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Did you know that if you die without a will, the laws of your state will distribute your property for you? And did you know that if the state runs out of those it has declared to be your heirs, the state itself may be the ultimate beneficiary? This eventuality can easily be avoided with the execution of a simple will.
In general, those who die "intestate" -- that is, without a will -- lose the ability to control the passing of their property to their heirs. Whether it stands alone or as part of an integrated estate plan, a will provides for the disposition of property not otherwise so provided. The execution of a will is a necessity in any estate plan.
Among other things, a simple will can:
- direct the disposition of property according to your desires;
- establish a trust to provide for minor beneficiaries long after your death;
- nominate guardians for minor children; and
- provide for the "pour over" of assets into a previously established trust which were not already transferred to the trust.
Your will is effective only upon your death. As such, you can always amend or revoke your will during your lifetime in order to take into account changes in circumstance or condition. Indeed, your will should be reviewed both periodically and at the happening of certain events, such as upon:
- changes in family circumstances, i.e., births, deaths, marriages or divorces;
- your move from one state to another;
- changes in federal or state tax laws; or
- significant changes in assets or property values.
A will does not by itself provide the maker with any income or estate tax benefits. Accordingly, more sophisticated estate planning will be necessary where, for example, your estate is valued above the estate tax exemption amount*, or where state estate taxes may impact your estate. Nonetheless, creating your will may be the first step toward an integrated estate plan.
* The federal estate tax exemption amount is $2,000,000 in 2006 increasing to $3,500,000 in 2009. The highest federal estate tax rate is 46% in 2006 and decreases to 45% in 2007-2009. The federal estate tax will be repealed on 1/1/10 until 12/31/10. Beginning 2011, the federal estate tax will be reinstated with a federal estate tax exemption amount of $1,000,000 and a maximum estate tax rate of 55%. Currently, bills are pending in Congress that, if passed, would permanently repeal or otherwise lessen the impact of the federal estate tax.
The concepts contained herein are not intended to serve as advice and may have legal, tax and accounting implications. Consult your Attorney and CPA for advice.
CWEB-L-118
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