NEWS AND RESOURCES

Financial Planning for February 2000

There is No Excuse for Not Having a Will.
If there is a will there is a way. If there is not a will, there will be lawyers, probate courts, and chaos between family members that sometimes is unrepairable. It is appalling how many people do not have a will. If you ask your friends if they have a will, you would be shocked of the number of them that have not prepared a will and testament. If you had them ask their parents how many of them have a current will, you would be even more shocked to find out how many 50-65 year old people have avoided preparing a will. Only 27% of Americans have a will when they die.

The most common excuses for not having a will is that people do not want to think about the inevitable. A lot of people think they do not have enough money to warrant having a will. Many people do not want to have to pick and choose what to give to different children. A common excuse is that they have told theirs heirs "who gets what". What people do not realize is that by not having a will, they will leave behind a mess that will create far more problems than they could ever imagine. A will ensures your assets and property will pass down to the desired people. A will alleviates problems and confusion in execution of the disbursement of your estate. There is no way for anyone to enforce your intended plan without a will.

Most of the complications that are usually associated with probate are avoided by a properly drafted will. You may want to seek out an attorney that specializes in probate because he is current with probate law in your state. Your CPA must be involved in preparing your will to avoid excessive taxation. Your CPA may also be willing to recommend a probate attorney that he or she had faith in. Do not make the mistake of copying someone else's will, especially from some other state. No matter the size of your estate, without a will, your heirs cannot carry out your wishes and pick up where you left off without specific instructions from you.

Keep a list in a place where someone knows where to find it of all your assets and update it annually. You do not need to make this public information to your family. Let your CPA or your attorney aware of the place you keep important papers. Tracking your assets is imperative. This is most important with real estate, stocks, bonds and other any other liquid assets. In tracking assets, don't forget IRA's and 401(k) plans. You must consider the most tax-effective way to transfer such accounts.

It does not seem fair to tax a "dead man" but it is a fact. You need to plan for the taxes. Your heirs may not know the most efficient way to pay estate taxes. Life insurance is a good way to help pay the estate taxes or make sure your estate is liquid enough so that assets do not have to be sacrificed to pay the taxes.

Another big mistake that people make is not sitting down with each individual heir and understanding what their personal goals are. Tailoring your estate to your heirs is the key. More than ever, the dialogue between middle-aged children and their parents on financial matters needs to take place. Most children feel very uncomfortable bringing up the issue of a will because they don't want their parents to think they care more about the money than their parents. It needs to be the parent that brings this up and implement a plan that makes the heirs feel comfortable discussing these issues.


Intestate

If you die without a will this is a prescription for trouble that will be time consuming and expensive. If you die intestate (without a will), the court will choose the person responsible for wrapping up your affairs. This person is called an Administrator. This probably won't be the person you wanted to handle your affairs. If you die with a will, you would have named an Executor to make these important decisions and you would have been able to pick someone you trusted to carry out your wishes. Dying intestate could result in a neutral lawyer appointed and all of his fees will be paid out of your estate.

For example, many people falsely believe that if they die, everything would automatically go to their surviving spouse. This is not always true. Marriage does not insure this. A lot of states give only one-third to one-half of the estate to the surviving spouse. The remaining can go to the decedent's parent(s) if they are alive. If both parents are dead, some states split the remainder among the decedent's brothers and sisters. Again, avoidable by having a will.

Besides hiding your will in a safe place, you might want to go one step further.
You are not required to record your will at the county courthouse when you have it prepared. It is generally recorded there when it is admitted to probate at your death. However, if you so desire, you can record it prior to death. Some people like to record such documents in order to be sure they are not lost.

Balancing the value of your assets changes over time. Get appraisals of your assets to distribute a true value of what you have. Appraisals vary in cost but may be worth the money if you look at what you want to leave to your heirs purely in a financial sense.

Don't leave a less-favored heir a note saying you left them nothing due to your poor relationship. It is far better to leave a little something (and you can add a note to express personal feelings) to prevent legal challenges to your will. Naming them in your will makes it legally clear that you intentionally meant to leave them a smaller portion of your estate.

If you die without a will, it would be like inviting the government in to disburse your money and material assets. You worked hard for your money and most likely spent a lot of time planning your retirement so that you would not outlive your money. Although this is not always the case, people with children generally try to leave something behind. There are a lot of things to understand about wills. Spending the time and money to get good financial advice and legal advice is without a doubt one of the most important financial moves you can make.


Tip:

More and more executives are receiving stock options as compensation, especially in the high-tech fields. What if the options survive the employee? Incentive stock options (ISOs) unlike nonqualified stock options (NSOs), cannot be transferred during the employee's lifetime. Upon death, the ISO may be transferred to a named beneficiary, including a trust. Should the representative of an employee's estate or the trustee of an employee's trust be granted the authority to exercise the option?

Does the representative have sufficient liquid assets to exercise the options? What about the income tax? Make sure to keep these questions in mind if you have a situation where stock options are involved in your will.

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