife would have to go to some other person to use my
children's money," he says.
5. Your son will be able to buy a Ferrari.
Once the money is divided according to the state formula and your kids
reach legal age, the funds are theirs to use as they see fit. That can
lead to some strange scenarios.
Children still living at home may have as much disposable income as the
surviving parent. Instead of being used for the mortgage or college
tuition, your money could end up buying your son a hot new set of
wheels.
4. Your kids may end up paying taxes on the life insurance collected
by your sister.
Wills typically specify where the money for estate taxes will come from,
and enable the executor to gather assets together to pay those taxes. If
you die without a will, the state steps in with its own formula,
allocating the taxes proportionately to the assets inherited. But
implementing that formula can be tough, says Michael J. Puzo, a partner
at the Boston law firm of Hemenway & Barnes. Some assets, such as
life-insurance and retirement-plan benefits, aren't governed by wills.
Nonetheless, they are part of an estate
and, thus, subject to estate taxes. This means a court-appointed
administrator may have to get money back from a beneficiary to pay
taxes.
"The administrator has the right to go chase people," Mr. Puzo
says. "But good luck."
He noted one case in which a child decided not to pay her share of the
estate tax and was taken to court. An administrator, however, may find
that it's actually cheaper to simply pay the tax than to incur the cost
of filing suit to recover.
3. Your soon-to-be ex-son-in-law will get a big chunk of your assets.
Without estate planning, your children will inherit their share of your
assets outright rather than through a trust."As such, the heirs'
assets aren't protected," says New York attorney Martin M. Shenkman.
That means creditors can get at your daughter's inheritance, and unless
your daughter is careful to keep those assets separate, so can her
husband if they later divorce.
2. Your neediest child gets shortchanged.
Say you die, leaving behind two children -- a 35-year-old plastic
surgeon with a big bank account and a 17-year-old just about to enter
college. Even though one clearly has a greater need, the resources are
still divided in equal shares, Mr. Leimberg says. But that equal but
inequitable division could leave your 17-year-old without enough to pay
tuition, he says.
And the No. 1 Terrible Thing That Could Happen If You Don't Have a
Will is....
1. Your final message is: 'I Don't Care.'
One of the last things your family may remember about you is how your
estate is settled. Leave behind a mess that causes people to end up with
either nothing or the wrong stuff, and feelings will be bruised.
"When you don't do a will," says Mr. Leimberg, the Bryn Mawr
attorney, "the message is, 'You weren't worth the trouble.' "
 
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